Pick-up in execution holds key for NBCC achieving its revenue target
Premium- The company has faced issues on execution and monetization of projects during the covid period
NEW DELHI : NBCC (India) Ltd, the government of India Navratna Enterprise, did see some impact of lockdowns on its performance during the June quarter. Labour availability being lower impacted its execution. The company, however, remains confident of achieving ₹7,000 crore revenues through execution pick-up remains under watch, feel analysts.
The company, which gets orders on a nomination basis, has a very strong order book. During the June quarter itself, the company had secured business worth ₹1,500 crore despite the pandemic. These included orders from NIT, Srinagar, worth ₹600 crore, National Sports University for ₹400 crore, and OHPC Odisha for ₹200 crore. The company, however, has faced issues on execution and monetization of projects during the covid period, and it is the pick-up that remains a key monitorable moving forward.
The company already has ₹18,000 crore worth of works awarded to contractors. This supports the company’s confidence in achieving ₹7,000 crore of revenues guidance. Notably, in Q1FY22, the company had clocked about ₹935 crore revenue. It thereby will need to clock a much higher run-rate in revenue moving forward. For now, though, the company has a requirement of 60,000 labourers. NBCC is struggling with 40,000 as of August as per analysts. The same thereby will remain to be watched for.
On the subsided covid-19 second wave, continuing awarding and as execution is expected to gain traction, management retained its FY22 (standalone) revenue guidance. FY22 margin guidance was slightly lowered from 2-3% to 2% now. Analysts at Anand Rathi Research say that “a healthy discussion pipeline for the Nauroji Nagar commercial space is an augury; any success would help execution gather pace at the Delhi Colony redevelopment projects". While the strong balance sheet and order book are key positives, the considerable dependence on real-estate liquidation for growth potential is a risk they add.
We forecast 21%/70%/29% CAGR in revenue/ Ebitda/net profit till FY23 say analysts at Antique Stock Broking Ltd. However, even ascribing 10x to FY23 core earnings per share and other investments-including real estate at ₹1,000 crore, we find all the best case is priced in, they add.
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