Shares of NCC Ltd plunged 15 per cent in Friday's trade on disappointing December quarter results and lowering of FY25 guidance by the civil construction company. There are near-term execution challenges, stock analyst said even as the company stayed cautiously optimistic.
NCC's debt ballooned to Rs 2,420 crore, up about Rs 680 crore sequentially, as working capital cycle deteriorated due to payment delays, said Nuvama Institutional Equities. This brokerage said that a muted hike in infra capex in the recent Budget should hurt the execution and payment cycle.
"We are slashing FY25/26E/27 EPS by 15 per cent/8 per cent/5 per cent and PE multiple from 22 times to 17 times. Maintain ‘BUY’ with a revised target price of Rs 282 from Rs 382 earlier, rolling forward valuations to Q3FY27E," it said.
On the back of slower L1 awards, muted collection in water segment and election related slowdown, NCC has downgraded its FY25 revenue growth guidance to 5 per cent from 15 per cent earlier. Ebitda margin guidance has been cut to 9.25 per cent against 9.5 per cent. HDFC Institutional Equities said the margin trajectory is required to be monitored due to excessive competitive pressure. NCC expects that it shall meet its guided order inflows of Rs 20,000-22,000 crore (25 per cent decline YoY) for FY25, with inflows of Rs 23,600 crore including L1 already in place.
"Prospects pipeline is Rs 2.1 lakh which will add further to order book. Standalone gross debt increased due to a slowdown in payments from clients, given the elections. Given the weak execution, we have recalibrated our estimates lower. We maintain BUY with a reduced target of Rs 335," it said.
NCC shares fell 14.58 per cent to hit a low of Rs 202.85. The stock is down 12 per cent in the past one year.
NCC ended the December quarter with an order book of Rs 55,500 crore, with book-to-bill of 2.8 times. It is L1 in Rs 9,000–1.0000 crore projects.
"Slower revenue growth is attributed to general elections and delayed payments from government projects. However, NCC maintains a strong order book and expects improved execution in Q4 and FY26. Strategic focus on infrastructure projects, smart meters, and water initiatives continues to drive long-term growth," Arihant Capital Markets said.