We met NBCC’s management team recently to get an update on the business and order inflow pipeline. We come back with renewed confidence in the redevelopment order opportunity in the country and why NBCC is best paced to capitalise on the same. In our view, the land/housing redevelopment opportunity will drive strong earnings growth for many years to come. Re-iterate buy with 22% upside.
NBCC’s ‘public works organisation’ status helps it bag orders without much competition and even on a nomination basis, in some cases. It has a strong presence in the project management contract (PMC) business with government organisations as its customer base that brings in a base order inflow of $800 million pa. It is fast emerging as a strong play on large housing colony/surplus land redevelopment opportunities from government bodies and other PSUs. NBCC enjoys negative working capital and passes on risks to sub-vendors on back-to-back contracts, thus remaining asset light.
Multiple triggers to drive >34% revenue CAGR over FY14-17. Four large housing colony redevelopment orders worth $3-4 billion are in the pipeline, which can potentially add $3-4 billion to its order backlog. NBCC recently signed an MoU with Air India for development of its surplus land. Together with the upcoming 100 Smart Cities opportunity, this could drive strong growth over next several years.