september 4, 2014 rating matrix nbcc ltd target : | 538...

September 4, 2014

Initiating Coverage

ICICI Securities Ltd | Retail Equity Research

Treasure trove in infrastructure space… National Building Construction Corporation (NBCC) is one of the largest public sector enterprises (PSEs) in the construction industry. We believe its PMC division (82% of FY14 revenues) is an economic moat for NBCC in which it gets orders largely on a nomination basis, enjoys negative WC & cash rich balance sheet along with a strong order book. We see the next leg of opportunities for NBCC in the PMC division from redevelopment of old government properties. The recent Navratna status also opens up opportunities to be explored with sick PSU land banks. We initiate coverage on NBCC with a BUY recommendation and a target price of | 538 [16x FY16 EPS and 0.6x PEG ratio (largely in line with current PEG)].

PMC…economic moat for NBCC!!! We believe the project management consultancy (PMC) division (82% of FY14 revenues) is the economic moat for NBCC in which it gets 70-80% orders on a nomination basis from various ministries given its public work organisation (PWO) status. It also enjoys negative working capital & a cash rich balance sheet and has a strong order book providing visibility. Currently, its order book stands at ~| 17,000 crore, 4.2x FY14 revenues.

Redevelopment projects…new thrust to growth… We believe the next leg of opportunities for NBCC lies in redevelopment of old government properties. The government has identified 30 old colonies in the redevelopment space in Delhi. Out of this, eight have only been awarded/under negotiation (NBCC’s potential market share – 62.5%) each aggregating | 2000-10,000 crore. NBCC, after successfully executing the New Moti Bagh project and being the only PSU in this segment, is likely to be a key beneficiary from these opportunities.

Real estate…Navratna status throws up new opportunities… NBCC has smartly deployed part of its cash in the long term value enhancing real estate business. Currently, it has a land bank of 170 acres (northern region – 55%). Secondly, the recent Navratna status for NBCC opens up opportunities to be explored in sick PSU land banks. Media reports indicate the company is in discussion with six PSUs.

Risk-reward still favourable despite run up; initiate with BUY rating… Though NBCC has run up sharply in the last six to 12 months, we believe the risk-reward is still favourable. Based on our scenario analysis, NBCC is still trading close to the Bear case scenario (| 427/share) and can offer significant upsides from current levels. Hence, we initiate coverage on NBCC with a BUY recommendation and an SOTP based target price of | 538/share (implying P/E of 16.0x FY16E & PEG of 0.6x). Exhibit 1: Financial performance

FY12 FY13 FY14 FY15E FY16ENet Sales (| crore) 3,429.3 3,186.8 4,008.8 4,878.8 5,978.6 EBITDA (| crore) 147.9 160.2 251.2 308.7 392.9 Net Profit (| crore) 190.2 207.5 247.2 327.8 398.4 EPS (|) 15.8 17.3 20.6 27.3 33.2 P/E (x) 27.5 25.2 21.2 16.0 13.1 Price / Book (x) 6.6 5.5 4.6 3.8 3.2 EV/EBITDA (x) 26.4 23.1 16.1 12.3 9.1 RoCE (%) 18.3 16.7 22.2 22.5 23.7 RoE (%) 23.9 21.8 21.9 24.0 24.1

Source: Company, ICICIdirect.com Research

NBCC Ltd | 466 Rating matrix

Rating : BuyTarget : | 538Target Period : 12 monthsPotential Upside : 15%

YoY Growth (%)

(YoY Growth) FY13 FY14 FY15E FY16ENet Sales -7.1% 25.8% 21.7% 22.5%EBITDA 5.5% 57.7% 22.9% 27.3%Net Profit 9.1% 19.1% 32.6% 21.5%EPS (|) 17.3 20.6 27.3 33.2

Valuation summary

(x) FY13 FY14 FY15E FY16EP/E 25.2 21.2 16.0 13.1 Target P/E 28.8 24.2 18.2 15.0 EV / EBITDA 23.1 16.1 12.3 9.1 P/BV 5.5 4.6 3.8 3.2 RoNW (%) 21.8 21.9 24.0 24.1 RoCE (%) 16.7 22.2 22.5 23.7

Stock data Particular AmountBloomberg/Reuters Code NBCC IN / NATO.NSSensex / Nifty 27019 / 808330 Day Average Volume 481,177.0 Market Cap (Rs crore) 5,592.0 52 week H/L 486 / 106Equity Capital (Rs crore) 120.0 Face value | 10Promoter's Stake (%) 90.0 FII Holding (%) 1.1 DII Holding (%) 0.9

Comparative return matrix (%) Return % 1M 3M 6M 12MNBCC (4.6) 44.5 216.1 281.7 NCC Ltd (5.4) (6.9) 161.9 284.3 Simplex Infrastructure (1.5) 23.1 201.6 626.1 Supreme Infrastructure (14.6) 0.1 65.9 94.7

Price movement

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01,0002,0003,0004,0005,0006,0007,0008,0009,000

Price (R.H.S) Nifty (L.H.S) Analyst

Deepak Purswani, CFA deepak,[email protected]

Nikunj Gala [email protected]


Company Background National Building Construction Corporation (NBCC) was incorporated in November, 1960 as a public sector undertaking (PSU) under the aegis of the Ministry of Urban Development (MoUD). NBCC, a Schedule ‘A’ Navratna, has grown to become one of the largest public sector enterprises (PSE) in the construction industry. Its core competency lies in rendering project management consultancy services (PMC), execution of civil engineering projects (EPC contracting) and development of real estate projects. It provides services in a wide gamut of projects of varied nature, complexities and at socio-political geographical locations, both at home as well as overseas. NBCC is the only GoI enterprise engaged in all three business verticals. The projects undertaken by the company are spread across 24 states and one union territory in India. Furthermore, NBCC ventured into foreign markets in 1977 and has executed many diversified projects over the years in countries like Mauritius, Nepal, Maldives, Libya, Iraq, Yemen, Turkey and Botswana. It is also exploring opportunities in Africa and West Asia to expand its business. In addition to this, NBCC has received approval to open offices in Muscat in West Asia and Botswana in Africa and expects to receive orders from these countries within a year. This strategy of the management to expand its business internationally will be beneficial in the coming years. Due to the vast experience and quality of services rendered by NBCC, a number of central government ministries and various state governments are utilising the services of NBCC as their extended engineering arm. Recently, the company has been notified as a public works organisation (PWO) as per which government department(s)/PSUs and autonomous bodies can award works to NBCC on a nomination basis.

