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

Quarterly Highlights Standalone

Operating profit 117 116 102 0.3 14.4

Source: Company, Angel Research

For 1QFY2013, Nagarjuna Construction Company (NCC)s performance was

significantly above our and consensus estimates. However, the company

continued its dismal show at the EBITDAM level. The current outstanding order

book of NCC stands at`

20,520cr (3.5x FY2013E revenue), with an order inflowof `2,001cr (up 48.3% yoy) for 1QFY2013.

On the top-line front,

NCC reported a jump of 29.0% yoy to`1,472cr, which was higher than our and

the streets expectation of `1,187cr and `1,257cr respectively. Revenue growth

was driven by building, power and water divisions. On the EBITDAM front, the

companys performance was in line with our estimates at 7.9%, a dip of 230bp on

a y-o-y basis. The interest cost came in at `93cr, a y-o-y jump of 7.5% but a

decline of 5.4% on a sequential basis. At the bottom-line level, NCC reporteda

y-o-y decline of 28.6% to `17cr, higher than our and consensus estimates owing

to a strong performance on the revenue front.

For FY2013 the company has given a guidance of

10-15% growth on the revenue front and is hopeful of maintaining the EBITDAM

at 8-9%. NCCs captive power plant is expected to contribute ~`350cr to FY2013

revenues. Further, by end of FY2013 NCC is looking to reduce its debt to below

`2,000cr levels through stake sale in its road BOT and power projects. During the

quarter the company has also managed to bring its receivable days down to 88

days from 91 days in 4QFY2012.

Key financials (Standalone)

% chg 6.2 3.5 10.5 12.2

% chg (18.4) (78.0) 117.0 15.0

EBITDA margin (%) 9.6 7.6 8.0 8.6

P/E (x) 6.1 27.9 12.9 11.2

RoAE (%) 7.1 1.5 3.2 3.6

RoACE (%) 9.7 6.7 7.9 8.3P/BV (x) 0.4 0.4 0.4 0.4

EV/Sales (x) 0.7 0.6 0.6 0.7

EV/EBITDA (x) 6.9 7.5 7.5 7.8


CMP `39

Target Price `45

Investment Period 12 Months

Stock Info

Sector

Net Debt (` cr) 2,507

Bloomberg Code

Shareholding Pattern (%)

Promoters 20.3

MF / Banks / Indian Fls 17.2

FII / NRIs / OCBs 42.1

Indian Public / Others 20.4

Abs. (%) 3m 1yr 3yr

Sensex 6.6 4.2 17.0

NCC 2.4 (39.0) (69.1)

217,561

5,323

NGCN.BO

NJCC@IN

1,004

1.7

74/28

266,656

Infrastructure

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

Face Value (`)BSE Sensex

Nifty

Reuters Code

022-39357800 Ext: 6842

[email protected]

Performance Highlights

1QFY2013 Result Update | Infrastructure

August 9, 2012

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NCC | 1QFY2013 Result Update

August 9, 2012 2

Exhibit 1:Quarterly performance (Standalone)

Total expenditure 1,355 1,025 1,653 32.2 (18.0) 4,851 4,588 5.7

OPM (%) 7.9 10.2 10.3 (230)bp (240)bp 7.6 9.6 (200)bp

Interest 93 87 98 7.5 (5.4) 384 257 49.5

Depreciation 23 20 22 14.1 3.7 83 69 21.1

Non operating income 23 25 34 (5.7) (30.1) 121 106 14.1

Nonrecurring items - - - - - -

Tax 7.9 12 4.7 (31.6) 69.3 17 102 (83.4)

PAT (%) 1.1 2.0 0.6 (90)bp 50bp 0.7 3.2 (250)bp


Exhibit 2:1QFY2013 Actual vs. Estimates

Net Sales 1,187 1,472 24.0

EBITDA 94 117 24.4

Interest 102 93 (9.0)

Tax 1 8 -

PAT 2 17 -


Strong revenue performance led by pick-up in execution

On the top-line front, NCC reported a jump of 29.0% yoy to `1,472cr, which was

higher than our and the streets expectation of`1,187cr and`1,257cr respectively.

This is the second consecutive quarter of robust revenue growth after a lackluster

performance for many quarters. The revenue growth was driven by building,

power and water divisions. The management has given revenue guidance for

FY2013 at 10-15%, which would be primarily driven by captive power project. As

per the management, captive power plant contributed `82cr to the revenue for1QFY2013 and for the full year it is expected to contribute`350cr.

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August 9, 2012 3

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


Exhibit 4:Decent order inflow for 1QFY2013


Projects updateCurrently, toll collection is `3.5lakhs/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`21lakhs/day. The management expects

`24lakhs/day going ahead.

NCC is getting `23lakhs/day as against

breakeven level of`25lakhs/day.

NCC has achieved financial closure for the

project and has begun with civil works.On the fuel supply front, for 70% of coal

requirement, the company has tied up with Coal India; and for the balance 30%, it

has identified coal mines in Indonesia with its share at 50%. The total investment in

the mine for NCC would be at around`50cr, out of which`8cr-10cr has already

been invested.

NCC has been shortlisted for signing a power purchase agreement (PPA) of

500MW with the Government of Andhra Pradesh for `3.7 per unit. Further, the

company is hopeful of tying up with the governments of Karnataka and Tamil

Nadu for more PPAs to ensure that it ties up 900-950MW of power through PPAs.

