Shares of ITD Cementation have gone up over 30% in the last 30 days, analysts at Nuvama see the stock surging further as the company’s September quarter profits were in line with the brokerage firm’s estimates.

The ITD Cementation Analyst: Mehul Mehta for Nuvama maintained the “buy” rating for the stock upgrading the price target to ₹340 from ₹296. The revised target indicates an around 27% upside from the stock’s last closing price of ₹268.45.

The ITD Cementation Thesis: In the September quarter, ITD Cementation reported a strong consolidated operating profit of ₹158 crore, in line with the brokerage’s expectations of ₹159 crore. As per the brokerage, this performance was driven by a quarter-on-quarter (QoQ) expansion of 100 basis points in the operating profit margin, reaching 9.8%.

The analysts however pointed out that the company’s revenue of ₹1,610 crore missed their estimates of around ₹1,730 crore. The drop in revenue was attributed to heavy rains in July, impacting business operations.

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The order book for the company stood at ₹22,080 crore at the end of September. The brokerage said that the management’s strategic focus revolves around bidding for projects with limited competition, particularly emphasizing complex ventures like maritime structures and underground metro projects. As per Mehta, this shift aims to enhance profitability, with a specific focus on higher average ticket size projects exceeding ₹1,500 crore, which is anticipated to result in double-digit margins. With a bid pipeline of around ₹14,000 crore, the management anticipates achieving an order inflow of ₹8,000 crore in FY24.

The domestic brokerage’s outlook for operating profit margin (OPM) is optimistic, with an expected expansion of 60 basis points (bp) and 40 bp in FY24 and FY25, respectively. This positive projection is based on the robust margin performance in Q2FY24, which the company’s management believes to be sustainable.

Price Action: ITD Cementation’s share price was up 0.99% to trade at ₹271.10 in early trade on Tuesday.

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