NCC, 11th February, 2013

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Please refer to important disclosures at the end of this report 1

Quarterly Highlights Standalone

Operating profit 86 77 112 10.8 (23.1)

Source: Company, Angel Research

For 3QFY2013, NCC posted a poor performance on the revenue front;however higher other income due to asset sale and lower tax expense helpedboost bottom-line growth. The current outstanding order book of NCC stands at`18,799cr (3.3x trailing revenues), with order inflows of `3,200cr for 9MFY2013.

On the top-linefront, NCC reported a decline of 6.3% yoy to `1,184cr, which wassignificantly lower than our estimate of `1,427cr. This was mainly due to lossin revenue of `200cr during the quarter on account to slow moving orders.On the EBITDAM front, the companys EBITDA margins stood at 7.2% (down116bp sequentially), which were below our estimate of 8.4%. However, on thebottom-line front, NCC reported a PAT of `11cr (in line with our estimate) against

a loss of `9cr in 3QFY2012. This was mainly on the back of higher other income

owing to asset sale and lower tax expense during the quarter.

For FY2013 the company has given a guidance of

15-20% growth on the revenue front and is hopeful of maintaining the EBITDAM

at 8-9%. However based on 9MFY2013 performance we believe it will not achieveits revenue guidance. NCCs captive power plant is expected to contribute

~`360cr to FY2013 revenues. Further, NCC reduced its debt by`100cr during

the quarter to `2,522cr and is in process of reducing its debt to below `2,000cr

through stake sale in one of its road BOT project, continued monetization of its

land bank, and stake sale in the Himachal Sorang project. The stock currently

trades at a PE of 6x and 4.5x (excluding subsidiaries valuation) our FY2013 and

FY2014 EPS estimates.

Key financials (Standalone)

% chg 6.2 3.5 11.7 12.2

% chg (10.7) (78.0) 119.3 33.2

EBITDA (%) 9.6 7.6 8.1 8.2

P/E (x) 6.4 29.2 13.3 10.0

P/BV (x) 0.4 0.4 0.4 0.4

RoE (%) 7.1 1.5 3.2 4.2

RoCE (%) 9.6 6.6 8.0 8.7

EV/Sales (x) 0.7 0.6 0.6 0.5

EV/EBITDA (x) 7.0 8.1 7.0 6.6

OB/sales(x) 2.7 3.3 3.4 3.3

Order inflows 6,828 10,118 8,476 8,484

%chg (23.4) 48.2 (16.2) 0.1


CMP `41

Target Price `44

Investment Period 12 Months

Stock Info

Sector

Net Debt (` cr) 2,467

Bloomberg Code

Shareholding Pattern (%)

Promoters 20.4

MF / Banks / Indian Fls 10.0

FII / NRIs / OCBs 41.0

Indian Public / Others 28.7

Abs. (%) 3m 1yr 3yr

Sensex 3.4 9.3 21.5

NCC (8.2) (24.4) (73.8)

Face Value (`)BSE Sensex

Nifty

Reuters Code

1,049

1.7

67/28

372,218

Infrastructure

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

219,485

5,904

NGCN.BO

NJCC@IN

022-39357800 Ext: 6842

[email protected]

Performance Highlights

3QFY2013 Result Update | Infrastructure

February 8, 2013

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NCC | 3QFY2013 Result Update

February 8, 2013 2

Exhibit 1:Quarterly performance (Standalone)

Total expenditure 1098 1187 1216 (7.4) (9.7) 3670 3199 14.7

OPM (%) 7.2 6.1 8.4 112bp (116)bp 7.9 8.5 (62)bp

Interest 99 107 102 (7.6) (2.9) 294 242 21.5

Depreciation 23 21 23 9.7 1.5 69 61 12.7

Non operating income 48 39 25 23.3 93.0 97 44 122.6

Nonrecurring items 0 0 0 0 0 0 0 -

Tax 1.0 (2.2) 3.6 - (72.1) 13 12 2.3

PAT (%) 0.9 (0.8) 0.6 - 31bp 0.9 0.7 17bp


Exhibit 2:2QFY2013 Actual vs Estimates

Net Sales 1,427 1,184 (17.0)

EBITDA 120 86 (28.5)

Interest 114 99 (12.9)

Tax 5 1 (79.9)

PAT 11 11 (3.2)Source: Company, Angel Research

Execution falters

On the top-line front, NCC reported a decline of 6.3% yoy to`1,184cr, which

was significantly lower than our estimate of`1,427cr. This is mainly due to (a)

lower-than-expected revenue recognition in two-three projects, particularly

from the power segment and (b) delay in receiving payments from clients. As

per the Management, the captive power plant contributed `240cr to the revenue

for 9MFY2013 and for the full year it is expected to contribute`360cr.

