For NBCC, new order inflows are a shot in the arm
Source: Live Mint
NBCC (India) Ltd, a Navratna public sector undertaking in the construction space, is hogging limelight as the company has received a slew of new work orders lately. In the past one month, the NBCC stock has gained 13%.
Last week, the National Company Law Appellate Tribunal appointed NBCC as the project management consultant (PMC) for Supertech Ltd’s 16 real estate projects valued at ₹9,445 crore. NBCC is already completing stalled projects of the Amrapali Group.
With its appointment as the development agency for housing projects stranded due to the bankruptcy of the developers, NBCC has seen the opening up of a new revenue stream. The Amrapali Group project is valued at ₹8,400 crore, of which about 90% of the work is finished, and a complete handover is expected by March.
NBCC mainly undertakes PMC and redevelopment work for government organisations, accounting for over 90% of its revenue. Its other businesses are engineering, procurement and construction (EPC) and real estate projects on self-owned land parcels.
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The inflow of new work orders bodes well for investors sentiment with the management eyeing ₹1 trillion work order book by FY25-end. In the September quarter (Q2FY25), NBCC’s consolidated order book stood at ₹84,400 crore, up from ₹52,000 crore at the end of FY24, representing 7.6x its trailing twelve-month revenue. Redevelopment projects accounted for nearly 53% of the order book, followed by PMC with a 45% share and real estate at 2-3%.
NBCC is trying to boost its presence in the real estate segment and is undertaking due diligence for a few real estate projects in Delhi, Jaipur, and Kochi. Rising focus on real estate should aid its overall margin outlook as margins in these projects are likely to be relatively higher at 20-25%. The management is targeting to start construction work on projects worth ₹800 crore in FY25 and ₹2,000 crore in FY26.
Overall, NBCC targets 25% revenue growth in FY25, against 16% in first half of FY25, with Ebitda margin of 5.5-6% against 4.2% in the first half. Although NBCC receives orders on nomination basis at a fixed fee of about 8%, it has managed to improve its margins with lower fixed cost for incremental sales. Its revenue has grown at CAGR of 14% during FY21-24, while Ebitda has grown at 61%, implying a 310 basis points improvement in margin.
Meanwhile, the stock has seen a sharp rally in calendar year 2024 so far, rising 84% and currently trading at a valuation multiple of 31x its FY26 estimated earnings, showed Bloomberg data. Further meaningful upside depends on the pace of increase in order inflow; however, timely execution is even more crucial as delays in project timelines can hurt NBCC’s profitability.
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