Exhibit 2: Major milestones


FII & DII holding trend (%)

0.67 0.54

1.57

1.12

2.08

1.64

0.740.90

0.00

0.50

1.00

1.50

2.00

2.50

Q2FY14 Q3FY14 Q4FY14 Q1FY15

(%)

FII DII

Shareholding pattern (Q1FY15) Shareholder Holding (%)

Promoters 90.0

Institutional investors 2.0

General public 8.0

IPO snapshot Particular ValueIssue opened on March 22 - 27, 2012

Price Band | 90 - 106

Issue Size | 108 - 127 crore

Issue Size 12 crore equity shares

Face Value | 10

Pre-issue Equity | 120 crore

Post-issue Equity | 120 crore

IPO Oversubscribed 4.93 times

Issue Price Fixed | 106

Listing Date 12 April, 2012

Rectangle


Exhibit 3: Segmental details


Project management consultancy (PMC)

Real estate development EPC contracting

Scope of work

Management and consultancy services for a range of civil construction projects including residential and commercial complexes, redevelopment of colonies, hospitals, educational institutions, infrastructure works for security personnel, border fencing as well as infrastructure projects such as roads, water supply systems, storm water drainage systems, water storage solutions and solid waste management schemes

EPC contract segment include engineering and construction services for power projects, including design and execution of: (i) Civil, structural and architectural works for power projects (ii) Cooling towers (iii) Chimneys

Real estate development segment focuses on principally two types of projects, namely: (i) Residential projects, such as apartments & townships and (ii) Commercial projects, such as office buildings and shopping complex

Order book (As on FY14)

| 14,266 crore | 1,274 crore | 460 crore

Revenue share (FY14 revenue)

~82% | 3289 crore

~16% | 625 crore

~2% | 95 crore

Value growth (FY04-14 CAGR)

19.3% 32.7% 4.4%

EBIT margin (FY12-14 Average)

7.1% 17.5% 13.1%

Growth drivers Opportunity from redevelopment of government colonies and infrastructure sector

Development on sick PSU’s land bank & modernisation of printing press

Opportunity from power sector & international market

Major clients Ministries such as MoUD, rural development, commerce and state government

Ministry of Home Affairs, Housing & Poverty Alleviation, MoUD, MoRD

NTPC, Bhel, Apgenco, KPCL, Mahagenco


Investment Rationale

PMC…economic moat for NBCC!!!

Project management company (PMC), which accounted for 82% of total revenues in FY14, is the cash cow business for NBCC. Recently, NBCC has been notified as a public works organisation (PWO). PWO is an organisation, which is covered under revised Rule 126 (2) of General Financial Rules (GFR), which implies government department(s)/PSUs and autonomous bodies can award the works to PWO on a nomination basis. Besides revised Rule 126 (2), various ministries prefer NBCC over others for the following reasons:

To avoid cost escalation issues from private companies To avoid due diligence process To shield itself by transferring accountability to NBCC Government authorities like CAG, CBI continuously monitors NBCC

As a result, NBCC gets 70-80% contract on a nomination basis from various ministries like Ministry of Urban Development, Home Affairs, Defence, External Affairs, Commerce & Industry, Corporate Affairs, Finance, New & Renewable Energy, etc. Then, it conceptualises the plan, prepares a detailed project report and outsources it to contractors selected by competitive bidding. In this division, it gets upfront advance from its clients. On the other hand, it gets an extended credit period from contractors. Consequently, its net working capital has remained negative, a key differentiator from other construction companies.

Exhibit 4: Revenue contribution from PMC division

3429

.3

3186

.8

4008

.8

4878

.8

5978

.6

3144

.7

2526

.8

3288

.9

4060

.0

5042

.0

91.779.3 82.0 83.2 84.3

0.0

1500.0

3000.0

4500.0

6000.0

FY12 FY13 FY14 FY15E FY16E

(| c

rore

)

0.0

20.0

40.0

60.0

80.0

100.0

(%)

Total Revenue Revenue from PMC % Contribution of PMC


Exhibit 5: EBIT and EBIT margin from PMC division

249.

1

143.

2

256.

4

308.

6

383.

2

7.9

5.7

7.8 7.6 7.6

0.0

100.0

200.0

300.0

400.0

500.0


(| c

rore

)

0.0

2.0

4.0

6.0

8.0

10.0

(%)

EBIT from PMC EBIT Margin of PMC


Working capital & cash flows - best in the industry…

NBCC has a unique advantage of generating cost-free float from its PMC division where it is able to get revenue upfront from clients. On the other hand, it gets an extended credit period from contractors. Consequently, this has led to a negative working capital cycle and healthy CFO and FCFF over the years. It is one of the biggest economic moats of NBCC as compared to its peers in the industry. In FY14, NBCC bought its land bank to expand its real estate business. This led to an increase in the inventory, in turn, leading to a higher working capital and lower CFO as compared to those in the previous year. Hence, it earns from both operations as well as float.

PMC Service Cycle • Sourcing of project/business development • Preparation of conceptual plan and detailed project

report • Execution of contract with client • Pre-construction activities and appointment of

contractors • Project monitoring, coordination and execution • Completion of project


Exhibit 6: Robust working capital management

Working Capital Requirement

-178.7

-346.9

-500.9-550.8

-607.2 -613.9-678.0 -717.7

-891.3-820.6

-314.8-373.6 -356.5

-1000.0

-800.0

-600.0

-400.0

-200.0

0.0

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

(| c

rore

)


Exhibit 7: Major components of WC

450.

1

632.

4

967.

0 1441

.4

852.

2

830.

3

1245

.7

1510

.4

1850

.9

2701

.2

2633

.7

2919

.6

3517

.1

4183

.2

1176

.3

0.0

1000.0

2000.0

3000.0

4000.0

5000.0


(| c

rore

)

Inventory Debtors Creditors


Exhibit 8: OCF & FCF remain healthy except FY14

438.

8

121.

5

381.

8

437.

7

119.

2

379.

8

-261

.5

369.

6

-261

.0

366.

6

-300.0

-200.0

-100.0

0.0

100.0

200.0

300.0

400.0

500.0


(| c

rore

)

CFO FCFF

-ve due to increase in land inventory


Strong order book and consistent order inflow…

NBCC’s order book has grown at 28.7% CAGR in FY04-14. The order book as on Q1FY15 is at | 17,000 crore i.e. 4.2x order book to bill ratio (as on FY14), providing strong revenue visibility over the next couple of years. The current order book comprises the PMC business ~ | 14,266 crore, EPC business ~ | 460 crore and real estate business ~ | 1,274 crore. Also, in the same period FY04-14, order inflows have grown at ~26% CAGR.