Going ahead, the Management has given revenue guidance of 15-20% for

FY2013, however based on the poor performance during the quarter; we believe it

will not be able to achieve its guidance. Hence, we have factored in a lower top-

line of`5,863cr (earlier estimate was of`5,947cr) and`6,576cr (earlier estimate

was of`6,569cr) for FY2013 and FY2014, respectively.

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February 8, 2013 3

Exhibit 3:Pick-up in execution led to revenue growth


Exhibit 4:Subdued order inflow for 2QFY2013


Projects updateCurrently, toll collection from the project is at

`4lakhs/day, much lower than the breakeven level of`8lakhs/day. However, the

company believes that toll revenue will pick up going ahead.

Toll collection is currently at `18-20lakh/day, much lower than was

estimated, owing to mining ban in the state imposed by the government. The

Management expects`24lakh/day going ahead.

NCC is drawing a toll revenue of `20-

22lakh/day as against breakeven level of`25lakh/day.

As per the Management, the company is in an advanced stage

of negotiation with some investors for part/full stake sale in the Himachal Sorang

project. The Management expects the deal to be completed within a period of 9-

10 months. The project is expected to be commissioned in March 2013. Further,

the company is also in talks with some regulatory authorities for signing short term

power purchase agreement (PPA).

The construction activity for the 1,320MW

(660MW x 2) Krishnapatnam power project is going as per schedule and the

company has recognized revenues of ~`240cr in 9MFY2013. Going forward, the

company expects to post revenues of ~`360cr in FY2013. However, the company

has not signed any power purchase agreement (PPA) till date and is hopeful of

tying up for one within the next few quarters.

Asset sale boosts bottom-line

On the EBITDAM front, the companys EBITDA margins stood at 7.2% (down

116bp sequentially), which were below our estimate of 8.4%. This was mainly

on account of slower-than-expected execution during the quarter. However, on

the bottom-line front, NCC reported a PAT of `11cr (in line with our estimate)

against a loss of`9cr in 3QFY2012. This was mainly on the back of higher other

income and lower tax expense during the quarter.

1142

1090

1264

1755

1472

1328

1184

5.1(9.2)

(5.4)

21.0 29.0

21.8

(6.3)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

Sales (` cr, LHS) Growth (yoy %, RHS)

16,

189

16,

570

21,

990

20,

196

20,

520

19,

639

18,

799

0.9 3.1

27.3 24.8 26.8

18.5(14.5)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

-

5,000

10,000

15,000

20,000

25,000

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

Order Booking ( cr, LHS) Growth (yoy %, RHS)

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Februa

Exhibi

Source:

Exhibi

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Exhibit 7:

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February 8, 2013 5

Outlook and valuation

For FY2013 the company has given a guidance of 15-20% growth on the revenue

front and is hopeful of maintaining the EBITDAM at 8-9%. However based on

9MFY2013 performance, we believe it will not achieve its revenue guidance.NCCs captive power plant is expected to contribute ~`360cr to FY2013 revenues.

Further, NCC reduced its debt by`100cr during the quarter to`2,522cr and is in

process of reducing its debt to below `2,000cr through stake sale in one of its

road BOT projects, continued monetization of its land bank and stake sale in the

Himachal Sorang project. The stock currently trades at a PE of 6x and 4.5x

(excluding subsidiaries valuation) our FY2013 and FY2014 EPS estimates.

Exhibit 9:Derivation of SOTP-based target price for NCC (FY2014E)

NCC Standalone Construction 567 22 P/E of 5x FY14 earnings

NCC - Internationalbusiness

Construction 64 2 P/E of 3x FY14 earnings

Road BOT

Brindavan Infra Annuity 37 1 NPV at CoE of 16%

Bangalore Elevated Toll 55 2 NPV at CoE of 16%

OB Infra Annuity 52 2 NPV at CoE of 16%

Western UP Toll 16 1 NPV at CoE of 16%

Pondicherry Tindivanam Toll 16 1 NPV at CoE of 16%

Power BOT

Himachal Sorang Merchant 115 4 P/BV multiple of 1x on FY12 end investment

NCC PowerPPA /Merchant

200 8 P/BV multiple of 0.5x on FY12 end investment

NCC Urban Infra +others

Real Estate 0 0No value ascribed on account of uncertainity relating to DubaiHarmony project


