NBCC LTD (NBCC) : Orderbook Solid Strong Inflows Anticipated

Result Update
September 16, 2016
NBCC Ltd (NBCC)
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Buy
| 281
12-18 months
13%
Orderbook solid; strong inflows anticipated
Whats changed?
Target
EPS FY17E
EPS FY18E
Rating
Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT
Net sales grew 14.3% YoY to | 1245.2 crore driven by growth in PMC
division (grew 20.7% YoY to | 1171.1 crore). However, sales was
below our estimate of | 1363.0 crore mainly on account of lower than
expected revenues in PMC division (| 1171.1 crore in Q1FY17 vs. our
expectation of | 1259.5 crore) and real estate division (| 17.3 crore in
Q1FY17 vs. our expectation of | 51.8 crore)
The EBITDA margin contracted 40 bps YoY to 3.5% and was below
our estimate of 4.5% mainly due to higher un-allocable expenses
(| 21.0 crore in Q1FY17 vs. our expectation of | 12.6 crore)
PAT grew 14.4% YoY to | 45.4 crore. However, it was below our
expectation of | 59.4 crore mainly on account of higher effective tax
rate (34.5% in Q1FY17 vs. 30.3% in Q1FY16) and EBITDA margin miss
Changed from | 228 to | 281

Changed from | 6.1 to | 4.8
Changed from | 9.6 to | 8.4
Unchanged
Q1FY17
1,245.2
44.9
3.5
45.4
Q1FY16
1,089.0
33.3
3.1
39.7
YoY (%)
14.3
34.7
50 bps
14.4
Q4FY16 QoQ (%)

2,241.2
-44.4
171.9
-73.9
7.7 -392 bps
131.8
-65.5
Key financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY15
4,361.0
287.0
277.3
4.6
FY16
5,749.2
345.8
308.4
5.1
FY17E
6,329.3
320.5
289.4
4.8
FY18E
10,389.9
649.6
501.2
8.4
FY16
48.3
54.6
39.2
10.0
20.7
31.1
FY17E
51.4
58.2
43.5
9.1
17.6
27.1
FY18E
29.7
33.6
22.4
7.8
26.3
40.7
Valuation summary
(x)
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)
FY15
53.7
60.7
47.7
11.2
20.9
32.0
Stock data
Particular
Market Capitalization
Total Debt
Cash
EV
52 week H/L (|)
Equity capital
Face value
Amount ( | crore)
14,886.0
0.0
1,133.5
13,752.5
267 / 162
120.0
|2
Price performance
Return %
| 249
1M
3M
6M
12M
NCC
11.6
15.6
25.4
38.7
NBCC
10.8
39.0
39.2
38.4
Simplex Infra
13.2
23.7
51.7
22.6
Research Analyst
Deepak Purswani, CFA
deepak,purswani@icicisecurities.com
Vaibhav Shah
vaibhav.shah@iciisecurities.com
ICICI Securities Ltd | Retail Equity Research
Orderbook grows further with order inflows of ~| 4500 crore in YTDFY17

The company witnessed robust order inflows of ~| 4500 crore in
YTDFY17. Its current orderbook inclusive of redevelopment projects
stands strong at ~| 70,000 crore, providing strong revenue visibility,
going forward. The orderbook comprises of ~| 93% from PMC and
redevelopment space, ~4% from the real estate division and ~3% from
the EPC division. Going forward, the management expects the orderbook
to close at ~| 80000 crore by FY17E end. Furthermore, in July, 2016, the
Union Cabinet approved the redevelopment of seven old colonies at Delhi
out of which, NBCC has been awarded three colonies viz. Sarojini Nagar,
Nauroji Nagar and Netaji Nagar while rest would be developed by CPWD.
The management expects the execution on these projects to begin in
FY18E and the company entails equity investment of ~| 500 - | 1000
crore. With its strong orderbook and huge opportunities lying ahead, we
anticipate NBCCs topline/bottomline to grow at a CAGR of 34.4%/27.5%
to | 10389.9 crore/ | 501.2 crore over FY16-18E.
Real estate division falters amid challenging environment

In Q1FY17, real estate revenues slumped 76.3% YoY to | 17.1 crore as
the company could not sell completed inventory primarily in Okhla amid
challenging demand environment. Currently, the company has a fully
constructed inventory of ~| 500 - | 600 crore. Furthermore, management
has stated that company will stay cautious and will not launch projects
aggressively keeping in mind the sluggish demand scenario in the real
estate market. However, the real estate division contributes only ~5% to
the topline.
To benefit from government initiatives over the long term

In our view, NBCC will be a key beneficiary of governments ambitious
schemes like Housing for all, AMRUT & Smart Cities aimed at urban
development. Furthermore, NBCC is already implementing a few smart
townships like Kidwai Nagar and New Moti Bagh. It is looking to provide
an all-round smart city solution.
Short term challenges; positive over long term; Maintain BUY

