A large order book and contribution from the new road projects should help NCC post robust growth.
After bagging five orders worth Rs 583 crore last month, Nagarjuna Construction Company (NCC) bagged new orders worth Rs 1,221 crore on Monday (a Rs 647-crore expressway construction project and Rs 358-crore turnkey electrical works). The latest orders have helped NCC surpass its order guidance of Rs 8,000 crore for 2009-10, besides enhancing its outstanding order position to about Rs 16,000 crore, or over 3.8 times its revenues in 2008-09, providing good revenue visibility.
The strong order book is a result of its diversified presence, such as in buildings, transportation, water, electrical and irrigation, along with its foray into power, oil and gas, metals and mining segments. In the power segment, it is developing three power plants with a total capacity of 1,700 Mw, including its own 1,320-Mw power plant that is to be commissioned by 2014. While NCC has acquired land and secured 70 per cent of the coal required for the power project, financial closure is expected soon.
On the back of its strong order book, analysts expect NCC’s core construction business to grow 20 per cent annually over the next two years. Overall growth is expected to be higher, driven by contribution from NCC’s two operational built-operate-transfer-based road projects (113 km), including the 50-km Bangalore Elevated project (commissioned in January 2010). Besides, by end-March 2010, NCC intends to commission two road projects measuring 142 km, followed by a 36-km project, to be commissioned in July 2010.
Notably, it has already prequalified for over 30 road projects worth Rs 27,000 crore. Thus, analysts expect NCC’s road business to bag more orders in future.
Meanwhile, analysts have pegged NCC’s value at Rs 185 per share on the sum-of-the-parts basis (including the real estate business). While the stock is a good long-term bet, at the current price of Rs 163.30, there is 12-13 per cent upside potential in the near term.
With inputs: Puneet Wadhwa & Jitendra Kumar Gupta
