NCC Shoots Up 8% As Analysts Cheer Quicker Cash Generation, Lower Debt

Construction company NCC’s shares surged by more than 8% on Thursday, following robust earnings for the fourth quarter.

What Happened: In the March quarter, NCC witnessed a 25% year-on-year increase in consolidated net profit, reaching ₹239.2 crore, driven by heightened execution.

Revenue for the infrastructure firm surged by 31% to ₹6,484.9 crore, benefiting from its record order wins in 2022-23. Notably, it received its highest-ever order inflow of about ₹26,000 crore in 2022-23 due to increased government spending under the National Infrastructure Pipeline (NIP).

Despite increased execution activity, NCC managed to reduce its gross debt by ₹470 crore quarter-on-quarter, with its net working capital cycle improving from 118 days to 84 days year-on-year.

Analyst Views: Analysts remain optimistic about NCC’s prospects, highlighting its substantial improvement in net working capital and plans to further reduce debt to ₹500 crore by March 2025.

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Analysts at JM Financial commend NCC’s resilience during adverse business cycles and its evident operational and NWC management improvements. They also highlight the receipt of a portion of proceeds from the firm’s Vizag deal, with expectations of further strengthening the balance sheet.

With a robust backlog ensuring revenue visibility, JM Financial upgraded NCC’s earnings projections for FY25 and FY26. They value the stock at 15 times the estimated core earnings per share (excluding other income) for March 2026 to set a revised price target of ₹285, indicating a 14% increase from the previous target, while maintaining a “buy” rating.

Despite temporary halts in development plans due to soft real estate conditions, analysts at Nuvama anticipate substantial value gains from NCC’s land holdings in the future. The brokerage maintains a “buy” rating on the stock, revising the target price upwards to ₹290 from ₹267.

Protected From Slowdown: Bullish sentiments towards NCC are further supported by its diversified presence in the construction sector, which shields it from potential slowdowns in specific verticals. Additionally, analysts said NCC boasts a substantial land bank across South Indian cities, promising significant value appreciation once the real estate market picks up.

Price Action: NCC’s share price was up 8.15% at ₹271.90 in afternoon trade on Thursday, nearing a record high.

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