December 9, 2015

NBCC: Increased focus on urban infra, monopoly in civil works for PSUs and debt-free status key positives

National Buildings Construction Corporation (NBCC) has seen no dearth of business. In the last month itself, it received orders of over Rs 5,000 crore. Not surprisingly, it has been a clear outperformer on the bourses yielding gains of 19 per cent since January 2015 at a time when Sensex is down seven per cent. Even in the last one month when markets were down, NBCC has traded flat. NBCC has also been among the better performing PSU stocks in 2015.

Given that NBCC gets priority to execute government’s civil contracts, the company has positioned itself as a competitive player in the business. Thus, analysts believe it is a serious contender to execute the Smart Cities project, once these contracts are awarded.

Analysts expect NBCC’s order book (Rs 30,000 crore as on September) to double by FY18. That apart, relatively shorter turnaround period for projects and zero-debt levels also make NBCC a preferred pick in the real estate segment.

Also, NBCC is also increasing the share of revenues from real estate and EPC business, which accounted for remaining 20 per of its revenues in Q2’FY16 (13 per cent a year ago). Since these businesses earn 17-29 per cent margins, any increase in revenue without significant capital deployment could boost margins and reduce dependence on PMC business.

Currently at Rs 945.10, the stock of NBCC trades its FY17 price earnings at 21.7 times.

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