Exhibit 9: Strong order book and consistent order inflow…

1205.4 1768.1 2691.7 3430.1 4232.36985.6 7728.8 7657.8 8446.8

13107.616000.0

24940.0

37940.0

1.82.3 2.2 2.3 2.1

3.4

2.6 2.4 2.4

4.1 3.9

5.1

6.3

0.0

5000.0

10000.0

15000.0

20000.0

25000.0

30000.0

35000.0

40000.0

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

(| c

rore

)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

(x)

Order Book Order Book to Bill ratio


Going forward, NBCC is planning to focus on higher order value

projects worth | 100 crore. This will have a huge impact on the

company’s financials as it will benefit from economies of scale

Rectangle


Going forward, the management has guided that order inflows will increase substantially primarily due to opportunities arising from redevelopment of old colonies in New Delhi (explained in detail below). Therefore, we expect order acquisition and execution to remain healthy. We have built in 18.3% CAGR in the order book during FY14-16E.

Diversified order book…

Using its competitive advantage in the PMC business, NBCC has been able to penetrate into diversified sectors. The size and diversification of the order book have enabled NBCC to resist an economic slowdown or downturn in any of the sectors.

Exhibit 10: PMC order book composition (| crore)

Infrastructure, 4918

Institutional, 5359

Hospital, 2359

Commercial, 1364

Residential, 3300


Exhibit 11: PMC order book composition (number of projects)

Infrastructure, 182

Institutional, 123

Hospital, 22

Commercial, 26Residential, 20


Healthy balance sheet & efficient cash management system…

We also like NBCC on account of its healthy balance sheet due to its PMC business – a cash cow business. NBCC has been debt free since FY08 with a current cash surplus of | 1,196 crore. This is an extremely unusual occurrence in the infrastructure/construction space where most players are loaded with mounting levels of debt. Secondly, it also generates healthy yield on the cash. In the last three years, its yield has been in the double digit territory.

Exhibit 12: Costless float

1491

.5

1642

.5

1285

.3

1552

.5

1782

.2

905.

7

1235

.9

1505

.3

1832

.0

2245

.0

10.3 9.8

12.8

10.0 10.0

0.0

500.0

1000.0

1500.0

2000.0

2500.0


(| c

rore

)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

(%)

Cash + Current Investment Advance from Clients Effective Yield


Exhibit 13: Other income

134.

6

149.

0

106.

0

155.

2

178.

2

3.8%

4.5%

2.5%

3.1%2.9%

0.0

50.0

100.0

150.0

200.0


(| c

rore

)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

(%)

Other Income (OI) OI as % of Total Revenue


Capital employed (| crore) FY12 FY13 FY14

PMC -711.7 -611.9 -355.6

Real Estate 479.4 633.0 849.2

EPC 44.9 75.4 80.9

Unallocated 982.9 854.2 552.8

Total 795.5 950.7 1127.3

Rectangle


Opportunities galore…growth drivers for PMC…

Redevelopment projects…new thrust to growth

While the PMC division can get projects from diverse sectors and grow at a steady rate on the back of a macroeconomic revival, the next big opportunity lies in redevelopment of old government properties.

Recently, the government started focusing on redevelopment of ramshackle buildings and old government colonies in Delhi and across India to build multi-storeyed residential and commercial complexes. The aim is to benefit from utilisation of an increase FSI in that area. NBCC has already completed one project of such kind i.e. New Moti Bagh project in Delhi under the GPRA scheme.

The successful execution of the New Moti Bagh project and PWO status for NBCC has opened up a huge opportunity in other government/PSU properties. Currently, NBCC is implementing similar redevelopment projects of a government colony in East Kidwai Nagar, Delhi. It is the first of 30 government colonies across Delhi spread over 1100 hectares of prime real estate. The government is planning to optimise land usage by modernising these colonies under an ambitious government redevelopment plan. Going ahead, the redevelopment of such localities in the capital is expected to generate a sizeable volume of business to NBCC. Also, all these projects are in the range of | 2000 - 10,000 crore. Exhibit 14: East Kidwai Nagar, New Delhi project case: Project Details: NBCC's Role:Project cost | 5000 crore PMC charges 10%Net area available for redevelopment

71 acres Commission on sale of units 2%

Project duration 60 months No. of units to be built~5,000 dwelling units (in 76 towers)

No. of units demolished 2331 old houses Equity requirement | 200 crore (seed money)IRR guaranteed on seed money

15%

Sequence of Events:

• The company invested | 90 crore as seed money at the inception of the project. However, people were apprehensive about the sale of commercial units. Hence, IRR was expected on seed money

• As much as 10% of the total residential area would be available for lease sale (for a period of 30 years) to centralgovernment departments/ministries, PSUs, autonomous bodies, etc. while the rest would go to the governmenthousing pool quota

•NBCC received overwhelming response for the commercial space. Total 80% of bookings have already been done of about | 4000 crore and those booking commercial space include EPFO office, IDBI Bank, Punjab & Sindh Bank, ONGC and Indian Oil

• NBCC got back the seed money of | 90 crore, which they had invested at the inception

• NBCC has also built a construction and demolition (C&D) waste recycling plant at the site to ensure zero-waste generation. The plant has a capacity to process 150 tonnes of waste per day, which will be used to produce 30,000 bricks that will be used in construction

• The management is expecting the project to be completed by FY18

Source: Company, Press reports, ICICIdirect.com Research

Re-development of Netaji Nagar | 5,000 crore

Re-development of Kasturba Nagar | 5,000 crore

Re-development of Thyagaraj Nagar | 5,000 crore

Greenfield project in Ghitorni | 15,000 crore

Re-development on land owned by Sick PSU | 1,000 crore

Modernization of printing press across India | 1,000 crore

Source: Company, Press Reports, ICICIdirect.com Research

Visible opportunities


Exhibit 15: Upcoming redevelopment projects: Netaji Nagar, Kasturba Nagar and Thyagaraj Nagar, New Delhi:Model Similar to East Kidwai Nagar Model

Project Size | 15,000 crore (| 5,000 crore each)

Project Status Received go-ahead from MoUD

Expected TimelineThe management is expecting it to be in the order book by December 2015

Redevelopment projects outside New Delhi worth | 5000-6000 crore:

