Order momentum held in Q4, giving NCC access to an order backlog with potential to deliver industry-leading growth in the coming year. To ensure undeterred execution in the recently-built OB, access to the key requisite, working capital, is now already in place. Consequently, NCC seems set to scale fresh highs. However, we have yet to come to terms with stringent execution timelines for some of the recently-won projects and a lengthened working cycle. We retain our Hold call.
Best-ever single-year order additions: Backed by strong additions in the buildings division, FY18 inflows were strong at Rs 233 bn, and consequently, the order backlog is at its highest ever. The group OB on 31st Mar’18, of Rs 325 bn, comprises orders of Rs 300 bn attributed to standalone operations and Rs 25 bn of the subsidiary/JV OB. FY19 revenue growth guidance at 45%: The significantly-augmented order backlog combined with a considerably de-levered balance sheet seems to be behind this strong revenue guidance.
On strong mobilisation receipts and QIP proceeds, debt down: Mobilisation advances (net accretion of Rs 9 bn in FY18 on strong inflows) and QIP money helped bring net debt down Rs 2.3 bn y/y to Rs 12.3 bn. WC cycle lengthens: More receivable days (at 104; up from 74 a year back) led to the working capital cycle extending to 129 days (~110 a year ago). Management expects this to contract by 9 days in FY19.
Valuation: We raise our FY19e/FY20e earnings 14/8% as we factor in the guided-to margins and the pending promoter infusion. Hence, we raise our target to Rs 143, implying a 16.4 exit multiple.