Exhibit 10:Key assumptions

Order Inflow 5,417 8,914 6,828 10,118 8,476 8,484

Revenue 4,125 4,754 4,872 5,236 5,851 6,563

Order Backlog (Y/E) 12,197 15,370 16,180 20,197 22,198 23,486

OB to Sales ratio (x) 3.0 3.2 3.3 3.9 3.8 3.6


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February 8, 2013 6

Exhibit 11:Recommendation summary

ABL 220 268 Buy 1,500 1,866 2,131 19.2 22.6 24.3 27.0 9.3 9.7 9.0 8.1 2.9CCCL 15 - Neutral 2,048 2,262 2,522 11.0 (0.5) 1.5 2.7 - - 9.9 5.5 2.2

IRB Infra 120 164 Buy 3,133 3,843 4,212 15.9 14.9 16.9 17.8 9.3 8.1 7.1 6.7 2.8

ITNL 193 225 Buy 5,606 6,564 7,054 12.2 25.6 26.3 29.0 6.5 7.5 7.4 6.7 1.5

IVRCL 32 32 Neutral 6,178 4,249 6,897 5.7 0.6 0.3 3.3 136.8 53.5 102.1 9.5 5.0

JP Assoc. 73 100 Buy 12,853 13,842 15,863 11.1 4.8 3.7 4.6 (2.8) 15.1 20.0 16.0 -

L&T 1,509 1,788 Buy 53,171 60,666 69,525 14.3 64.3 63.2 75.1 8.1 23.5 23.9 20.1 2.7

Punj Lloyd 50 - Neutral 10,557 11,892 13,116 11.5 2.8 1.8 3.2 7.8 18.0 27.4 15.5 2.3

Sadbhav 122 168 Buy 2,676 2,344 2,804 2.4 9.3 7.2 8.7 (3.5) 13.1 17.0 14.0 2.9

Simplex In. 168 251 Buy 6,010 6,906 8,053 15.8 18.1 23.2 31.3 31.7 9.3 7.2 5.4 2.4

Unity Infra 38 59 Buy 1,973 2,180 2,455 11.5 14.0 13.3 15.0 3.5 2.7 2.8 2.5 2.2

ABL 220 268 Buy 1,500 1,866 2,131 19.2 22.6 24.3 27.0 9.3 9.7 9.0 8.1 2.9


Exhibit 12:SOTP break-up

ABL 86 32 - - 182 68 - - - - 268

CCCL 16 100 - - - - - - - - 16

IRB Infra 52 32 - - 113 69 4 3 - - 164

ITNL 74 33 - - 121 54 - - 30 13 225

IVRCL 17 46 - - - - 20 54 - - 37

JP Assoc. 27 27 30 30 - - - - 43 43 100

L&T 1,351 76 - - - - 437 24 - - 1,788

Punj Lloyd 64 100 - - - - - - - - 64

Sadbhav 70 41 - - 99 59 - - - - 168

Simplex In. 251 100 - - - - - - - - 251

Unity Infra 52 88 - - 7 12 - - - - 59


Company background

NCC, having started off as a building/industrial construction company, has

emerged as an EPC contractor with a diversified product portfolio. NCCs presence

across all the key infrastructure verticals: 1) roads; 2) buildings; 3) water; 4)

irrigation; 5) electrical; 6) power; 7) oil and gas; and 8) metals endows it with a

relatively de-risked business model. NCC has also ventured in international

geographies such as Oman and UAE, which further diversifies its business.

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February 8, 2013 7

Profit & loss statement (Standalone)

Other operating income 26.5 14.1 8.6 2.0 11.7 13.1

% chg 19.5 15.1 6.2 3.5 11.7 12.2

R.M. consumed 1,442 1,766 1,756 1,961 2,152 2,381

Construction expenses 1,663 1,797 1,866 1,856 2,034 2,270

Employee expenses 189 184 244 240 288 340

SG&A 484 547 722 794 913 1,046

% chg 3.9 29.4 0.4 (17.7) 19.0 13.6

(% of Net Sales) 9.0 10.1 9.6 7.6 8.1 8.2

Depreciation & Amortisation 53 53 69 83 95 107

% chg 2.8 34.5 (3.3) (24.1) 20.2 13.9

(% of Net Sales) 7.8 9.0 8.2 6.0 6.5 6.6

Interest & other Charges 162 196 257 384 397 427

Other Income 70 69 106 121 135 151

(% of PBT) 30.7 22.6 39.8 227.8 114.3 96.3

Share in profit of Associates - - - - - -

% chg (6.9) 33.0 (12.5) (80.1) 122.5 33.2

Extraordinary Expense/(Inc.) - 49.6 - - - -

Tax 74.3 120.4 102.1 16.9 38.9 51.7

(% of PBT) 32.6 34.1 38.5 32.0 33.0 33.0

Add: Share of earnings of asso. - - - - - -

Less: Minority interest (MI) - - - - - -

Prior period items - - - - - -

% chg (5.0) 19.0 (10.7) (78.0) 119.3 33.2(% of Net Sales) 3.7 3.8 3.2 0.7 1.3 1.6