BhubaneswarNBCC has signed an agreement for redevelopment of twogovernment properties of 100 acres each

Kolkata & BhopalIn discussion with West Bengal and Madhya Pradeshgovernments for redevelopment of government properties withan area of 20-30 acres each. Approval is expected in this fiscal

Source: Company, Press Reports, ICICIdirect.com Research

Exhibit 16: Greenfield project in Ghitorni, New Delhi

Project nature Signed MoU with CPWD to develop their land

Project cost | 15,000 crore

PMC charges 7-10%

Commission on sale of units 2%

Net area available for redevelopment ~250 acres

Built-up area ~50-60 lakh sq ft

Project duration Four or five years

Residential-cum-commercial complex 80% - residential, 20% - commercial

No. of units to be built 10,000 residential flat (100 towers)

Expected in order book By the end of FY15 Source: Company, Press Reports, ICICIdirect.com Research

Opportunities from various government schemes…

NBCC has been executing many landmark projects as a PMC as its core strength leveraging its rich experience in diverse sectors. The company has also been designated as the implementing agency for executing projects under Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Pradhan Mantri Gram Sadak Yojna (PMGSY), solid waste management (SWM) and developmental work in the North Eastern Region.

NBCC has signed an agreement with the state government of Punjab wherein it will build 18 de-addiction centres at an initial cost of | 100 crore using prefab technology.

Also, the company is in the process of sending a Cabinet note for redevelopment of 18 government presses across India wherein presses will be modernised and the rest of the land will be used for commercial exploitation.

Recently, in the state budget speech, the Rajasthan chief minister announced the formation of a JV with NBCC to execute various redevelopment works and construction projects in Rajasthan.


Real estate… value additive business…

We also like NBCC’s strategy to invest part of its surplus cash flow into the value enhancing real estate business in a disciplined manner and keep its balance sheet debt free. Currently, NBCC has accumulated 170 acres of land reserves spread across 12 states in India. Going ahead, it is looking to plough back 50% of its annual profit in the land to explore opportunities in the real estate division and looking to raise its contribution to 30-40% over the next three to five years from 15-16% currently. In the real estate division, NBCC has adopted two models, which are 1) A model exactly similar to a pure real estate development model

wherein the company buys land/development rights from either central/state government entities or private owners, develops the land and sells it off (solely or in JV)

2) A model wherein NBCC carries out redevelopment of government colonies or PSU quarters. Here, the model is exactly similar to that of the PMC division

NBCC believes there is significant potential in the real estate business. Hence, it is expanding its presence aggressively via a diverse range of projects. The management has set a target to build 10,000 housing units by 2018, entailing an investment of about | 6000 crore. Currently, NBCC has 170 acres of land bank reserves, spread across 12 states in India. On these lands, it has nine ongoing projects and 13 forthcoming projects out of which NBCC is planning to start at least five to seven projects in FY15 itself. Also, to realise the company’s vision to have real estate project in every state, the management is planning to buy more land parcels (two or three land parcels) at an estimated value of | 400 crore in FY15E. Exhibit 17: NBCC land bank detail in acres

55

17

13

10

5

43

23

40

UP

NCR

Kolkata

Ahmedabad

Raipur

Bhubaneswar

Patna

Kerala

Others


Real estate development cycle • Identification of potential land • Acquisition of land • Pre-construction licenses and approvals • Sub-contracting • Project execution • Post-construction licenses and approvals • Sale • Maintenance


In the last few years, excess cash generated from the PMC business has been deployed in the higher margin real estate business. Hence, revenue from the real estate business has grown at ~83% CAGR to | 625 crore during FY12-14. Also, its contribution to overall revenue has reached 15-16%. The management envisages greater than 25% contribution from the real estate division to overall revenue in the next couple of years, which would lead to higher operating margins. Hence, we expect revenues from real estate to grow at 15% CAGR during FY14-16E to | 826 crore.

Exhibit 18: Revenue contribution from real estate division

3429

.3

3186

.8

4008

.8

4878

.8

5978

.6

185.

1

526.

8

718.

8

826.

6

625.

0

5.4

16.5 15.6 14.7 13.8

0.0

1500.0

3000.0

4500.0

6000.0


(| c

rore

)

0.0

4.0

8.0

12.0

16.0

20.0

(%)

Total Revenue Revenue from Real Estate % Contribution of Real Estate


Exhibit 19: EBIT and EBIT margin from real estate division

125.

7

101.

4

23.1

129.

4

157.

1

12.5

23.9

16.218.0 19.0

0.0

50.0

100.0

150.0

200.0

FY12 FY13 FY14 FY15E FY16E(|

cro

re)

0.0

4.0

8.0

12.0

16.0

20.0

24.0

(%)

EBIT from Real Estate EBIT Margin of Real Estate


Exhibit 20: Revenue from real estate division

185.

1

526.

8

625.

0

718.

8

826.

60.0

200.0

400.0

600.0

800.0

1000.0


(| c

rore

)

CAGR - 83%

CAGR - 15%


Navratna status opens up opportunities for real estate development…

NBCC became the fifteenth Navratna company on June 23, 2014 among 250 PSUs in India. Navratna status gives the company freedom to forge tie-ups in the international market and also allows its autonomy on investment decision up to | 1000 crore. The government is considering a proposal to hive off real estate owned by sick PSUs such as Bengal Chemicals, National Bicycle Corporation and Richardson & Cruddas in Mumbai's Worli, Byculla, etc. to NBCC. NBCC will be using the direct sale of land or JV for the development of real estate. This is expected to pave the way for long-term opportunities for NBCC in the real estate segment.

Capital employed (| crore) FY12 FY13 FY14

PMC -711.7 -611.9 -355.6

Real Estate 479.4 633.0 849.2

EPC 44.9 75.4 80.9

Unallocated 982.9 854.2 552.8

Total 795.5 950.7 1127.3


EPC…well poised to take on new opportunities in infrastructure sector…

NBCC was incorporated as a pure EPC player wherein it has been executing engineering and construction services for projects such as chimneys, cooling towers and various types of power plant works. However, growth has remained subdued in the last few years. Currently, only 3-4% of the revenue is contributed by the EPC business. Going ahead, the government’s priority to boost infrastructure will create opportunities for the construction industry. NBCC is well poised to grab this opportunity.

Exhibit 21: Revenue contribution from EPC division

3429

.3

3186

.8

4008

.8

4878

.8

5978

.6

99.5

133.

1

94.8

100.

