For investors in NCC Ltd, the plate is full—but unpalatable.
Shares of the construction and infrastructure company tanked more than 10% in early trade on Friday after its December quarter (Q3FY25) results disappointed. Payment delays played spoilsport, hurting key earnings metrics, with net profit at ₹185.40 crore missing consensus estimates of ₹240 crore due to lower revenue and compressed margins.
Adding to investor concerns, the company’s management has significantly lowered its FY25 revenue growth guidance to around 5% from 15% earlier. Earnings before interest, tax, depreciation and amortization (Ebitda) margin guidance was also trimmed to 9.25% from 9.5%. In Q3FY25, Ebitda margin contracted both sequentially and year-on-year to around 8.8%. The company attributed the downward revision to project execution slowdowns amid election-related payment delays.
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According to analysts at Antique Stock Broking Ltd, the management’s revised target implies flattish full-year Ebitda growth, with Q4FY25 margin expected at 9.8%.
“If these margins can sustain in FY26, it’s a major positive for the stock,” Antique Stock Broking said in a report on 7 February. But for now, given the excessive competitive pressures, the margin trajectory needs to be monitored.
Payment delays amid state elections triggered a liquidity crunch, reflected in NCC’s rising debt. Gross debt surged to ₹2,400 crore in Q3FY25 from ₹1,730 crore in the previous quarter, while the net working capital cycle deteriorated to 119 days from 102 days. Although the NCC management anticipates a gradual easing of debt levels, the strain has already weighed on stock performance.
On the brighter side, NCC has maintained its FY25 order inflow guidance at ₹20,000-22,000 crore, with ₹13,600 crore already secured till date. The company won orders worth ₹8,440 crore in Q3FY25, closing the quarter with an order book of approximately ₹55,500 crore.
The management has said that NCC is the lowest bidder (L1) for ₹9,000-10,000 crore worth of projects likely to be finalized in Q4FY25. The company has a robust ₹2.4 trillion bid pipeline.
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The company’s order book remains dominated by buildings (38%), followed by electrical T&D (19%) and transportation (19%). Maharashtra holds the largest share at 39%, with Uttar Pradesh at 13%. No other state accounts for more than a 10% share in NCC’s order book. NCC also foresees new opportunities in Andhra Pradesh’s capital city development and has secured an order for a river interlinking project, with expectations of further contracts in this segment.
But as things stand, NCC’s earnings estimates have been downgraded by a slew of brokerages following the Q3FY25 results. Nuvama Institutional Equities has slashed FY25 and FY26 estimated earnings per share by 15% and 8%, respectively and the price-to-earnings multiple is down to 17x from 22x.
“Muted hike in infra capex in the recent Budget shall affect the execution/payment cycle, in our view,” said the Nuvama report dated 6 February.
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The brokerage has lowered its target price to ₹282 from ₹382 earlier. NCC’s shares currently trade at around ₹212, hovering near their 52-week low of ₹200.55 apiece seen on 14 March.
