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R e s u l t s b e l o w e x p e c t a t i o n …
NCC Limited’s (NCC) Q1FY12 performance was below our expectation on
account of slower execution and higher interest expenses. While the
EBITDA margin at 10.2% was higher than our estimates of 9.5% due to
lower contribution from the low margin road segment, the bottomline
was impacted owing to high interest expenses. The management has
guided for topline of | 5900 crore and order inflow of | 9000 crore in
FY12. However, concerns remain on equity requirement for the power
plant and NCC’s aggressive plan in the road segment. Nonetheless, the
current valuation discounts most of the negatives in the stock.
ƒ Higher interest cost impacts bottomline
NCC reported muted topline growth of ~5% YoY growth to | 1141
crore on account of weak execution. The EBITDA margin at 10.2% was
higher than our estimates of 9.6% due to lower contribution of the low
margin road segment. However, the bottomline at | 23.3 crore vs. our
estimates of | 27.9 crore, was impacted by the higher interest cost,
which saw a YoY jump of 118.1% to | 64 crore.
ƒ Equity funding for subsidiary to stretch balance sheet further
NCC has total equity requirement of | 970 crore for the power project
over the next four years (| 150 crore already invested). Additionally,
the company is looking to bag road projects worth | 4,500-5,000 crore
in FY12. If this materialises, it would entail equity requirement of |
1000-1250 crore over the couple of years. At the given stretched
balance sheet, the funding support from the parent level seems an
uphill task. Although NCC is looking for a stake sale in NCC Infra to a
private equity player, the present market condition does not suggest it
is possible in near term.
V a l u a t i o n
Though there would be some pain in the near term due to rising debt
level and interest outgo and the balance sheet could stretch due to equity
funding in the subsidiary, we believe most of the negatives seem to be
priced in the current market price. At the CMP, the stock is trading at 3.7x
FY13E adjusted P/E and 0.5x FY13 P/BV. We maintain our BUY
recommendation on the stock with a price target of | 74 per share based
on SOTP valuation methodology and time horizon of 24 months.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R e s u l t s b e l o w e x p e c t a t i o n …
NCC Limited’s (NCC) Q1FY12 performance was below our expectation on
account of slower execution and higher interest expenses. While the
EBITDA margin at 10.2% was higher than our estimates of 9.5% due to
lower contribution from the low margin road segment, the bottomline
was impacted owing to high interest expenses. The management has
guided for topline of | 5900 crore and order inflow of | 9000 crore in
FY12. However, concerns remain on equity requirement for the power
plant and NCC’s aggressive plan in the road segment. Nonetheless, the
current valuation discounts most of the negatives in the stock.
ƒ Higher interest cost impacts bottomline
NCC reported muted topline growth of ~5% YoY growth to | 1141
crore on account of weak execution. The EBITDA margin at 10.2% was
higher than our estimates of 9.6% due to lower contribution of the low
margin road segment. However, the bottomline at | 23.3 crore vs. our
estimates of | 27.9 crore, was impacted by the higher interest cost,
which saw a YoY jump of 118.1% to | 64 crore.
ƒ Equity funding for subsidiary to stretch balance sheet further
NCC has total equity requirement of | 970 crore for the power project
over the next four years (| 150 crore already invested). Additionally,
the company is looking to bag road projects worth | 4,500-5,000 crore
in FY12. If this materialises, it would entail equity requirement of |
1000-1250 crore over the couple of years. At the given stretched
balance sheet, the funding support from the parent level seems an
uphill task. Although NCC is looking for a stake sale in NCC Infra to a
private equity player, the present market condition does not suggest it
is possible in near term.
V a l u a t i o n
Though there would be some pain in the near term due to rising debt
level and interest outgo and the balance sheet could stretch due to equity
funding in the subsidiary, we believe most of the negatives seem to be
priced in the current market price. At the CMP, the stock is trading at 3.7x
FY13E adjusted P/E and 0.5x FY13 P/BV. We maintain our BUY
recommendation on the stock with a price target of | 74 per share based
on SOTP valuation methodology and time horizon of 24 months.
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