ICICI Direct Sees Upside In Mid Cap Construction Stock, Buy Call Given: Target Price Rs 110

ICICI Direct has assigned buy call to mid cap construction stock, NCC Ltd with a target price of Rs 110 apiece. The current market price of the stock is Rs 90 apiece. If you buy NCC Ltd now, you will get potential 22% return in a target time period of 12 months. Check key details below:

1. NCC Ltd Stock Outlook & Return

The current market price of NCC Ltd is Rs 90 apiece with an intraday decline of 1.53%. The stock's 52-week high is Rs 96 apiece and 52-week low is Rs 51 apiece, respectively. The company has a market capitalisation of Rs 5,669 crore. The stock has given 21% return in last 3-months and 81% return in last 5-years.

2. NCC Secures Orders Worth Rs 5033 crore In Q3 FY23

The company has secured orders worth Rs 5033 crore in Q3FY23, with inflows of ~Rs 12150 crore in 9MFY23. We note that NCC's order book at the end of Q2FY23 on a standalone basis was at an elevated level of Rs 40,020 crore (3.4x order book to TTM bill ratio). The management has guided for ~Rs 16,000 crore of order inflows during FY23, which is on track.

3. What Should Investors Do?

NCC's share price has de-grown by 32% over the past five years (from ~Rs 132 in January, 2018 to ~Rs 90 levels currently). Strong execution and management guidance of continued traction along with margin improvement make us maintain our constructive view and BUY rating on the company. We value NCC at Rs 110/share (at 10x FY25 P/E).

4. Key Triggers For Future Price Performance

Firmly placed to capitalise on a huge infrastructure pipeline; continued momentum in awarding activities to translate into healthy order inflows. Strong order book to ensure topline growth (16% CAGR over FY22-25E) with margins stable at ~10%. Focus on monetisation of non-core subsidiaries to bring in cash flows. Unwinding of receivables to provide liquidity boost; strengthening of balance sheet is likely with a gradual decline in debt.

5. About NCC Ltd

NCC is one of the leading construction companies in India with a presence across varied verticals of the infrastructure space such as buildings, roads, water, mining and electrical with order book at Rs 40,020 crore as on Q2FY23. Well-diversified order backlog, robust execution capabilities and strong focus on debt reduction, working capital to characterise NCC over the next few years.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.