0

110.

0

2.9

4.2

2.42.0 1.8

0.0

1500.0

3000.0

4500.0

6000.0


(| c

rore

)

0.0

1.0

2.0

3.0

4.0

5.0

(%)

Total Revenue Revenue from EPC % Contribution of EPC


Exhibit 22: EBIT and EBIT margin from EPC division

31.5

10.9

4.3

5.0

5.5

10.9

23.7

4.6 5.0 5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


(| c

rore

)0.0

4.0

8.0

12.0

16.0

20.0

24.0

(%)

EBIT from EPC EBIT Margin of EPC


Opportunity in international markets… The company is also looking at strategic alliances with domestic and international players in West Asia, Europe and Commonwealth of Independent States (CIS) countries to scout for EPC contracts as the acquisition route would be time consuming. NBCC has already signed a JV with Oman based Al Naba Construction LLC for EPC contracts in Oman and the UAE. Also, it is looking at similar opportunities in political stable geographies like Turkey and CIS countries.

Navratna status gives the company freedom to forge tie-ups in the international market and also allows it autonomy on investment decisions up to | 1000 crore. Currently, only 1-2% of the total revenue is contributed by international projects. Going ahead, the management is expecting the contribution to go up to 10-12%.

EPC projects development cycle • Bidding process • Award of contract • Appointment of sub-contractors • Project monitoring • Completion of project


One of the best among construction players...

A company that has no debt and a healthy return profile like NBCC is very rarely seen in the construction industry. Hence, we believe NBCC is one of the best placed among its peers in the pure construction industry. NBCC’s current order book at | 16,000 crore i.e. 4.7x order book to bill ratio (considering revenue from PMC only), with better execution capability compared to others provides strong revenue visibility over the next couple of years.

Exhibit 23: Gross leverage

0

2.11.7

2.4

3.9

00.5

11.5

22.5

33.5

44.5

NBCC Simplex Supreme IVRCL HCC

(x)

D/E


Exhibit 24: Order book & order book to bill ratio (FY14)

16,0

00

15,2

57

5,89

6

19,9

00

14,2

00

-

4,000

8,000

12,000

16,000

20,000

24,000

NBCC Simplex Supreme IVRCL HCC(|

cro

re)

0.0

1.0

2.0

3.0

4.0

5.0

(x)

Order book Order book to bill ratio


While comparing, we would like to emphasis more on RoE and RoCE than margins as each player has different capex intensity and working capital requirement (depending on the type of asset). NBCC has recorded an average RoE of 22.1% and average RoCE of 18.2% during FY10-14.

Exhibit 25: RoE trend

23.9

7.8

24.7

0.6

-15.8

21.8

4.8

23

-6.2-11.2

21.9

4.5

14.2

-27

0.4

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0


(%)

FY12 FY13 FY14


Exhibit 26: RoCE trend

18.3

11.4

19.2

9

5.1

16.7

9.3

18.9

7.4

3.6

22.2

9.3

16.2

2.3

10.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0


(%)

FY12 FY13 FY14


Rectangle


The five year revenue CAGR of 14.8% and EBITDA CAGR of 10.6% makes NBCC stand apart from others.

Exhibit 27: Revenue growth vs. EBITDA growth

-8

-4

0

4

8

12

16

20

-20 -16 -12 -8 -4 0 4 8 12 16

EBITDA Growth (5 Year CAGR)

Reve

nue

Grow

th (5

Yea

r CAG

R)

NBCC Simplex IVRCL HCC


While other players struggle to manage their working capital, NBCC has consistently been able to maintain a negative working capital in the last 10 years.

Exhibit 28: Working capital management

-1000

-200

600

1400

2200

3000

-75 -50 -25 0 25 50 75 100 125 150 175 200 225 250

Working capital days

Net

Wor

king

Cap

ital (

| cr

ore)



Rectangle


Risks & Concerns Higher dependence on PMC business…

The PMC business accounts for ~82% of total revenues. The business is a high value and low margin one for NBCC. Hence, any delay or decline in PMC orders could adversely affect its future business prospects and financial conditions. However, NBCC is increasing its exposure to the real estate business and expects greater than 25% contribution to topline in the next couple of years that would offset its higher dependence on PMC.

Higher dependency on government projects…

Currently, NBCC receives 90% of its projects from government entities. Any change in government policies may adversely affect its performance. However, its recent Navratna status gives the company freedom to forge tie-ups in the international market and also allows it autonomy on investment decision up to | 1000 crore. The management is aggressively looking at opportunities in political stable geographies such as Turkey and CIS countries.

Aggressive expansion in real estate business…

The company is aggressively expanding into the real estate business, which is highly regulated in India. New policies, a delay in statutory & regulatory approvals and fluctuations in interest rates can have a significant impact, going ahead. Furthermore, real estate prices are already at peak level across markets. Any correction in property prices may lead to lower profitability for the real estate business, going ahead.

Higher contribution of other income in total income…

NBCC has a unique advantage of generating cost-free float from its PMC division, leading to a negative working capital cycle. In turn, this leads to higher other income, which contributes significantly to its bottomline.

Dependent on sub-contractors for execution of projects…

NBCC conceptualises the plan, prepares detail project reports and then completely outsource civil construction and other development works to the sub-contractor via competitive bidding. The only responsibility after this is to monitor and coordinate till the completion of the project. A delay on part of a sub-contractor or quality standard issues can lead to cost overruns and additional liabilities for NBCC.

Expected opportunities from redevelopment projects may not fructify…

Delhi High Court expressed apprehension that commercialisation and redevelopment project of South Extension-II and Kidwai Nagar would lead to creation of "urban slums". Few senior advocates of these areas have filed a petition for a stay on these projects, saying "intelligent urbanisation" has not been followed by authorities while undertaking the work. Hence, in that case, the government may not approve further redevelopment projects. However, we believe probability of occurrence of this event is very low considering the successful completion of New Moti Bagh and current status of East Kidwai Nagar Project.

Minimum 25% public shareholding rule for PSUs to increase supply…

According to new regulations, all PSUs need to adhere to the rule of minimum of 25% public shareholding in the next three years. This will lead to an increase in supply of shares in the market, which may affect share price in the short-term. However, considering the investment rationale in totality, we believe it will eventually converge to its fair valuation in the long term.


