The civil construction industry is vital, contributing over $10 trillion to the global economy. Employing millions, it encompasses infrastructure projects such as roads, bridges, and airports. Expected to grow at a CAGR of 5.7%, the industry aims to meet rising urbanization and infrastructure demands worldwide.
With a market capitalization of Rs 20,232.36 crore, the shares of NCC Ltd were trading at Rs 322.05 per share, increasing around 0.51 percent as compared to the previous closing price of Rs 316.30 apiece.
Looking into the company’s financial performance, revenue soared by 31 percent from Rs 4,949 crore in Q4FY23 and Rs 6,485 crore in Q4FY24 but, during the same period of time, net profit magnified by 18 percent from Rs 203 core to Rs 239 crore.
ICICI Direct, one of the well-known brokerages in India, gave a ‘Buy’ call on the construction stock with a target price of Rs 395 apiece, indicating a potential upside of 23 percent from Monday’s closing price of Rs 322.05 per share.
Here is the rationale behind the bullish potential upside:
● NCC’s strong order book of ₹51,483 crore, supported by a 2.8x book to bill ratio, underscores robust future project execution capabilities. Despite expected ordering delays in 1HFY25 due to elections, the company anticipates booking ₹20,000 – 22,000 crore in new orders, aiming for 15% revenue growth in FY25.
● With a consolidated order book at ₹57,536 crore and a substantial FY24 order inflow of ₹27,283 crore, NCC projects a healthy revenue CAGR of around 15% from FY24 to FY26E, targeting ₹24,209 crore by leveraging its strong market position and sustained growth strategy.
● The formation of a new government in Andhra Pradesh may revive the Amravati Capital City project, potentially presenting NCC with a new order opportunity. Previously, NCC had orders worth approximately ₹6,600 crore from Amravati in 2017-18, a significant portion of which was canceled in 2019.
● NCC anticipates EBITDA margins of 9.5% – 10% for FY25, focusing on revenue growth amid competitive bidding. Brokerage projected margins of 10%/10.5% for FY25/FY26 (up from 9% in FY24) reflect robust execution capabilities and stability in finance costs, supporting a projected 27.9% earnings CAGR from FY24 to FY26E.
● Strong earnings growth is expected to enhance return ratios, with RoEs forecasted to increase to 15.4% in FY26 from 12.3% in FY24. This improvement reflects NCC’s
efficient capital deployment and operational efficiency, driven by sustained topline expansion and margin enhancement strategies.
According to the company filing, NCC Ltd received orders valuing { 335 Crores (Excluding GST) in June’2024. The orders are related to the Building Division. These orders are received from Private Limited Company and do not include any internal orders.
NCC Limited operates in the infrastructure sector, notably constructing industrial and commercial buildings, housing projects, highways, bridges, and flyovers, water supply and environmental projects, mining, power transmission lines, irrigation, and hydrothermal power projects.
Written by:- Abhishek Singh
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