Broker's call

CMP: ₹64.7

Target: ₹69

Over the past one year, NBCC, in no uncertain terms, has lost its flavour. The stock is down over a third, when the sector’s median performance is down only by a tenth. True, NBCC faces uncertainty in critical projects. The worst, however, is priced in. But the street is missing the bigger picture: for a company of ₹80,000 crore order backlog, there are too many moving parts. Add another ₹20,000-25,000 crore expected as order inflow, accretion to backlog is clear on cards.

Further, the Central government wants NBCC to take up stressed project impacting 3 lakh homebuyers. To understand this in magnitude, to revive 46,000 housing units, NBCC, in one instance at the Supreme Court, has submitted plans of ₹85,000 crore, including ₹770 crore as fees. If this metric is anything to go by, the stressed opportunity in itself is in excess of ₹55,000 crore, one could argue. Note, NBCC has ignored these orders in its prospect pipeline. Even better, just within the existing backlog, at the current valuation one can argue for a core business at 6x FY21 clean profits. Add newly snapped up entities and conventional order pipeline, the opportunity, we must admit, is huge. Maintain ‘buy’.

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