We are positive on NBCCs business model given the huge set of
opportunities, going ahead and expect its revenues/earnings to grow at of
34.4%/27.5% CAGR over FY16-FY18E. We also like NBCC given its
negative working capital, cash rich balance sheet (| 1133.5 crore as on
FY16) and strong return ratios (RoE of 26.3% & RoCE of 40.7% in FY18E),
going ahead. Consequently, we maintain our BUY recommendation with
revised SOTP based target price of | 281 (implying 33.5x FY18E EPS).
Variance analysis
Particular
Net Sales
Q1FY17
Q1FY17E
Q1FY16
1,245.2
1,363.0
1,089.0
Other Income
Material Consumed
Changes in Inventories of WIP
Expenditure in Piece rate Work
Employee Benefit Expenses
Other Expenses
EBITDA
EBITDA Margin (%)
YoY(%) Q4FY16
QoQ(%)
14.3
2,241.2
-44.4
34.7
2.3
-65.5
1,216.4
54.7
11.3
44.9
3.5
30.0
85.7
0.0
1,138.0
49.7
29.6
62.9
4.5
32.3
22.0
-18.8
971.7
67.1
16.0
33.3
3.1
7.5
-89.5
248.3
25.2
-18.4
-29.5
34.7
50 bps
31.9
188.5
-237.8
2,083.3
52.0
38.4
171.9
7.5
8.8
-98.8
-72.5
-41.6
5.3
-70.7
-73.9
-392 bps
0.6
9.7
69.3
23.9
45.4
0.5
7.6
84.8
25.4
59.4
0.7
8.0
56.9
17.2
39.7
-8.2
NM
21.8
38.7
14.4
0.6
14.0
189.2
57.5
131.8
-1.2
NM
-63.4
-58.4
-65.5
New
6,329.3
320.5
5.0
289.4
4.8
% Change
-13.7
-25.7
-80.1bps
-20.4
-20.4
Depreciation
Interest
PBT
Taxes
PAT
Comments
Sales was below our estimate of | 1363.0 crore mainly on account of lower
than expected revenues in PMC division (| 1171.1 crore in Q1FY17 vs. our
expectation of | 1259.5 crore) and real estate division (| 17.3 crore in
Q1FY17 vs. our expectation of | 51.8 crore)
EBITDA margin contracted 40 bps YoY to 3.5% and was below our estimate
of 4.5% mainly due to higher un-allocable expenses (| 21.0 crore in Q1FY17
vs. our expectation of | 12.6 crore)
PAT was below our expectation of | 59.4 crore mainly on account of higher
effective tax rate (34.5% in Q1FY17 vs. 30.3% in Q1FY16) and EBITDA
margin miss
Source: Company, ICICIdirect.com Research
Change in estimates
FY17E
Particulars
Revenue
EBITDA
EBITDA Margin
PAT
EPS
Old
7,336.0
431.5
5.8
363.7
6.1
FY18E
Old
10,968.0
759.8
6.9
576.3
9.6
New
10,389.9
649.6
6.2
501.2
8.4
% Change
Comments
-5.3 We have factored in muted revenue growth in real estate revenues
-14.5
-69.9bps
-13.0 Revenue degrade leads to earnings degrade
-13.0
Assumptions for PMC division

Current
| crore
Order inflow
Order Backlog
Average Execution
FY16
19,661
52,000
15.5%
FY17E
15,000
79,985
10.0%
Comments
Earlier
FY18E
16,500
84,785
13.7%
FY17E
15,000
78,832
11.5%
FY18E
17,000
83,464
14.5%
We have tweaked our estimates slightly
Page 2
Company Analysis
Strong order book and consistent order inflow
NBCC witnessed order inflows of ~| 4500 crore in YTDFY17 taking its
orderbook to ~| 70,000 crore (including redevelopment opportunities).
The orderbook consist of ~93% from PMC & redevelopment, ~4% from
real estate & ~3% from EPC division. Going forward, the management
has guided for an closing orderbook of ~| 80000 crore for FY17E. Going
ahead, we have built in healthy orderbook of ~| 79985 crore/~| 84785
crore in FY17E/FY18E respectively on back of healthy opportunities.
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
84785
12.5
12.0
79985
10.0
520008.9
2.3
1768
3.4
2.3
2.2
2.1
6986
4233
3430
2692
2.6
2.4
7729
7658
2.4
8162
3.8
3.8
12163
15427
14.0
8.1 8.0
4.5
6.0
20000
4.0
(x)
(| crore)
Exhibit 2: Strong order book and consistent order inflow
2.0
0.0
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
Order Book
FY13
FY14
FY15
FY16
FY17E
FY18E
Order Book to Bill ratio
PMCeconomic moat for NBCC!!!

Project management consultancy (PMC) division is the cash cow business
for NBCC. Its PWO status helps in getting contract on nomination basis.
As a result, NBCC gets 70-80% contract on a nomination basis from
various ministries. In Q1FY17, the PMC division revenues grew by 20.7%
YoY to | 1171.1 crore
100
175.0
90
140.0
Total Revenue
Q3FY16
Revenue from PMC
Q4FY16
1171.1
1245.2
2059.9
2241.2
1239.9
1421.1
897.7
Q2FY16
Q1FY17
% Contribution of PMC
Source: Company, ICICIdirect.com, Research
70
70.0
60
35.0
(%)
7.8
7.5
7.3
7.3
7.3
89.2
Q1FY16
1116.6
970.0
0.0
8
1089.0
500.0
105.0
161.0
80
1000.0
7.6
7.5
90.2
(%)
80
8.0
7.8
67.5
87
1500.0
(| crore)
94
92
89
(| crore)
2000.0
Exhibit 4: EBIT and EBIT margin from PMC division
70.8
Exhibit 3: Revenue contribution from PMC division
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
EBIT from PMC
EBIT Margin of PMC
Source: Company, ICICIdirect.com, Research
Page 3
7.0
Working capital & cash flows - best in the industry