Financials Revenues to grow at CAGR of 21.2% during FY14-16E…

NBCC needs to achieve a target revenue of | 4,200 crore, PAT margin of 5.6% and order inflow of | 5,000 crore in FY15 as per the MoU signed with Government of India. By looking at NBCC’s past track record and current position, we believe it will over achieve the set MoU target. Considering the current order book and its ongoing projects, we expect revenues to witness robust growth at 21.2% CAGR to | 5979 crore in FY14-16E. Exhibit 29: Revenue growth momentum to continue…

2041.2

2982.0 3126.83447.7 3198.5

4067.0

4878.8

5978.6

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

CAGR - 21.2%


EBITDA to grow at 25.1% CAGR during FY14-16E…

We expect revenues from the high margin real estate business to increase substantially during FY14-16E. Also, the company’s strategy to focus on high value projects in the PMC division will further boost EBITDA margins as they have lower percentage of overhead cost. Hence, these will lead to an overall EBITDA margin expansion by 40 bps to 6.6% in FY16E. Consequently, EBITDA is expected to grow at 25.1% CAGR to | 392.9 crore during FY14-16E. Exhibit 30: EBITDA and EBITDA margin trend

95.5

113.

2

151.

0

159.

3

251.

2

308.

7

392.

9

3.23.6

4.45.0

6.2 6.3 6.6

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

FY10 FY11 FY12 FY13 FY14 FY15E FY16E

(| c

rore

)

0.0

2.0

4.0

6.0

8.0

EBITDA EBITDA Margin

CAGR - 25.1%


We expect revenue to witness robust growth of 21.2%

CAGR to | 5979 crore during FY14-16E

We expect an EBITDA margin expansion by 40 bps to 6.6%

in FY16E. Consequently, EBITDA is expected to grow at

25.1% CAGR to | 392.9 crore during FY14-16E

NBCC has signed a memorandum of understanding (MoU) with the government every year setting targets in terms of revenue, PAT, order book, etc. It has been rated ‘Excellent’ since 2003-04 as it has exceeded the target every year since then. On account of this and its Schedule ‘A’ Miniratna status, the government recently granted Navratna status to NBCC


PAT to grow at 27.0% CAGR during FY14-16E…

NBCC’s bottomline has grown at 27.0% CAGR during FY10-14 largely led by its robust topline growth and zero interest expenses. We envisage PAT will post healthy growth at 27.0% CAGR during FY14-16E to | 398.4 crore aided mainly by the strong topline performance.

Exhibit 31: PAT growth trend

116.

5

140.

3

190.

2

207.

5

247.

2

327.

8

398.

4

3.94.5

5.5

6.56.1

6.7 6.7

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0


(| c

rore

)

0.0

2.0

4.0

6.0

8.0

PAT PAT Margin

CAGR - 27%


Consistent dividend payer….

NBCC pays out ~20-25% of its earnings as dividends to investors as reinvestment requirements are small given the asset-light nature of the business. At the current market price, the dividend yield for FY14 (dividend of | 5/share) was 1.1%. According to the letter bearing reference no: DO No. 3(4)-B(S)/2007 dated October 5, 2007 issued by the Department of Economic Affairs, Ministry of Finance, GoI, all profit making public sector enterprises with a majority holding of GoI are required to declare a minimum dividend on equity of 20% or a minimum dividend pay out of 20% of post tax profits, whichever is higher.

Exhibit 32: Dividend payout track record…

20.0 2022.1 21.7

24.3 24.324.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0


(%)


We envisage PAT will post healthy growth of 27% CAGR

during FY14-16E to | 398.4 crore aided mainly by the

strong topline performance

NBCC pays out ~20-25% of its earnings as dividends to

investors. We expect a similar payout ratio, going ahead


Healthy return ratios…

The average RoE and RoCE of NBCC during FY10-14 have remained at the level of 22.1% and 18.2%, respectively, on the back of a strong bottomline show. Going forward, we expect asset turnover to remain at the same level as that of FY14. However, in FY14-16E, we estimate an increase of 220 bps in RoE from the FY14 level mainly driven by an increase in PAT margins. Exhibit 33: RoE and RoCE (%) trend

21.3 21.5

23.9

21.8 21.9

24.1 24.2

16.9 16.818.3

16.7

22.2 22.523.7

12.0

15.0

18.0

21.0

24.0

27.0


(%)

RoE RoCE


Exhibit 34: PAT margin to drive future RoE…

1.0 1.0 1.0 1.0 1.0 1.0 1.0

5.5 4.8 4.43.4 3.7 3.6 3.7

3.94.5

5.5

6.56.1

6.7 6.7

0.0

3.0

6.0

9.0

12.0

15.0

18.0


(x)

0.0

2.0

4.0

6.0

8.0

(%)

Leverage (Asset/Equity) Asset Turnover (Sales/Asset) PAT Margin (PAT/Sales) (RHS)

21.3 21.5 23.9 21.8 21.9 24.1 24.2

Source: Company, ICICIdirect.com Research Note: Bubble value represents RoE (%)

We anticipate an increase of 220 bps in RoE from FY14

level mainly driven by an increase in PAT margins


Valuation At the CMP, the stock is trading at 13.0x FY16E P/E and 3.1x FY16E P/BV. Given the healthy order book in the PMC division and cash rich balance sheet, NBCC’s revenues have grown at a CAGR of 14.5% during FY09-FY14 despite the challenges being encountered by the industry. Going ahead, we expect NBCC’s next leg of growth to come from redevelopment of government properties in Delhi. Hence, we anticipate NBCC’s revenues and net profit will grow at a sturdy CAGR of 21.2% and 27.0%, respectively, during FY14-16E. We also like NBCC due to its cash rich balance sheet and healthy return ratio profile. Hence, we initiate coverage on NBCC with a BUY recommendation and an SOTP based target price of | 538/share. We have valued NBCC’s PMC business at | 465/share (10x FY16 EV/EBIT- 33% premium to leading construction companies multiple given the regulatory advantage in the business, better balance sheet and healthy return profile). The real estate business has been valued at | 70.8/share (at 1x FY14 P/BV) while the EPC business has been valued at | 2.3/share (5x FY16EV/EBIT). Our target price implies 16x FY16 EPS and 0.6x PEG ratio (largely in line with the current PEG). Exhibit 35: One year forward P/E

050

100150200250300350400450500

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Pric

e (|

)

Price 5x 7x 9x 11x 13x

Source: Bloomberg, ICICIdirect.com Research

Exhibit 36: One year forward P/BV

050

100150200250300350400450500

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Pric

e (|

)

