Mid-Cap Construction Company Declares 110% Dividend, Stock Can Rise Upto 23.28%

The board of NCC, a mid-cap, construction company declared a dividend of 110% for the financial year when it posted the March performance report on the securities exchange. The company posted a robust performance. Strong positive CFO-led marked reduction in gross/net debt and continuing strong orders were the key notables of NCC's Q4 and FY23, Anand Rathi highlighted in its research coverage report.

The stock broking firm feels that the construction company has a bright outlook for FY24 going ahead. Therefore it suggests investors to buy the stock as it believes that the stock price will go up by nearly 23.28% to reach a target price level of 143 per share.

Q4FY23 Performance

Strong positive CFO-led marked reduction in gross/net debt and continuing strong orders are the key notables of NCC's Q4 and FY23. Execution abilities, too, were at the fore and allowed it to benefit from it's a sturdy order book.

NCC's Q4's fresh third-party orders of ~Rs61bn, additional (~Rs30bn) scope at its MDO project, and ~Rs 42 billion of further crystalised EPC potential at rural drinking-water supply orders gave it the strongest single-quarter additions of ~Rs133bn.

With this, full-year additions, too, were at a new high (~Rs 259 billion) and took the group OB to a life high of ~Rs 502 billion (3.3x TTM revenue).

However, the Q4 better scale notwithstanding, strong recoveries, higher mobilisation advances, and trade payables helped to lower gross debt (~Rs 9.7 billion q/q, ~Rs 2 billion y/y, to ~Rs 9.8 billion). The net-debt reduction was even sharper (~Rs 10.9 billion q/q, ~Rs 4.4 billion y/y, to ~Rs 1.8 billion).

Guidance

Management sees core operations to hold the potential to effect Rs 1 billion- Rs 2 billion de-levering in FY24.On recent strong orders added and its continuous healthy execution makes management hopeful about FY24 revenue to be ~20% better than FY23.

The EBITDA margin is likely to mirror FY23 but a ~50bp PAT margin expansion is envisaged. FY24 capex is likely at ~ Rs 2.8 billion, but potential not ruled out (based on new orders) and finance costs are envisaged at Rs 5 billion-5.2 billion.

Valuation & Rating

Accounting for significantly stronger-than-expected orders added, Anand Rathi's revenue estimates rise. "We also consider FY23's notably lower net debt. Hence, FY24e earnings rise ~15% and FY25e are up ~21%. At the CMP, the stock (excl. investments) is available at an EV/EBITDA of 4.1x FY25e. "

Dividend Details

The Board of Directors of the mid-cap company has recommended a final dividend of Rs 2.20 (110%) per Equity Share of the face value of Rs 2 each, for the Financial Year 2022-23 for consideration and is subject to the approval of the Members at the ensuing Annual General Meeting.

The board has fixed Friday, August 25, 2023, as the record date to determine the names of eligible shareholders of dividends for the financial year. The dividend, if approved by the shareholders at the AGM of the Company will be paid on or before September 30, 2023.

Share Price Movement

The latest closing price of this mid-cap construction stock is Rs 114.45, it was down 1.08% on an intraday basis. In the last one year and three years, its share price has surged massively by 82.83% and 321.55% respectively.

Disclaimer

The stocks have been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the author, or the brokerage house will not be liable for any losses caused as a result of decisions based on the write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.