% chg (5.0) 19.0 (10.7) (78.0) 119.3 33.2

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February 8, 2013 8

Balance sheet (Standalone)

Equity Share Capital 46 51 51 51 51 51Share App Money - - - - - -

Reserves & Surplus 1,640 2,194 2,327 2,360 2,424 2,511

Total Loans 1,244 1,530 2,484 2,234 2,334 2,534

Deferred Tax Liability 19 25 31 25 25 25

Gross Block 623 756 923 1,039 1,159 1,339

Less: Acc. Depreciation 164 202 249 313 408 515

Capital Work-in-Progress 28 43 46 35 35 35

Goodwill - - - - - -

Inventories 750 754 896 1,234 1,343 1,488

Sundry Debtors 1,026 1,299 1,454 1,307 1,462 1,622

Cash 135 200 121 65 45 35

Loans & Advances 1,448 1,852 2,466 3,432 3,608 3,712

Other 3 3 9 15 15 15

Current liabilities 1,641 1,845 1,974 3,382 3,663 3,849

Mis. Exp. not written off - - - - - -

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February 8, 2013 9

Cash flow statement (Standalone)

Profit before tax 228 353 266 53 118 157

Depreciation 22 38 46 64 95 107Change in Working Capital (435) (477) (788) 246 (159) (224)

Less: Other income (70) (69) (106) (121) (135) (151)

Direct taxes paid (74) (120) (102) (17) (39) (52)

(Inc.)/ Dec. in Fixed Assets 25 (148) (169) (105) (120) (180)

(Inc.)/ Dec. in Investments (175) (201) (260) (39) - -

Other income 70 69 106 121 135 151

Issue of Equity (6) 6 - - - -

Inc./(Dec.) in loans 350 286 954 (250) 100 200

Dividend Paid (Incl. Tax) (29) (39) (30) (9) (15) (18)

Others (3) 368 5 0 0 0

Inc./(Dec.) in Cash (98) 65 (78) (57) (20) (10)

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February 8, 2013 10

Key ratios

P/E (on FDEPS) 6.1 4.3 6.4 29.2 13.3 10.0P/CEPS 4.5 4.1 4.5 8.8 6.0 4.9

P/BV 0.6 0.5 0.4 0.4 0.4 0.4

Dividend yield (%) 2.7 3.2 2.4 0.7 1.2 1.5

EV/Sales 0.5 0.5 0.7 0.6 0.6 0.5

EV/EBITDA 5.8 4.9 7.0 8.1 7.0 6.6

EV / Total Assets 0.7 0.6 0.7 0.7 0.7 0.7

EPS (Basic) 6.7 9.5 6.4 1.4 3.1 4.1

EPS (fully diluted) 6.7 9.5 6.4 1.4 3.1 4.1

Cash EPS 9.1 10.0 9.0 4.6 6.8 8.3

DPS 1.1 1.3 1.0 0.3 0.5 0.6

Book Value 73.7 87.5 92.7 94.0 96.5 99.9

EBIT margin 7.8 9.0 8.2 6.0 6.5 6.6

Tax retention ratio 67.4 65.9 61.5 68.0 67.0 67.0

Asset turnover (x) 1.6 1.5 1.2 1.1 1.2 1.3

ROIC (Post-tax) 8.5 8.9 6.1 4.6 5.4 5.9

Cost of Debt (Post Tax) 10.2 9.3 7.9 11.1 11.6 11.8

Leverage (x) 0.5 0.6 0.8 0.9 0.9 1.0

Operating ROE 7.6 8.6 4.7 (1.5) (0.3) 0.3

ROCE (Pre-tax) 11.8 12.8 9.6 6.6 8.0 8.7

Angel ROIC (Pre-tax) 12.8 13.6 10.1 6.8 8.2 8.8

ROE 9.4 9.3 7.1 1.5 3.2 4.2

Asset Turnover (Gross Block) 6.5 6.9 6.0 5.4 5.3 5.3

Inventory / Sales (days) 57 57 59 74 80 79

Receivables (days) 83 89 99 96 86 86

Payables (days) 152 141 145 200 236 224

Wcap cycle (ex-cash) (days) 120 139 177 190 167 160

Net debt to equity 0.7 0.6 1.0 0.9 0.9 1.0

Net debt to EBITDA 3.0 2.8 4.9 5.4 4.8 4.6

Interest Coverage 2.0 2.2 1.6 0.8 1.0 1.0

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February 8, 2013 11

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investmentdecision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any wayresponsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or inthe past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, pleaserefer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited andits affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement NCC

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

NCC, 11th February, 2013

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