Nagarjuna Construction Company Ltd (NCC) (Q4 FY07) - Investment Update

Nagarjuna Construction Company Ltd (NCC)

Recommendation: HOLD

CMP: Rs168
Target Price: Rs182

Nagarjuna Construction (NCC) posted a healthy topline growth of 56% yoy during FY07. Though the numbers were close to our estimates for the year, it was lower than management guidance of Rs30bn. With its present order book of Rs73bn, NCC is well placed to reach Rs40bn revenue target for FY08E. However, high order intake accretion is needed during FY08 to meet our revenue estimate for FY09E (46.4% of FY09E revenues on account of assumed new orders). While turnover CAGR is expected to be 37.3% during FY07-09E, margin upside during FY08-09E seems ruled out as new orders result in higher initial costs. Further, there is a capital raising plan, which is likely to result in an 18-20% equity dilution, not factored into our projections. We recommend a HOLD.

Warm Regards,

Amar Ambani
India Infoline Ltd.



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