NCC's Q1FY19 results (Outperformer) - Better than expected execution
Q1FY19 result highlights
- NCC’s Q1FY19 results were above estimate led by pick up in execution on the back of strong order backlog and higher margins. Recurring PAT grew 89.4%yoy to Rs1bn as against estimate of Rs836m.
- Revenue grew 17.2%yoy to Rs23.6bn (est: Rs22.2bn) led by robust order inflows of Rs253bn in FY18. EBITDA grew 56.6%yoy to Rs2.7bn (est: Rs2.3bn) and EBITDA margin expanded 290bp yoy to 11.3%, above estimate of 10.3%, led by better job mix and strong operating performance. The management is confident of maintaining a similar EBITDA margin for FY19.
- Interest cost grew 17.9%yoy to Rs1bn (flat qoq) largely due to higher BG/LC charges in view of the increased scale of operations/bidding. Gross debt rose to Rs18bn (flat yoy) from Rs13bn in Mar-18 due to increased working capital. Receivables grew from Rs21bn in June-17 to Rs24.4bn in Jun-18 but have subsequently reduced by ~Rs1.4bn due to recoveries from state government projects.
- Order inflow upto Jul-18 stood at Rs43.6bn (ex of GST) and it does not include Mumbai-Nagpur Super Expressway project worth Rs30.9bn (awaiting LOI). Order backlog as on Jun-18 stood at Rs306bn (ex-mining and international orders; 3.9x TTM revenue) and consolidated order backlog stood at Rs328bn.
- NCC has maintained it’s FY19 revenue guidance of ~Rs110bn and order inflow guidance at ~Rs140bn.
- Consolidated revenue grew 14%yoy to Rs25.1bn and recurring PAT grew 6.6x yoy to Rs1bn, which is almost in line with standalone recurring PAT. This implies reduction in contribution of loss from international construction and other businesses.
Key positives: Strong execution and margins and reduced losses in the international construction business.
Key negatives: Increase in gross debt.
Impact on financials: No major change in earnings.
Valuations & view
NCC’s robust order wins in FY18 and continued order wins YTD FY19 provide the company with the much-needed thrust to accelerate growth momentum. The recent incidences of BG encashment and unfavourable arbitration outcome for two of its previously completed projects have stretched its working capital levels (by ~Rs7bn) but NCC expects to gain substantial relief through its appeals/counter claims and recover most of its dues/restrict its liability. While we see risk to NCC’s FY19 revenue guidance due to execution constraints the sustained improvement in margins is quite encouraging. Valuations at 10.4x FY20E earnings (after building in the execution risk) are attractive. Maintain Outperformer with revised price target of Rs154.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.