Nagarjuna Construction Company : Target Price Rs. 45


For 1QFY2013, Nagarjuna Construction Company (NCC)’s performance was significantly above and consensus estimates.

However, the company continued its dismal show at the EBITDAM level. The current outstanding order
book of NCC stands at Rs. 20,520 cr (3.5x FY2013 E revenue), with an order inflow of Rs. 2,001 cr (up 48.3 per cent yoy) for 1QFY2013. We maintain our Buy view on the
stock.

Robust revenue growth offset by poor margin performance: On the top-line front,
NCC reported a jump of 29 per cent yoy to Rs. 1,472 cr, which was higher than our and
the street’s expectation of Rs. 1,187cr and Rs. 1,257cr respectively. Revenue growth
was driven by building, power and water divisions.

On the EBITDAM front, the company’s performance was in line with our estimates at 7.9%, a dip of 230bp on
a y-o-y basis. The interest cost came in at  Rs. 93cr, a y-o-y jump of 7.5 per cent but a
decline of 5.4 per cent on a sequential basis.

At the bottom-line level, NCC reported a y-o-y decline of 28.6 per cent to Rs. 17 cr, higher than our and consensus estimates owing to a strong performance on the revenue front.

Outlook and valuation:

For FY2013 the company has given a guidance of 10 to 15 per cent growth on the revenue front and is hopeful of maintaining the EBITDAM at 8 to 9 per cent. NCC’s captive power plant is expected to contribute Rs. 350 cr to FY 2013 revenues.

Further, by end of FY2013 NCC is looking to reduce its debt to below Rs. 2,000 cr levels through stake sale in its road BOT and power projects. During the quarter the company has also managed to bring its receivable days down to 88 days from 91 days in 4Q FY2012.
The stock is currently trading at low valuation of 0.4x P/BV FY2014 and, hence, we maintain our Buy view on the stock with a sum-of-the-parts (SOTP) target price of Rs. 45.

CMP Rs. 39
Target Price Rs. 45
Investment Period 12 Months

Review By
Mr. Nitin Arora
022-39357800 Ext: 6842
nitin.arora@angelbroking.com

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