NCC shares have further rerating potential post Q3 earnings, says Centrum; here’s why

Shares of construction firm NCC Ltd hit their all-time high today after the company reported a 40 percent rise in its consolidated net profit for the December 2023 quarter. Profit climbed to Rs 220.65 crore led by higher execution during the quarter. Profit came at Rs 157.7 crore in the December 2022 quarter.

The stock rose 4.51% to a high of Rs 229.40 against the previous close of Rs 219.50 on BSE.

NCC stock is trading higher than the 20-day, 50-day, 100-day and 200-day moving averages.

NCC share has gained 131% in one year and risen 29% since the beginning of this year. Market cap of the firm stood at Rs 13,514 crore. Total 12.45 lakh shares of the firm changed hands amounting to turnover of Rs 27.71 crore on BSE.

In terms of technicals, the relative strength index (RSI) of NCC stands at 68.1, signaling neither the stock is overbought or oversold. The stock has a one-year beta of 0.6, indicating low volatility during the period.

At 11:20 am, the stock was trading 2.05% lower at Rs 215 on BSE.

Revenue from operations climbed 34.5 percent to Rs 5,260.1 crore in Q3 against Rs 3909.60 crore in the December 2022 quarter. The company reaped the benefits of its record order wins witnessed in 2022-23, according to an exchange filing by NCC Ltd.

NCC logged its best-ever order inflows of about Rs 26,000 crore in 2022-23 on the back of higher outlay by the government under the National Infrastructure Pipeline (NIP).

NCC closed 2022-23 with an order book of Rs 50,244 crore, the benefits of which will be seen in the company's topline for the remainder of 2023-24. The company reported EBITDA of Rs 505.41 crore in Q3.

Centrum Broking in an earnings preview said NCC has further rerating potential. It has an add rating on the stock with a target price of Rs 210.

"We believe that diversified EPC players like NCC have further rerating potential given the vast opportunities across multiple infra segments to tap into. We have increased our PAT estimates for FY24/FY25 by 16%/17% to factor in better execution and margins. Our revised target price now stands at Rs 240 (Rs 182 earlier) based on 13x Sep25 PAT (12x earlier). We maintain our Add rating on the stock," said the brokerage.

Nuvama has revised its target to Rs 267 against Rs 194 earlier. It has maintained a buy call on the stock.

"Robust order intake/margin improvement leads us to revise FY24E/25E/26E EPS upwards by 20%/13%/11% and P/E multiple from 15x to 18x. Maintain ‘BUY’ with a revised TP of INR267 (INR194 earlier) while rolling forward the valuation to Q3FY26E," said Nuvama.

NCC Limited is engaged in construction/project activities in the infrastructure sector. The company is engaged in the infrastructure sector, primarily in the construction of industrial and commercial buildings, housing projects, roads, bridges and flyovers, water supply and environment projects, mining, power transmission lines, irrigation, and hydrothermal power projects, real estate development.

Also read: Stocks in focus: Jefferies cuts RIL, HDFC Bank weights, ups SBI, Axis Bank's in long-only portfolio. Here's why

Also read: Zomato shares jump 5% to hit new 52-week high; brokerages see up to 67% upside