Nagarjuna Construction Company (NCC) posted a poor performance for 2Q FY 2012, below our and street expectations. Owing to the company’s poor performance in 1HFY 2012 and as no
respite is expected from the macro challenges faced by the company in the medium term, we are revising our estimates downwards for FY 2012 & FY 2013.
However, owing to its attractive valuations and diversified order book with
exposure to most growth sectors, we maintain our Buy view on Nagarjuna Construction.
Dismal performance on all fronts:
For 2Q FY 2012, NCC reported a 9.2% yoy decline in its top line to Rs. 1,090 cr, which was below our/street expectations of
Rs. 1,261cr/Rs. 1,271cr. EBITDA margin for the quarter came in at 9.5%, lower than
our estimate of 10.3%.
Interest cost during the September quarter came in at Rs. 70.9 cr a
yoy/qoq jump of 89.4%/10.9% which above our estimates. The company’s bottom
line came in at Rs. 11.4 cr, registering a yoy decline of 75.2%, owing to subdued topline
growth and escalating interest costs, and much lower than our/street estimate
of Rs. 29.8cr/ Rs. 29.1 cr.
Outlook and valuation:
The current outstanding order book of NCC stands at Rs. 16,570 cr (3.3x FY2011 revenue), with order inflow of Rs. 1,746 cr for 2Q FY2 012. Going ahead, we believe the NCC’s order inflow would be driven by EPC work of its own power plant.
However, earnings would continue to reel under pressure due to a soaring interest costs owing to high interest rate regime and increased debt levels – to fund its investments in the captive projects (read power project/road BOT project) and working capital requirements.
At the current price, the stock is trading at attractive valuations (4.4x its FY2013E earnings adjusted for its
investments and subsidiaries) and at 0.5x FY2013E on P/BV basis (standalone).
Our revised target price of Rs. 75 (earlier Rs. 82) is arrived on SOTP basis and implies
an upside of Rs. 38.0% from current levels hence we maintain Buy on the stock.
Angel Broking recommends Buy with a Target Price of Rs 75 (12 months).
(Shailesh Kanani
022-39357800 Ext: 6829
shailesh.kanani@angelbroking.com
Nitin Arora
022-39357800 Ext: 6842)
respite is expected from the macro challenges faced by the company in the medium term, we are revising our estimates downwards for FY 2012 & FY 2013.
However, owing to its attractive valuations and diversified order book with
exposure to most growth sectors, we maintain our Buy view on Nagarjuna Construction.
Dismal performance on all fronts:
For 2Q FY 2012, NCC reported a 9.2% yoy decline in its top line to Rs. 1,090 cr, which was below our/street expectations of
Rs. 1,261cr/Rs. 1,271cr. EBITDA margin for the quarter came in at 9.5%, lower than
our estimate of 10.3%.
Interest cost during the September quarter came in at Rs. 70.9 cr a
yoy/qoq jump of 89.4%/10.9% which above our estimates. The company’s bottom
line came in at Rs. 11.4 cr, registering a yoy decline of 75.2%, owing to subdued topline
growth and escalating interest costs, and much lower than our/street estimate
of Rs. 29.8cr/ Rs. 29.1 cr.
Outlook and valuation:
The current outstanding order book of NCC stands at Rs. 16,570 cr (3.3x FY2011 revenue), with order inflow of Rs. 1,746 cr for 2Q FY2 012. Going ahead, we believe the NCC’s order inflow would be driven by EPC work of its own power plant.
However, earnings would continue to reel under pressure due to a soaring interest costs owing to high interest rate regime and increased debt levels – to fund its investments in the captive projects (read power project/road BOT project) and working capital requirements.
At the current price, the stock is trading at attractive valuations (4.4x its FY2013E earnings adjusted for its
investments and subsidiaries) and at 0.5x FY2013E on P/BV basis (standalone).
Our revised target price of Rs. 75 (earlier Rs. 82) is arrived on SOTP basis and implies
an upside of Rs. 38.0% from current levels hence we maintain Buy on the stock.
Angel Broking recommends Buy with a Target Price of Rs 75 (12 months).
(Shailesh Kanani
022-39357800 Ext: 6829
shailesh.kanani@angelbroking.com
Nitin Arora
022-39357800 Ext: 6842)
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