NBCC has a unique advantage of generating cost-free float from its PMC
division where it is able to get revenue upfront from clients. On the other
hand, it gets an extended credit period from contractors. Consequently,
this has led to a negative working capital cycle and healthy CFO and FCFF
over the years. It is one of the biggest economic moats of NBCC as
compared to its peers in the industry. In FY14, NBCC enhanced its land
bank to expand its real estate business which led to an increase in the
inventory, in turn, leading to a higher working capital and lower CFO as
compared to those in the previous year. Hence, it earns from both
operations as well as float.
Exhibit 5: Robust working capital management
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
600.0
FY18E
356.7
400.0
200.0
37.3
17.3
(| crore)
0.0
-35.7
-200.0
-400.0
-600.0
-272.1
-346.9
-500.9
-800.0
-550.8
-607.2
-613.9
-678.0
-1000.0
-717.7
-891.3
-820.6
Working Capital Requirement
Exhibit 7: OCF & FCF to remain healthy

400.0
FY16
FY18E
Creditors
-437.9
FY13
-200.0
-438.1
FY14
FY15
FY16
FY17E
42.3
38.3
112.1
83.4
180.8
0.0
61.7
(| crore)
2574.6
FY17E
Debtors
3273.5
6286.3
FY15
Inventory
1568.4
FY14
2167.6
4161.9
0.0
1424.7
2007.9
3805.2
1000.0
1145.7
1704.1
3279.1
3000.0
996.7
1316.4
2919.6
(| crore)
4000.0
59.5
200.0
5000.0
2000.0
-ve due to increase

in land inventory
218.8
6000.0
-153.9
7000.0
-160.7
Exhibit 6: Major components of WC
FY18E
-400.0
-600.0
CFO
FCFF
Opportunities galoregrowth drivers for PMC

Redevelopment projectsnew thrust to growth
While the PMC division can get projects from diverse sectors and grow at
a steady rate on the back of a macroeconomic revival, the next big
opportunity lies in redevelopment of old government properties.
The government started focusing on redevelopment of ramshackle
buildings and old government colonies in Delhi and across India to build
multi-storeyed residential and commercial complexes. In July, 2016,
NBCC has finally been entrusted the work of redeveloping 3 colonies
namely: Sarojini Nagar, Netaji Nagar, and Nauroji Nagar while the
remaining 4 colonies will be redeveloped by CPWD.
Page 4
The successful execution of the New Moti Bagh project and PWO status
for NBCC has opened up a huge opportunity in other government/PSU
properties. Currently, NBCC is implementing similar redevelopment
projects of a government colony in East Kidwai Nagar, Delhi. It is the first
of 30 government colonies across Delhi spread over 1100 hectares of
prime real estate.
Opportunities from various government schemes
NBCC has been executing many landmark projects as a PMC as its core
strength leveraging its rich experience in diverse sectors. The company
has also been designated as the implementing agency for executing
projects under Jawaharlal Nehru National Urban Renewal Mission
(JNNURM), Pradhan Mantri Gram Sadak Yojna (PMGSY), solid waste
management (SWM) and developmental work in the North Eastern
Region. NBCC has signed an agreement with the state government of
Punjab wherein it will build 18 de-addiction centres at an initial cost of
| 100 crore using prefab technology.
Real estate value additive business
Capital employed
1427.1
Unallocated
Total
80.9
120.8
128.6
552.8
565.0
393.0
1127.3
1338.3
1488.5
Exhibit 8: Revenue contribution from real estate division
Exhibit 9: EBIT and EBIT margin from real estate division
1000.0
Q1FY16 Q2FY16 Q3FY16

Total Revenue
% Contribution of Real Estate
40.0
15.0
30.0
1.4
17.3
49.8
2.2
2241.2
10.0
1421.1
1116.6
163.0
1089.0
0.0
110.0
7.7
6.7
20.0
(%)
14.6
1780.3
73.2
(| crore)
1500.0
500.0
50.0
25.0
2000.0
43.8
10.0
0.0
0.0
31.6
28.5
20.0
5.0
Q4FY16 Q1FY17
Revenue from Real Estate
50.9
Q1FY16
23.5
Q2FY16
Q3FY16
Q4FY16
Q1FY17
EBIT from Real Estate
55.0
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
(%)
-460.2
1071.7
7.6
-419.2
849.2
15.8
-355.6
Real Estate
25.8
PMC
EPC
We also like NBCCs strategy to invest part of its surplus cash flow into the
value enhancing real estate business in a disciplined manner and keep its
balance sheet debt free. Currently, NBCC has accumulated 170 acres of
land reserves spread across 12 states in India. However, the company is
not aggressive in this segment and does not wish to launch any new
projects but would focus on completion of the existing projects. Majorly,
the projects are for affordable housing and middle income group.
However, in Q1FY17, the real estate revenues slumped 76.3% YoY to |
17.1 crore due to sluggish real estate market. Currently, the company has
an fully constructed inventory of ~| 500 - | 600 crore. The company has
started 2 real projects at Lucknow and Kochi in FY17and the management
has stated that company will not launch projects aggressively keeping in
mind the demand scenario in the real estate market.
FY16
46.4
FY15
37.3
FY14
(| crore)
(| crore)
EBIT Margin of Real Estate
Page 5
EPCwell poised to take on new opportunities in infrastructure sector

