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Narnolia
NBCC (Accumulate)
CMP: ₹54.75
Target: ₹60
NBCC (India), formerly known as National Buildings Construction Corporation, is a blue-chip Government of India Navratna Enterprise under the Ministry of Housing and Urban Affairs.
NBCC has posted strong revenue growth but the margin declined during the quarter due to change in accounting policy and which will sustain at this level. Revenue growth is likely to remain strong on account of pick in execution of large projects. Delhi high court has given nod for redevelopment projects in Delhi and execution is expected to start from January. NBCC has taken up stalled Amrapali project for construction of 46,000 units at cost of ₹8,000 crore as consultant and exploring various options for financing it. Additionally, company has expressed economic interest to acquired debt loaded JPINFRA. So, any update on the same will be key monitorable for near term. We have incorporated lower EBITDA margin in our estimates and reduce EPS by 7/11 per cent for FY19/FY20.
We are cautiously optimistic on the company and maintain our ‘accumulate’ rating owing to the current sharp drop in share price. We value NBCC at 22x FY20 EPS and arrived at the target price of ₹60.
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