Price 0.8x 1.2x 1.6x 2x 2.4x


Exhibit 37: One year forward EV/EBITDA

-500

250

1,000

1,750

2,500

3,250

4,000

4,750

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

EV (|

Cr)

EV 10x 8x 4x 2x


We initiate coverage on NBCC with a BUY rating with a

target price of | 538/share. Our target price implies 16x

FY16 EPS and 0.6x PEG ratio (largely in line with current

PEG). At the CMP, the stock is trading at 13.0x FY16E P/E

and 3.1x FY16E P/BV

Rectangle


Exhibit 38: Peer group matrix

CMP M Cap(|) TP(|) Rating (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E

NBCC 466 538 Buy 5,592 20.6 27.3 33.2 22.3 16.8 13.9 17.2 13.2 9.8 4.9 4.0 3.3 21.9 24.0 24.1Simplex Infra (SIMCON) 288 354 Buy 1,430 12.2 14.0 27.1 23.1 20.1 10.4 7.3 6.7 5.7 1.0 1.0 0.9 4.5 4.9 8.8Supreme Infra (SUPINF) 342 350 Hold 687 40.7 44.5 57.8 5.4 5.0 3.8 5.3 5.0 4.6 1.1 0.9 0.8 14.2 13.0 14.5

Sector / CompanyEPS (|) P/E (x) EV/EBITDA (x) P/B (x) RoE (%)


Scenario analysis indicates risk reward still favourable…

Though NBCC has run up sharply in the last six to 12 months, we believe NBCC is still close to our Bear case valuation and can offer significant upside based on our Bull case valuation. Hence, we still believe the risk-reward ratio is favourable even at the current valuation. We discuss each of our valuation cases in detail below:-

Exhibit 39: Summary of scenario analysis (SOTP valuation)

Bear Case Base Case Bull Case

368.9 464.7 595.1

7x FY16E EV/EBIT 10x FY16E EV/EBIT DCF valuation (refer Exhibit 41)

56.6 70.8 84.5

0.8x FY14 P/BV 1x FY14 P/BV 1x FY15 P/BV

1.8 2.3 2.8

4x FY16E EV/EBIT 5x FY16E EV/EBIT 6x FY16E EV/EBIT

Value per Share 427.3 537.7 682.3

PMC

Real Estate

EPC

Source: ICICIdirect.com Research

Bear case scenario…

Though we believe NBCC should trade at a premium to leading construction companies given its regulatory advantage in the business model, cash rich balance sheet and better return profile, we have valued the company’s PMC business at 7x FY16 EV/EBIT, which is at par with leading construction companies. Hence, we value NBCC’s PMC business at | 369/share. The real estate business has been valued at | 56.6/share (at 0.8x FY14 P/BV) and EPC business at | 1.8/share (4x FY16 EV/EBIT). Overall, we have valued NBCC at | 427/share. Base case scenario…

In our base case valuation, we have valued NBCC’s PMC business at 10x FY16 EV/EBIT, which is at a 33% premium to leading construction companies. In our view, NBCC should trade at a premium to leading construction companies given its regulatory advantage in the business model, cash rich balance sheet and better return profile. Hence, we value NBCC’s PMC business at | 465/share. The real estate business has been valued at | 70.8/share (at 1x FY14 P/BV) & EPC business at | 2.3/share. Overall, we have valued NBCC at | 538/share. Our target price implies 16x FY16 EPS and 0.6x PEG ratio (largely in line with the current PEG).


Bull case scenario…

In the Bull case scenario, we have valued NBCC’s PMC business on the DCF based methodology to capture the huge opportunities available in the segment, particularly from the redevelopment space. We highlight that we have only considered redevelopment opportunities worth ~| 25,000 crore, which are known at this point of time. Redevelopment from other various states and even new opportunities in Delhi could provide upsides to our valuation. Exhibit 42 also gives an idea about our implied revenues and EBIT growth assumption in FY15E-20E. We have considered a terminal growth rate of 4% and cost of equity of 13.1% (refer Exhibit 41 for details). Based on these assumptions, we have valued NBCC’s PMC business at | 595/share. As far as the real estate business is concerned, we have valued it at | 84.5/share, which is at 1x FY15 P/BV. Overall, we have valued NBCC at | 682/share in our Bull case valuation.

Exhibit 40: DCF valuation of PMC division

| crore FY15E FY16E FY17E FY18E FY19E FY20E

Revenues 3876.4 4831.4 6169.3 7377.0 8690.8 9366.1

EBIT (1-t) 83.7 115.7 162.4 196.4 231.5 249.5Change in WC 221.9 264.7 356.0 334.9 344.5 121.3

Capex -3.0 -3.0 -3.0 -3.0 -3.0 -3.0

FCFF 302.7 377.4 515.4 528.3 573.0 367.9

Discount Factor 1.0 0.9 0.8 0.7 0.6PV of FCF (A) 1872.9 377.4 456.5 414.4 398.2 226.4

Terminal Value 4298.5Discount Factor 0.6155

PV of Terminal Value (B) 2645.7Total Value of PMC division 4518.6

Add: Net Cash 2622.5Equity Value of PMC division 7141.1

No of Shares Outstanding 12.0Fair Value per Share of PMC division 595.1


Exhibit 41: WACC assumptions Beta 1.1

Risk free rate (Rf) 8.5%Risk Premium 4.0%

Market return (Km) 12.5%

Required Rate of Return (Cost of Equity) 12.9%

Equity to Total capital 100.0%WACC 12.9%


Exhibit 42: Implied growth/assumptions Revenue CAGR over FY15E - FY20E 19.3%

EBIT CAGR over FY15E - FY20E 17.9%

Terminal Growth Rate 4.0%Terminal Value 4298.5

FCFF of PMC division 4518.6Net Cash of PMC division 2622.5

Equity Value of PMC division 7141.1


Exhibit 43: Sensitivity to terminal growth rate & WACC

10.9% 11.9% 12.9% 13.9% 14.9%

2.0% 612.0 578.6 551.2 528.3 508.8

3.0% 644.0 603.4 570.9 544.3 522.04.0% 685.2 634.5 595.1 563.5 537.6

5.0% 740.5 674.7 625.4 587.0 556.36.0% 818.2 728.4 664.5 616.5 579.3

WACC (%)

Term

inal

Gro

wth

Ra

te %



Tables Exhibit 44: Profit & loss account (Standalone) (| Crore) FY12 FY13 FY14 FY15E FY16ENet Sales 3,429.3 3,186.8 4,008.8 4,878.8 5,978.6 Other Income 153.0 160.6 164.2 155.2 178.2 Total Revenue 3,582.3 3,347.4 4,173.0 5,034.0 6,156.8