NBCC was incorporated as a pure EPC player wherein it has been
executing engineering and construction services for projects such as
chimneys, cooling towers and various types of power plant works.
However, growth has remained subdued in the last few years. Currently,
mere 5.0% of the revenues are contributed by the EPC business. Going
ahead, the governments priority to boost infrastructure will create
opportunities for the construction industry. NBCC is well poised to grab
this opportunity.
12.1
6.0
15.0
5.6
4.0
-2.0
-1.3
Q1FY16
Q2FY16
3.2
0.0
10.0
5.0
2.0
15.9
131.5
1245.2
71.2
Q4FY16 Q1FY17
Revenue from EPC
2.0
8.0
(| crore)
(%)
Q1FY16 Q2FY16 Q3FY16

Total Revenue
% Contribution of EPC
2241.2
55.9
0.0
1421.1
3.0
45.9
500.0
1116.6
4.0
89.5
1000.0
11.9
(%)
10.0
5.0
4.2
1089.0
(| crore)
5.0
20.0
17.3
9.7
5.0
1500.0
12.0
5.9 6.0
5.0
-0.6
2000.0
Exhibit 11: EBIT and EBIT margin from EPC division
8.5
Exhibit 10: Revenue contribution from EPC division
Q3FY16
Q4FY16
Q1FY17
EBIT from EPC
0.0
-5.0
EBIT Margin of EPC
Navratna status opens up new set of opportunities

NBCC became the fifteenth Navratna Company on June 23, 2014 among
250 PSUs in India. Navratna status gives the company freedom to forge
tie-ups in the international market and also allows its autonomy on
investment decision up to | 1000 crore. The government is considering a
proposal to hive off real estate owned by sick PSUs such as Bengal
Chemicals, National Bicycle Corporation and Richardson & Cruddas in
Mumbai's Worli, Byculla, etc. to NBCC. NBCC will be using the direct sale
of land or JV for the development of real estate. This is expected to pave
the way for long-term opportunities for NBCC in the real estate segment.
The company is also looking at strategic alliances with domestic and
international players in West Asia, Europe and Commonwealth of
Independent States (CIS) countries to scout for EPC contracts as the
acquisition route would be time consuming. NBCC has already signed a
JV with Oman based Al Naba Construction LLC for EPC contracts in Oman
and the UAE. Also, it is looking at similar opportunities in political stable
geographies like Turkey and CIS countries.
Navratna status gives the company freedom to forge tie-ups in the
international market and also allows it autonomy on investment decisions
up to | 1000 crore.
Page 6
Financials
Revenues to grow at CAGR of 34.4% during FY16-18E
We expect revenue to witness robust growth of 34.4%
CAGR to | 10389.9 crore during FY16-18E
NBCC has achieved its target revenue of | 4,200 crore, PAT margin of
5.6% and order inflow of | 5,000 crore in FY15 as per the MoU signed
with Government of India. By looking at NBCCs past track record and
current position, we believe it will over achieve the expected MoU target
in FY17E and FY18E. Considering the current order book, its ongoing
projects and strong opportunities, we expect revenues to witness robust
growth at 34.4% CAGR to | 10389.9 crore in FY16-18E.
Exhibit 12: Revenue growth momentum to continue
12000.0
CAGR - 34.4%
10000.0
8000.0
6000.0
4008.8
4361.0
5749.2
6329.3
10389.9
0.0
3186.8
2000.0
3429.3
4000.0
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
EBITDA to grow at 37.1% CAGR during FY16-18E

We anticipate EBITDA margin to remain flat at 6.2% in
FY18E. EBITDA is expected to grow at 37.1% CAGR to |
649.6 crore during FY16-18E.
The management is not aggressive on the real estate business. Going

ahead, with lower proportion of revenues from the high margin real estate
and EPC division, we anticipate a moderate 93 bps expansion in the
EBITDA margin from 5.9% in FY16 to 6.9% in FY18E. Consequently,
EBITDA is expected to grow at 37.1% CAGR to | 649.6 crore during FY1618E.
Exhibit 13: EBITDA and EBITDA margin trend
900.0
7.0
6.5
5.9
CAGR - 37.1%
5.5
600.0
6.2
5.0
5.0
4.4
(%)
(| crore)
5.0
300.0
151.0
159.3
224.0
287.0
345.8
320.5
649.6
0.0
113.2
3.6
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
EBITDA
3.0
EBITDA Margin
Page 7
PAT to grow at 27.5% CAGR during FY16-18E

We envisage PAT will post healthy growth of 27.5% CAGR
during FY16-18E to | 501.2 crore aided mainly by the
strong topline performance
NBCCs bottomline has grown at 19.0% CAGR during FY10-15 largely led
by its robust topline growth and zero interest expenses. We envisage PAT
will post a growth at 27.5% CAGR during FY16-18E to | 501.2 crore aided
mainly by the strong topline performance.
Exhibit 14: PAT growth trend
600.0
7.0
6.5
6.3
6.1
400.0
5.3
5.0
4.5
4.5
190.2
207.5
247.2
277.3
308.4
289.4
501.2
4.8
140.3
0.0
6.0
5.5
(| crore)
200.0
CAGR - 27.5%
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
PAT
4.0
PAT Margin
Dividend Payout increased sharply.

