NCC Limited is one of the largest Indian construction companies in terms of revenues. It has a well diversified order book with presence across buildings & housing, roads, water & environment, irrigation, electrical, metals, mining and railways. Also it has a pan India presence with offices across 13 cities in key states such as Maharashtra, Andhra Pradesh, Telangana, Karnataka, Gujarat, Uttar Pradesh, West Bengal, Tamil Nadu, etc. Key projects executed: Agra Lucknow Expressways – Uttar Pradesh; ESI Hospital and Medical College, Gulbarga, Karnataka; Outer ring Road, Hyderabad Growth Corridor – Telangana; Infrastructure development, Ministry of Defense ‐ Arunachal Pradesh; Water Supply Project, Rajkot ‐ Gujarat. 

Read more on the about us page for the company. 

Investment Rationale:

1.  Order book remains robust at ₹ 341.9 billion with order inflow of  128 billion in 9MFY19 (~ 200 billion YTD). NCC has increased its revenue guidance from 110 billion to ~ 120 billion now and expects to add ~ 70- 80 billion orders in 4QFY19E.


2.  Favorable industry dynamics: Various initiatives such as Bharat Mala, Sagar Mala, Pradhan Mantri Awas Yojna, Namami Gange Programme, Freight Corridors, Industrial Corridors, Smart Cities, etc. to provide additional impetus to Construction industry


3.  Diversified Order Book across industry Segments and Geography: Robust and regionally diversified order book diversified across 24 states in India with strong counter parties. Book to bill of 3x provides revenue visibility. Also its varied presence across segments helps in neutralizing the slowdown in order inflows in any one or two segments.

Debt profile comfortable: Debt to equity has come down from 1x in FY14 to 0.5x in FY18.  Gross debt is now ~  21.6 billion due to a significant ramp up in execution (on course to post ~65% YoY growth in FY19E) and increased Capex (~₹ 4 billion guided for FY19E).


The revenue for the company has picked up in last 12 months, growing at a robust pace surpassing street expectations. Forthcoming elections is one of the risks to order inflows however it has sufficient on its plate to execute.

The market cap of the company is  6000 Crores. The CMP is  100. One can look to buy at these levels and add if it comes down to 85-90 levels. With the current order book, the revenues can grow at ~15% from FY19-FY21E after an exceptional performance in FY19. The EBITDA and PAT margins will be stable to improving which can be seen in the historical performance of the company. On an EPS of  10 in FY20, we value it at 13x FY20E to come up with a target price of  130, a 30% upside from CMP.


Stock price performance:

The stock has become 5x in the last 5 years, implying a CAGR growth of close to 30%