Raw Material Expenses 139.5 351.9 425.8 510.7 625.9 Employee Expenses 157.2 170.8 182.1 218.5 262.2 Exp.in Piece rate Work / Consultancy 2,959.0 2,468.6 3,153.2 3,782.6 4,635.3 Other Expenses 41.2 41.9 54.7 58.2 62.3 Provisions & Write-offs 2.9 5.0 - - - Total Operating Expenditure 3,299.8 3,038.3 3,815.8 4,570.1 5,585.7

EBITDA 147.9 160.2 251.2 308.7 392.9

Interest Paid on Advances from Clients 7.4 5.3 22.4 19.5 23.7 PBDT 275.1 303.8 334.9 444.4 547.5 Depreciation 2.0 1.3 1.3 1.5 1.7 Less: Exceptional Items (13.5) - - - - PBT 286.7 302.5 333.5 442.9 545.8 Total Tax 99.7 94.1 86.4 115.2 147.4 PAT 190.2 207.5 247.2 327.8 398.4

EPS 15.8 17.3 20.6 27.3 33.2 Source: Company, ICICIdirect.com Research


Exhibit 45: Balance sheet (Standalone) (| Crore) FY12 FY13 FY14 FY15E FY16EEquity Capital 120.0 120.0 120.0 120.0 120.0 Reserve and Surplus 675.5 830.7 1,007.3 1,244.6 1,533.2 Total Shareholders funds 795.5 950.7 1,127.3 1,364.6 1,653.2

Deferred Tax Liability (8.4) (9.5) (23.3) (23.3) (23.3)

Source of Funds 787.1 941.2 1,103.9 1,341.3 1,629.8

Total Gross Block 35.2 38.0 37.5 39.5 42.5 Less: Accumulated Depreciation 11.9 13.7 15.0 16.5 18.2 Net Block 23.3 24.3 22.5 23.0 24.3

Investments 223.6 162.1 146.7 166.1 190.6

Inventory 450.1 632.4 967.0 1,176.3 1,441.4 Debtors 852.2 830.3 1,245.7 1,510.4 1,850.9 Loans and Advances 554.4 422.3 508.8 619.0 758.6 Cash 1,325.2 1,537.7 1,196.0 1,446.4 1,654.9 Other Current Assets 28.1 29.0 10.2 10.2 10.2 Total Current Assets 3,209.9 3,451.7 3,927.6 4,762.3 5,716.0

Creditors 1,177.3 820.5 919.2 1,122.8 1,375.9 Provisions 140.6 144.7 144.0 163.7 188.6 Other Current Liabilities 1,523.8 1,813.2 2,000.3 2,394.3 2,807.3

Net Current Assets 368.2 673.4 864.0 1,081.5 1,344.2

Other non-current assets 171.9 81.4 70.8 70.8 70.8

Application of Funds 787.1 941.2 1,103.9 1,341.3 1,629.8



Exhibit 46: Cash flow statement (Standalone) (| Crore) FY12 FY13 FY14 FY15E FY16EProfit after Tax 190.2 207.5 247.2 327.8 398.4 Add: Depreciation 2.0 1.3 1.3 1.5 1.7 Add: Interest Paid 7.4 5.3 22.4 19.5 23.7 Cash Flow before WC changes 199.5 214.2 270.9 348.8 423.8

Net Increase in Current Assets 225.5 (29.2) (817.6) (584.3) (745.2) Net Increase in Current Liabilities 13.7 (63.4) 285.2 617.2 691.0 Net Cash Flow from Operating Activities 438.8 121.5 (261.5) 381.8 369.6

Inc/ (Dec) in Deferred Tax Liability (3.2) (1.1) (13.9) - - (Purchase)/Sale of Fixed Assets (1.0) (2.4) 0.5 (2.0) (3.0) Net Cash flow from Investing Activities (227.2) 148.6 12.7 (21.4) (27.5)

Proceeds from issues of Equity Shares 30.0 - - - - One time adj. in P&L Appropriation (30.0) - - - - Adj. in General Reserves - - (0.4) - - Dividend and Dividend Tax Paid (48.8) (52.3) (70.2) (90.4) (109.9) Interest Paid (7.4) (5.3) (22.4) (19.5) (23.7) Net Cash flow from Financing Activities (56.2) (57.6) (92.9) (109.9) (133.5)

Net Cash flow 155.4 212.5 (341.8) 250.5 208.5 Opening Cash / Cash Equivalent 1,169.8 1,325.2 1,537.7 1,196.0 1,446.4 Closing Cash / Cash Equivalent 1,325.2 1,537.7 1,196.0 1,446.4 1,654.9



Exhibit 47: Ratio analysis FY12 FY13 FY14 FY15E FY16E

Per Share Data (|)EPS 15.8 17.3 20.6 27.3 33.2 Cash EPS 16.0 17.4 20.7 27.4 33.3 BV 66.3 79.2 93.9 113.7 137.8 Operating profit per share 12.3 13.3 20.9 25.7 32.7 Cash per Share 110.4 128.1 99.7 120.5 137.9

Operating Ratios (%)EBITDA Margin 4.3 5.0 6.2 6.3 6.6 PAT Margin 5.5 6.5 6.1 6.7 6.7

Return Ratios (%)RoE 23.9 21.8 21.9 24.0 24.1 RoCE 18.3 16.7 22.2 22.5 23.7

Valuation Ratios (x)P/E 27.5 25.2 21.2 16.0 13.1 EV / EBITDA 26.4 23.1 16.1 12.3 9.1 EV / Net Sales 1.1 1.2 1.0 0.8 0.6 Sales / Equity 4.3 3.4 3.6 3.6 3.6 Market Cap / Sales 1.5 1.6 1.3 1.1 0.9 Price to Book Value 6.6 5.5 4.6 3.8 3.2

Turnover Ratios (%)Asset turnover 4.8 3.7 3.9 4.0 4.0 Debtors Turnover Ratio 4.0 3.8 3.2 3.2 3.2 Creditors Turnover Ratio 2.9 3.9 4.4 4.3 4.3

Solvency Ratios (x)Current Ratio 1.1 1.2 1.3 1.3 1.3 Quick Ratio 1.0 1.0 1.0 1.0 1.0



RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: > 10%/ 15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]

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september 4, 2014 rating matrix nbcc ltd target : | 538...

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