NBCC has paid out ~47% of its earnings as dividends to
investors in FY16 and we expect a similar payout ratio,
going ahead
The government has issued revised guidelines for CPSEs (Central Public
Sector Enterprise) to pay annual dividend of 30% of PAT or 30% of
Government of India's equity, whichever is higher in lieu of the previous
guidelines in 2004 communicating a dividend policy of 20% of PAT or
20% of equity, whichever is higher. However, this should not impact
NBCC much as it has paid ~47% of PAT as dividend in FY16. Going
forward, we expect NBCC to maintain a similar dividend payout ratio.
Exhibit 15: Dividend payout track record
50
47
47
47
FY16
FY17E
FY18E
45
(%)
40
35
30
25
23
26
25
FY12
FY13
29
29
FY14
FY15
20
FY11
Page 8
Healthy return ratios

The average RoE and RoCE of NBCC during FY10-15 have remained at the
level of 21.6% and 30.5%, respectively, on the back of a strong
bottomline show. They stood at 20.7% & 31.2% in FY16. Going ahead, we
expect RoE and RoCE to bounce to 26.3% & 40.7 % in FY18E with an
anticipated bottomline growth.
Exhibit 16: RoE and RoCE trend
45.0
40.7
39.0
(%)
33.0
27.0
33.0
21.5
21.9
21.8
27.1
32.0
25.4
21.0
31.1
30.8
28.6
20.9
26.3
20.7
17.6
22.2
15.0
FY11
FY12
FY13
FY14
FY15
RoE
FY16
FY17E
FY18E
RoCE
Exhibit 17: PAT margin to drive future RoE

18.0
8.0
6.5
5.5
(x)
12.0
9.0
6.0
6.3
4.8
6.0
5.3
4.5
4.5
3.0
0.0
6.1
3.5
1.0
1.2
2.6
1.3
FY11
FY12
FY13
Leverage (Asset/Equity)
4.8
4.0
5.4
3.5
3.2
3.8
3.8
1.0
1.0
1.0
1.0
1.0
FY14
FY15
FY16
FY17E
FY18E
Asset Turnover (Sales/Asset)
(%)
15.0
2.0
0.0
PAT Margin (PAT/Sales)
Page 9
Conference call highlights
Management guidance: The management has guided for ~25-30%

revenue growth, going forward
Orderbook Update: NBCCs witnessed order inflows of ~| 4500 crore

in YTDFY17 taking its orderbook to ~| 71000 crore (including
redevelopment orders). Out of this, 93% comes from the PMC
division, ~4% from real estate division and ~3% from EPC division.
The company expects execution of redevelopment of 3 colonies to
begin in Q1FY18. Further, the company will have to make an upfront
equity investment of ~| 500-1000 crore in redevelopment of 3
colonies
Update on key projects: In terms of execution, for Kidwai Nagar

project, unexecuted work stands at ~| 2500 crore as on Q1FY17 and
the project is expected to be completed by 2019. For AIIMS Trauma
centre (PMC work), basic works such as constructing boundary wall
has started and the management expects the company to start the
actual work by October and expect it to complete in 36 months with
revenue recognition to begin in Q2FY18. While, works for AIIMS
Western Campus & Ayurvigyan Nagar would start in Q1FY18
Lower employee expenses: The employee expenses came in lower at

| 54.7 crore in Q1FY17 vs. | 67.1 crore in Q1FY16 mainly on account
of a one-off of | 14.1 crore as post retirement medical benefit under
employee benefit expense in Q1FY16
Real Estate Update: The company has ~30-32 land parcels and has a
fully constructed inventory of ~| 500-600 crore. Further, the company
is not aggressive in this segment and would focus on completion of
the existing projects. It has launched 2 new real estate projects in
Lucknow and Kochi in FY17
Page 10
Outlook and Valuation

We ascribe target price of | 281/share for NBCC based on
SOTP methodology
We are positive on NBCCs business model given the huge set of

opportunities, going ahead and expect its revenues/earnings to grow at of
34.4%/27.5% CAGR over FY16-FY18E. We also like NBCC given its
negative working capital, cash rich balance sheet (| 1133.5 crore as on
FY16) and strong return ratios (RoE of 26.3% & RoCE of 40.7% in FY18E),
going ahead. Consequently, we maintain our BUY recommendation with
revised SOTP based target price of | 281 (implying 33.5x FY18E EPS).
We have valued NBCCs PMC business & redevelopment business on the
DCF based methodology to capture the long term opportunities in each
business. We have considered cost of equity of 12.1% for the PMC
business and 13% for the redevelopment space. Based on these
assumptions, we have valued NBCCs PMC business at | 129/share & redevelopment opportunities at | 123/share. The real estate business has
been valued at | 24/share (at 1x P/BV) while the EPC business has been
valued at | 5.0/share (8x FY18E EV/EBIT). Overall, we ascribe target price
of | 281/share for NBCC based on SOTP methodology.
Exhibit 18: SoTP valuation summary
SOTP valuation
Equity Value (| crore)
| per share
Comments
PMC Business
7751
129
DCF based valuation
Re-development Opportunity
7354
123
DCF based valuation
Real Estate Business
1435
24
at 1x P/BV
298
at 8x FY18E EV/EBIT
16838
281
EPC
Total
Exhibit 19: One year forward P/E

