NBCC shares near 52-week high after PSU construction firm bags order from SAIL

NBCC shares surged on Thursday after the state-run construction company bagged a project management consultancy order worth Rs 180 crore from PSU steel major SAIL. The NBCC stock gained by as much as Rs 6, or 10.7 per cent, to Rs 62.3 apiece in morning deals on BSE, coming within inches of a 52-week high touched last week.

In a regulatory filing post-market hours on Wednesday, New Delhi-headquartered NBCC said the deal involved consultancy and management services for the upcoming infrastructure-related projects of SAIL's Bokaro Steel unit. The company said the timeline of the order was yet to be decided. 

NBCC also said, in a separate filing, that it had signed a memorandum of understanding (MoU) with the steel ministry, Rashtriya Ispat Nigam Ltd (RINL) and National Land Monetization Corp Ltd (NLMC) for the monetisation of RINL's non-core assets at Visakhapatnam, Andhra Pradesh. As per the agreement, NBCC will act as a technical and transactional advisor.

Last week, the company signed an agreement with the Kerala State Housing Board for a project to the tune of Rs 2,000 crore.

Many analysts have positive views on the Navratna construction company, banking on improvements in execution amid moderating input costs, while others have flagged its slow pace of awarding projects and a low margin profile. 

Analysts at Geojit Financial Services are of the view that the company lacks visibility when it comes to cancellation of orders. 

"NBCC has removed a total of Rs 3,000 crore of orders from its order book due to slow progress and the government is unlikely to go ahead with the projects... The order book now stands at Rs 46,500 crore (which is eight times its revenue on a trailing 12 months basis), of which the company has only awarded Rs 16,500 crore of projects to contractors," they wrote in a research report dated August 24.

According to the brokerage, which has a 'sell' rating on NBCC with a price target of Rs 28, tendering activity remains key to realising revenue potential for the company in the coming years.

How NBCC fared in Q1

The company began the financial year 2023-24 on a strong note, with a net profit of Rs 75 crore for the April-June period< as against a net loss of Rs 6 crore for the corresponding quarter a year ago owing to an exceptional item of Rs 110 crore.

Its revenue increased 6.6 per cent on a year-on-year basis to Rs 1,918 crore for the first quarter of the financial year 2023-24, and margin improved by 10 basis points to 2.9 per cent, according to a filing. 

The company reported Rs 57 crore in earnings before interest, taxes, depreciation and amortisation (EBITDA) for the quarter ended June 30, marking an increase of 9.6 per cent compared with the year-ago period. 

The NBCC management plans to achieve revenue of Rs 9,000 crore in the year ending March 2024 on the back of better execution.

What does NBCC do?

NBCC conducts operates in project management consultancy and realty development businesses in the domestic as well as foreign markets. The state-run company operates in three main segments: project management consultancy (PMC), engineering, procurement and construction (EPC), and real estate. 

The company handles a host of government projects such as the Pradhan Mantri Gram Sadak scheme, aimed at ensuring nationwide road connectivity. 

NBCC shares: Past performance

NBCC shares have rewarded investors with a return of more than 50 per cent in 2023 so far, sharply outperforming a 10.5 per cent rise in the headline Nifty index. 

As of Wednesday's closing price, the NBCC stock has surged 77 per cent in the past year while the blue-chip index gained 11.7 per cent.

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