NBCC management, during our recent interaction, reiterated its focus on execution of its Rs 800 bn order book (13x TTM revenue). The company has tendered out Rs 100 bn projects in the past six months and expects to maintain similar run rate going ahead. With Rs 500 bn projects in its order book belonging to the ‘self revenue generation’ category, real estate monetisation emerges as the key monitorable since it will determine project award and consequently execution. We expect execution to gather pace in FY19 when work on Pragati Maidan, redevelopment projects in Delhi, among others, gathers steam. Maintain Hold with target price of Rs 227.
Ordering for redevelopment of Delhi colonies gains traction: Work on redevelopment of three GPRA colonies in Delhi has gathered pace over the past six months. Total amount to be generated through real estate monetisation for these colonies is Rs 320 bn; the company has done sales of Rs 25 bn to date here. Hence, pick-up in pace of monetisation will be key.
Project pipeline remains strong: Of the 10 railway stations given to NBCC to redevelop, design and DPR, work has been completed in almost all projects. For AIIMS redevelopment projects, tendering for the Ayurvigyan Nagar contract has already started, while that for Ansari Nagar project will happen later.
Outlook and valuations: Burgeoning opportunities in building construction are triggering order accretion for NBCC. However, with bulk of the projects being on ‘self revenue generation’ mode, realty monetisation will determine stock performance, in our view. We expect execution to gather pace in FY19 driven by pick-up in work on projects awarded over the past six months. We maintain Hold with target price of Rs 227, based on 38x FY20e EPS.