300
Price (|)
200
100
Price
10x
20x
30x
40x
Sep-16
Jun-16
Mar-16
Dec-15
Sep-15
Jun-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
50x
Source: Bloomberg, ICICIdirect.com Research
Page 11
Exhibit 20: One year forward P/BV
Exhibit 21: One year forward EV/EBITDA
300
17,000
14,000
11,000
EV (| Cr)
Price (|)
200
100
8,000
5,000
2x
8x
EV
10x
25x
20x
Jun-16
Sep-16
Mar-16
Sep-15
Dec-15
Jun-15
Dec-14
Mar-15
Jun-14
30x
Sep-14
Dec-13
35x
Mar-14
Jun-13
Sep-13
Dec-12
Sep-16
Jun-16
Mar-16
Sep-15
6x
Dec-15
Jun-15
Dec-14
Mar-15
Jun-14
4x
Sep-14
Dec-13
Mar-14
Jun-13
Sep-13
Mar-13
Sep-12
Dec-12
Price
Mar-13
-1,000
Sep-12
2,000
15x

Exhibit 22: Valuation

FY15
FY16
FY17E
FY18E
Sales
(| cr)
4,361.0
5,749.2
6,329.3
10,389.9
Growth
(%)
8.8
31.8
10.1
64.2
EPS
(|)
4.6
5.1
4.8
8.4
Growth
(%)
12.2
11.2
-6.2
73.2
PE EV/EBITDA
(x)
(x)
53.7
47.7
48.3
39.2
51.4
43.5
29.7
22.4
RoNW
(%)
20.9
20.7
17.6
26.3
RoCE
(%)
32.0
31.1
27.1
40.7
[
Page 12
Recommendation History vs. Consensus Chart

120.0
300
100.0
(|)
60.0
(%)
80.0
200
40.0
100
20.0
0
0.0
Jul-14
Sep-14
Dec-14
Price
Feb-15
Apr-15
Idirect target
Jul-15
Sep-15
Dec-15
Consensus Target Mean
Feb-16
May-16
Jul-16
% Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Mar-16
Mar-16
Event
NBCC secures orders worth | 131 crore in the project management consultancy (PMC) division in February, 2016
The Board of Directors of NBCC at its meeting on March 11, 2016, considers and approves the proposal for splitting one equity share into five of the
company subject to the approval of shareholders with respect to the same
Mar-16
The Board of Directors of NBCC accord in-principle approval for takeover of Hindustan Steelworks Construction (HSCL) after restructuring its balance
sheet involving waiving off government loans with interest up to the date of takeover.
Apr-16
May-16
Jun-16
Jun-16
Jul-16
Jul-16
NBCC secures projects worth | 227 crore in the project management and consultancy (PMC) division in March, 2016
NBCC has secured projects worth | 133.4 crore in April, 2016.
NBCC has split its share in 1:5 ratio
NBCC bags orders worth | 1901 crore in May, 2016
The company received orders worth ~| 588 crore in June, 2016
NBCC is entrusted the work of redeveloping 3 colonies namely: Sarojini Nagar, Netaji Nagar, Nauroji Nagar while the remaining will be redeveloped by
CPWD.
The Cabinet has approved 15% stake sale in NBCC. Currently, Centre holds 90% stake in the company.
The company received orders worth ~| 345 crore in July, 2016
NBCC has secured work for construction of 30 bedded ESIC Hospital at Baltikuri, West Bengal worth | 250 crore
NBCC has signed Memorandum of Agreement (MOA) with Goa Shipyard Ltd. for construction of Office Building for Mine Counter Measure Vessels
(MCMV) and additional space in the Yard of Goa Shipyard, valuing ~| 100 crore
Jul-16
Aug-16
Aug-16
Aug-16
Aug-16
Sep-16
Sep-16
NBCC secured | 120 crore order from Archaeological Survey of India for construction of Institute of Archaeology & UNESCO Category-II Centre at Greater
Noida.
NBCC has secured total business worth | 614.8 crore in August, 2016
NBCC has bagged an order worth ~| 270 crore from University Grant Commission (UGC) for construction of new UGC building complex at JNU campus
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Shareholding Pattern
Name
Government of India
Allianz Global Investors Asia Pacific Limited
Tata Asset Management Limited
Amundi Hong Kong Limited
Norges Bank Investment Management (NBIM)
J.P. Morgan Asset Management (Hong Kong) Ltd.
L&T Investment Management Limited
Capital Investment Trust Corporation
Kotak Mahindra Asset Management Company Ltd.
Principal PNB Asset Management Company Ltd.
Latest Filing Date

