NCC has expanded its presence in various sectors of construction and infrastructure development. NCC’s construction endeavors span across the nation and encompass Buildings, Transportation, Water and Environment, Electrical Transmission and Distribution, Irrigation, Mining and railway projects. In the operations expanding over four decades company has seen significant growth in terms of quality and quantity. 

NCC’s Business

• NCC operates in construction and infrastructure space since 1978. In this time company has completed 490+ building projects, 20,000+ kms water pipelines and 350,000+ Acres land irrigation.
• NCC has seven business divisions which include - Building construction, Transportation, Water & environment, Electrical T&D, Irrigation, Mining and Railways.
• As of Mar-23 NCC has an order book value at 50,244crores. Below is percentage of order from different divisions -

• Company has its presence in 27 states in India and two more countries. To control its operations they have a strong network of 225 operational sites and 10 offices across India.

Strong Industry Outlook

• India has an ambition to become a USD 30 trillion economy by 2047, and for this India needs to invest around USD 20 trillion in its infrastructure which provides tremendous opportunities to companies operating in this sector. 
• In order to grow a country needs faster and cost effective logistics. India’s logistic cost as a percentage of GDP is around 14-18% against the global benchmark of 8%. In world banks’ logistic performance index India stands at 38th position and Indian government is making constant efforts to improve it.
• Indian government has announced initiatives like National Infrastructure Pipeline (NIP) to boost Indian Infrastructure and it has planned capital expenditure of Rs. 142 lakh crores between FY22-25.
• In the last budget government has announced the establishment of Infrastructure Finance Secretariat to drive private lenders to provide finance to Infra sector.

Peer Comparison

Strong Growth Plans

• NCC is planning to enter into a new vertical to maintain a growth rate of 20% Y-o-Y.
• Company is focusing on improving in-house abilities for better planning, Engineering, Designing process, Digitalization, Quality, Safety, Governance etc.
• Keeping debt at low level to maintain adequate head room for growth plans.
• Diversification of order book across major states to mitigate risk of execution and collection.

• The Company achieved a Revenue CAGR of 17% in the last 3 years and Company planning to continue sustainable growth.

   

Key Performance Indicators for NCC

Strong Growth in Order Book

Low D/E 

Growing Cash Profit

Financial Performance

Revenue – NCC has reported growing profit since last three years with CAGR of 17%.

EBITDA – Improvement in EBITDA Y-o-Y basis reflects improvement in operational efficiency and margins.

Net Cash Flow - Net Cash flow has been reduced this year still company is able to generate positive cash flow. Given the increase in order book, company has large outflow in investing activities.

ROCE – ROCE has improved tremendously almost near 20%.

Shareholding Pattern – Promoters’ and FII’s have increased their holdings significantly in last fiscal.

SWOT Analysis 

Strengths - 

• Showing good signs of profitability & efficiency.
• Effectively using Shareholders fund - Return on equity (ROE) improving since last 2 year.
• Company with Zero Promoter Pledge.
• Company has been maintaining a healthy dividend payout.

Weakness – 

• Company’s’ cost of borrowings is high.
• Declining profits every quarter for the past 2 quarters.

Opportunity – 

• Working capital requirement of company has been reduced from 132 days to 82.5 days. Improving company’s’ liquidity.
• D/E of company has reduced over past few years, allowing company to explore new verticals.
• FII’s are showing faith on company as they have increased their position by more than 10%.

Threat – 

• There has been an increase in the number of operators in the niche segment that the company functions in.
• Company has direct risk of supplies as for new projects they need heavy supplies.

Conclusion – 

• Infra and construction sector has shown significant growth and expected to do same in coming years, NCC being one of the prominent player in sector has direct advantage.
• Rising order book value is sign of sustainable growth in company and reflects about strong business health.
• Continuous growth in Revenue and EBITDA has been witnessed and tells a lot about financial health of company.
• NCC has a P/E of 22.19 against the industry average of 29.50.

Note – Some parts of data reflected in report is taken from following sources – 

• Annual Reports
• Investor Presentation – NCC Ltd.

• Company website

  - Team Icore