NBCC’s Q2FY15 results were below expectations, led primarily by weaker-than-expected margins in the PMC (project management consultancy) segment.
Overall revenue growth, too, was weaker than expected, led by unsold inventory in the real-estate segment, even though PMC segment revenue growth was good at 24% y-o-y.
We do not attribute much value to NBCC’s quarterly results near term. Rather, we view it as a play on upcoming redevelopment opportunities, which are not reflected in current results. Management commentary in the post-results concall suggests that full-year FY15 margins are likely to be in line with FY14 numbers, thus arresting the margin concerns seen in H1FY15.
Revenue at R904 crore was up 5% y-o-y but below our estimate, largely due to a miss in the real-estate segment. PMC segment revenues were strong at R778 crore, up 24% y-o-y, although margins were down 260 bps y-o-y.
Overall EBITDA margins, however, were at 5.5% compensated by stronger margins in the real-estate segment. The tax rate at 25% was lower than usual, which as per the company, was due to certain non-recurring tax benefits during the quarter and will normalise to the full tax rate in the quarters ahead. Due to the misses in revenue and margins, EBITDA declined 26% y-o-y.
Order inflow remained good during the quarter at R2500 crore, despite no redevelopment orders in H1.
By Nomura