31-Mar-16
31-Dec-15
30-Jun-16
30-Apr-16
31-Dec-15
30-Apr-16
31-May-16
31-Dec-15
30-Jun-16
30-Jun-16
% O/S
90.0%
0.4%
0.4%
0.3%
0.3%
0.2%
0.1%
0.1%
0.1%
0.1%
Position (m)
540.0
2.5
2.4
1.8
1.5
0.9
0.7
0.6
0.5
0.4
Change (m)
0.0%
-13.6%
0.0%
0.0%
-33.0%
-27.4%
-33.4%
-22.4%
16.2%
-1.2%
(in %)
Promoter
Public
Others
Total
Dec-15
90.00
10.00
0.00
100.00
Mar-16
90.00
10.00
0.00
100.00
Jun-16
90.00
10.00
0.00
100.00
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Kotak Mahindra Asset Management Company Ltd.
Pramerica Asset Managers Pvt. Ltd.
Sells
Value (m)
0.5
0.5
Shares (m)
0.2
0.2
Investor name
Driehaus Capital Management, LLC
L&T Investment Management Limited
Value (m)
-1.5
-1.1
Shares (m)
-0.1
-0.1
Page 13
Financial summary
Profit and loss statement
(| Crore)
Net Sales
Other income
Total revenues
Raw Material Expense
Employee benefit expenses
Other Expenses
EBITDA
Interest
Depreciation
Other income
PBT
Taxes
PAT
PAT Growth rate
Adjusted EPS (Diluted)
| Crore
FY15
4,361.0
146.6
4,548.7
3,822.6
195.1
56.3
287.0
FY16
5,749.2
129.0
5,956.1
5,103.7
222.3
77.5
345.8
FY17E
6,329.3
135.5
6,546.6
5,545.2
266.7
196.9
320.5
FY18E
10,389.9
142.3
10,618.1
9,108.7
320.0
311.6
649.6
40.2
2.3
146.6
391.0
113.7
277.3
12.2
4.6
36.8
2.2
129.0
435.8
127.4
308.4
11.2
5.1
40.0
2.5
135.5
413.4
124.0
289.4
(6.2)
4.8
62.7
2.7
142.3
726.4
225.2
501.2
73.2
8.4
| Crore
FY15
(| Crore)
Profit after Tax
Depreciation
Interest
Others
Cash Flow before wc changes
Net Increase in Current Assets
Net Increase in Current Liabilities
Net CF from operating activities
(Purchase)/Sale of Fixed Assets
Net CF from Investing activities
Inc / (Dec) in Equity Capital
Dividend
Net CF from Financing activities
Net Cash flow
Opening Cash
Closing Cash/ Cash Equivalent
| Crore
FY15
277.3
2.3
0.1
(12.5)
380.9
19.5
(554.3)
(153.9)
(6.8)
(5.0)
(70.2)
(70.2)
(229.1)
896.2
667.1
FY16
308.4
2.2
0.1
(572.7)
(134.6)
316.2
37.2
218.8
(38.0)
(0.8)
(144.4)
(144.4)
73.7
1,059.5
1,133.2
FY17E
289.4
2.5
0.1
(330.3)
85.8
70.7
(73.1)
83.4
28.8
(342.5)
(135.5)
(135.5)
(394.6)
1,133.2
738.6
FY18E
501.2
2.7
0.1
(1,054.4)
(325.2)
686.9
(319.4)
42.3
(4.0)
(408.7)
(234.7)
(234.7)
(601.1)
738.6
137.5
FY15
FY16
FY17E
FY18E
4.6
4.7
22.1
1.3
5.1
5.2
24.8
2.4
4.8
4.9
27.4
2.3
8.4
8.4
31.8
3.9
6.6
6.4
95.9
142.6
126.7
6.0
5.4
90.4
127.5
114.3
5.1
4.6
90.4
125.0
120.0
6.3
4.8
90.4
115.0
120.0
20.9
32.0
20.7
31.1
17.6
27.1
26.3
40.7
47.7
53.7
3.1
3.4
11.2
0.5
39.2
48.3
2.4
2.6
10.0
1.0
43.5
51.4
2.2
2.4
9.1
0.9
22.4
29.7
1.4
1.4
7.8
1.6
1.0
0.7
1.0
0.7
1.0
0.7
1.1
0.7
Balance sheet
(| Crore)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Minority Interest
Total Debt
Deferred Tax Liability
Total Liabilities
Assets
Gross Block
Less Acc. Dep
Net Block
Net Intangibles Assets
Total Fixed Assets
Investments
Inventory
Sundry Debtors
Loans & Advances
Cash & Bank Balances
Other Current Assets
Total Current Assets
Trade Payable
Other Current Liabilities
Provisions
Net Current Assets
Total Assets
Cash flow statement
FY16
FY17E
FY18E
120.0
1,204.1
1,324.1
(19.5)
1,305.0
120.0
1,368.5
1,488.5
(31.5)
1,457.0
120.0
1,522.4
1,642.4
(31.5)
1,611.0
120.0
1,788.9
1,908.9
(31.5)
1,877.0
41.5
15.3
26.2
26.2
161.0
1,145.7
1,704.1
612.3
1,059.5
16.2
4,537.7
1,514.0
1,765.1
141.2
1,117.4
1,305.0
79.3
17.3
62.0
62.0
230.8
1,424.7
2,007.9
617.6
1,133.5
7.1
5,190.8
1,800.0
2,005.2
221.3
1,164.2
1,457.0
50.6
19.9
30.7
30.7
730.8
1,568.4
2,167.6
766.8
738.6
7.1
5,248.4
2,080.9
2,081.0
237.5
849.0
1,611.0
54.6
22.6
32.0
32.0
1,230.8
2,574.6
3,273.5
1,258.7
137.5
7.1
7,251.4
3,415.9
2,870.4
350.9
614.2
1,877.0
Key ratios
Per Share Data (|)
EPS - Diluted
Cash EPS
Book Value
Dividend per share
Operating Ratios (%)
EBITDA / Net Sales
PAT / Net Sales
Inventory Days
Debtor Days
Creditor Days
Return Ratios (%)
RoNW
RoCE
Valuation Ratios (x)
EV / EBITDA
P/E (Diluted)
EV / Net Sales
Market Cap / Sales
Price to Book Value
Dividend yield
Solvency Ratios (x)
Net Debt / Equity
Debt / EBITDA
Current Ratio
Quick Ratio
Page 14
ICICIdirect.com coverage universe (Construction)

