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PSU with unique business model…
We recently met the management of NBCC to understand its business
model and long term opportunities. NBCC, a Schedule ‘A’ Navratna, has
grown to become one of the largest public sector enterprises (PSE) in the
construction industry. Its core competency lies in rendering project
management consultancy services (PMC), execution of civil engineering
projects (EPC contracting) and development of real estate projects. NBCC
has a strong and diversified order book worth | 16,000 crore i.e., 3.9x
order book to bill ratio, providing strong revenue visibility over the next
couple of years.
PMC – money spinning business…
Given the Public Works Organisation (PWO) status, NBCC gets 70-80%
orders on a nomination basis from various ministries in the PMC
business, a key differentiator for NBCC. In this division, it is able to get
revenue upfront from clients. On the other hand, it gets extended credit
period from contractors. Consequently, this has led to a negative working
capital cycle and healthy CFO and FCFF over the years. Currently, it has a
strong and diversified order book of ~| 16,000 crore.
Redevelopment projects…new thrust to growth…
The successful execution of the New Motibagh project and PWO status
for NBCC has opened up a huge opportunity in other government/PSU
properties. Currently, NBCC is implementing a similar re-development
project of the government colony in East Kidwai Nagar, New Delhi
(| 5,000 crore). NBCC is also awaiting approval from the government for
redevelopment of another three colonies viz. Netaji Nagar, Kasturba
Nagar and Thyagaraj Nagar in New Delhi (> | 10,000 crore) and modern
township in Ghitorni, New Delhi (~ | 10,000 crore).
Real estate - value additive business…
We also like NBCC’s strategy to invest part of its surplus cash flow into
the value enhancing real estate business in a disciplinary manner and
keep its balance sheet debt free. The recent Navratna status has given the
company autonomy on investment decisions up to | 1000 crore. Also,
NBCC is in talk with sick PSUs for real estate development on their land
either through sale or joint development (JD) model.
Remain positive on growth prospects…
At the CMP, NBCC is trading at 21.8x FY14 P/E. Given its debt-free
balance sheet, PMC’s cash generating business model and huge
opportunities in the redevelopment & real estate segment, we remain
positive on NBCC’s growth prospects.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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PSU with unique business model…
We recently met the management of NBCC to understand its business
model and long term opportunities. NBCC, a Schedule ‘A’ Navratna, has
grown to become one of the largest public sector enterprises (PSE) in the
construction industry. Its core competency lies in rendering project
management consultancy services (PMC), execution of civil engineering
projects (EPC contracting) and development of real estate projects. NBCC
has a strong and diversified order book worth | 16,000 crore i.e., 3.9x
order book to bill ratio, providing strong revenue visibility over the next
couple of years.
PMC – money spinning business…
Given the Public Works Organisation (PWO) status, NBCC gets 70-80%
orders on a nomination basis from various ministries in the PMC
business, a key differentiator for NBCC. In this division, it is able to get
revenue upfront from clients. On the other hand, it gets extended credit
period from contractors. Consequently, this has led to a negative working
capital cycle and healthy CFO and FCFF over the years. Currently, it has a
strong and diversified order book of ~| 16,000 crore.
Redevelopment projects…new thrust to growth…
The successful execution of the New Motibagh project and PWO status
for NBCC has opened up a huge opportunity in other government/PSU
properties. Currently, NBCC is implementing a similar re-development
project of the government colony in East Kidwai Nagar, New Delhi
(| 5,000 crore). NBCC is also awaiting approval from the government for
redevelopment of another three colonies viz. Netaji Nagar, Kasturba
Nagar and Thyagaraj Nagar in New Delhi (> | 10,000 crore) and modern
township in Ghitorni, New Delhi (~ | 10,000 crore).
Real estate - value additive business…
We also like NBCC’s strategy to invest part of its surplus cash flow into
the value enhancing real estate business in a disciplinary manner and
keep its balance sheet debt free. The recent Navratna status has given the
company autonomy on investment decisions up to | 1000 crore. Also,
NBCC is in talk with sick PSUs for real estate development on their land
either through sale or joint development (JD) model.
Remain positive on growth prospects…
At the CMP, NBCC is trading at 21.8x FY14 P/E. Given its debt-free
balance sheet, PMC’s cash generating business model and huge
opportunities in the redevelopment & real estate segment, we remain
positive on NBCC’s growth prospects.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK
http://content.icicidirect.com/mailimages/IDirect_NBCC_MgmtNote.pdf
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