CMP
M Cap
Sector / Company
(|)
TP(|) Rating
(| Cr)
248 281
Buy 14,886
NBCC (NBCC)
231 230 Hold 8,110
IRB Infra (IRBINF)
123 140
Buy 3,152
PNC Infratech (PNCINF)
295 330
Buy 5,059
Sadbhav Engg. (SADENG)
159 160 Hold 2,964
Ashoka Buildcon (ASHBUI)
352 440
Buy 1,742
Simplex Infra (SIMCON)
88
90
Buy 4,903
NCC (NAGCON)
EPS (|)
P/E (x)
EV/EBITDA (x)
P/B (x)
RoE (%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
5.1
4.8
8.4 48.3 51.4 29.7 39.2 43.5 22.4 10.0
9.1
7.8 20.7 17.6 26.3
19.1 16.8 17.1 12.1 13.8 13.5 7.4
7.0
5.4 1.6
1.5
1.4 13.1 10.6 10.0
9.5
7.7
8.4 13.0 16.0 14.6 11.5 10.1
7.6 2.3
2.0
1.8 11.3 12.7 12.4
7.8 11.9 12.7 37.8 24.9 23.3 19.2 15.9 13.7 3.4
3.0
2.7
9.1 12.2 11.7
3.7
4.4
6.0 42.8 42.8 42.8 9.3
9.2
8.3 1.3
1.3
1.2
3.1
3.6
4.7
14.8 16.5 31.8 23.7 21.4 11.1 7.9
6.9
6.1 1.1
1.1
1.0
4.9
5.2
9.4
4.0
4.1
5.7 22.0 21.7 15.5 8.9
7.8
6.8 1.4
1.4
1.3
6.5
6.4
8.4
Page 15
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com
Page 16
Disclaimer
ANALYST CERTIFICATION
We , Deepak Purswani, CFA MBA (Finance) and Vaibhav Shah, MBA (Finance); research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.
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Page 17

NBCC LTD (NBCC) : Orderbook Solid Strong Inflows Anticipated

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NBCC LTD (NBCC) : Orderbook Solid Strong Inflows Anticipated

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Result Update

September 16, 2016

NBCC Ltd (NBCC)

Orderbook solid; strong inflows anticipated

Changed from | 228 to | 281

Q4FY16 QoQ (%)

ICICI Securities Ltd | Retail Equity Research

Orderbook grows further with order inflows of ~| 4500 crore in YTDFY17

Real estate division falters amid challenging environment

To benefit from government initiatives over the long term

Short term challenges; positive over long term; Maintain BUY

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Assumptions for PMC division

We have tweaked our estimates slightly

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 2: Strong order book and consistent order inflow

Order Book to Bill ratio

Source: Company, ICICIdirect.com Research

PMCeconomic moat for NBCC!!!

Revenue from PMC

Source: Company, ICICIdirect.com, Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 4: EBIT and EBIT margin from PMC division

Exhibit 3: Revenue contribution from PMC division

EBIT from PMC

EBIT Margin of PMC

Source: Company, ICICIdirect.com, Research

Working capital & cash flows - best in the industry

Working Capital Requirement

Source: Company, ICICIdirect.com Research

Exhibit 7: OCF & FCF to remain healthy

-ve due to increase

Exhibit 6: Major components of WC

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Opportunities galoregrowth drivers for PMC

ICICI Securities Ltd | Retail Equity Research

Real estate value additive business

Exhibit 8: Revenue contribution from real estate division

Exhibit 9: EBIT and EBIT margin from real estate division

Q1FY16 Q2FY16 Q3FY16

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

EBIT from Real Estate

EBIT Margin of Real Estate

Source: Company, ICICIdirect.com Research

EPCwell poised to take on new opportunities in infrastructure sector

Source: Company, ICICIdirect.com Research

Q1FY16 Q2FY16 Q3FY16

Exhibit 11: EBIT and EBIT margin from EPC division

Exhibit 10: Revenue contribution from EPC division

EBIT from EPC

EBIT Margin of EPC

Source: Company, ICICIdirect.com Research

Navratna status opens up new set of opportunities

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com Research

EBITDA to grow at 37.1% CAGR during FY16-18E

The management is not aggressive on the real estate business. Going

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research