NCC is now looking to achieve completion of this project inDecember 2012 from its earlier guidance of June 2012.

Poor EBITDAM and higher interest cost drag earnings downwards

On the EBITDAM front, the companys performance was in line with our estimates

at 7.9%, a dip of 230bp on a y-o-y basis. The interest cost came in at `93cr, a

y-o-y jump of 7.5% but a decline of 5.4% on a sequential basis. As per the

management the interest cost was lower on a sequential basis owing to reduction

in debt in 4QFY2012. However the companys debt increased again during the

end of 1QFY2013 which would result in higher interest cost going ahead. At the

bottom-line level, NCC reporteday-o-y decline of 28.6% to `17cr, higher than

our and consensus estimates owing to a strong performance on the revenue front.

1,

335

1,

450

1,

142

1,

090

1,

264

1,

755

1,

472

12.6

(4.7)

5.1

(9.2)(5.4)

21.0

29.0

(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

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

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

2,

729

577

1,

349

1,

701

6,

893

1,

000

2,

000

31.5

(72.1)

(33.3)

15.6

152.6

73.3

48.3

(100.0)

(50.0)

0.0

50.0

100.0

150.0

200.0

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000


Order Boo king (` cr, LHS) Growth ( yoy %, RHS)

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August 9, 2012 4

Exhibit 5:Dismal performance continues


Exhibit 6:PAT dragged down by poor EBITDAM and high int. cost


Order book analysis

NCC had an order inflow of`2,001cr during the quarter, a jump of 48.3% on a

y-o-y basis. This was mainly led by water and building divisions. The order book as

of 1QFY2013 stands at `20,520cr (3.5x FY2013E revenue), which is spread

across various verticals and the major contributors include the power, building,

irrigation and water segments.

Exhibit 7:Order backlog of`20,520cr (as of 1QFY2013, cr)


128 131

117

103

78

102

117

9.6

9.0

10.2

9.5

6.15.8

7.9

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0


EBITDA (` cr, LHS) EBITDAM (%, RHS)

41

36

23

11

(9)

11

17

3.0

2.5

2.0

1.0

(0.8)

0.6

1.1

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0


PAT (` cr, LHS) PATM (%, RHS)

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August 9, 2012 5

Outlook and valuation

For FY2013 the company has given a guidance of 10-15% growth on the revenue

front and is hopeful of maintaining the EBITDAM at 8-9%. NCCs captive power

plant is expected to contribute ~`350cr to FY2013 revenues. Further, by end ofFY2013 NCC is looking to reduce its debt to below `2,000cr level through stake

sale in its road BOT and power project. During the quarter the company has also

managed to bring its receivable days down to 88 days from 91 days in

4QFY2012.

Exhibit 8:Derivation of SOTP-based target price for NCC (FY2014E)

Brindavan Infra NPV CoE -14%, NCC's share 33.3% 12.4 0.5 1.1

Bangalore Elevated Tollway NPV CoE -14%, NCC's share 35.4% 29.1 1.1 2.5

Western UP Tollway NPV CoE -14%, NCC's share 30.0% 28.3 1.1 2.4

OB Infra NPV CoE -14%, NCC's share 64.0% 47.1 1.8 4.0

Pondicherry Tindivanam NPV CoE -14%, NCC's share 49.0% (25.2) (1.0) (2.2)

Himachal Sorang P/BV 1.0x FY12E equity invested; NCC's share 67.0% 103.2 4.0 8.9

NCC Power P/BV 0.5x FY12E equity invested; NCC's share 55.0% 185.0 7.2 15.9

Himalaya Green P/BV 1.0x FY12E equity invested; NCC's share 54.0% 30.0 1.2 2.6


Exhibit 9:Key assumptions

4,951 7,948 6,800 10,117 7,938 8,525

4,151 4,778 5,074 5,250 5,804 6,513

12,200 15,370 16,180 20,196 22,330 24,342

2.9 3.2 3.2 3.8 3.8 3.7


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August 9, 2012 6

Exhibit 10:Recommendation summary

ABL 228 273 Buy 1,514 2,014 2,293 23.1 18.0 22.6 26.7 21.7 12.7 10.1 8.5 3.9CCCL 17 - Neutral 2,128 2,489 2,755 13.8 (0.4) 3.0 4.0 - - 5.5 4.1 2.8

HCC 17 - Neutral 3,988 4,239 4,522 6.5 (3.7) (2.3) (1.0) - - - - 3.5

IRB Infra 120 166 Buy 3,131 3,964 4,582 21.0 14.9 15.5 16.9 6.5 8.0 7.7 7.1 -

ITNL 168 259 Buy 5,606 6,660 7,967 19.2 25.6 24.8 28.9 6.4 6.6 6.8 5.8 4.3

IVRCL 44 61 Buy 4,971 5,510 6,722 16.3 0.9 2.5 4.6 125.5 49.3 17.5 9.7 5.6

JP Assoc. 77 91 Buy 12,853 15,259 17,502 16.7 4.8 4.2 5.0 1.9 15.9 18.1 15.3 -

L&T 1,419 1,553 Accu. 53,171 60,474 69,091 14.0 64.3 72.1 76.3 9.0 22.1 19.7 18.6 2.5

Madhucon 36 56 Buy 1,802 2,206 2,502 17.8 4.9 4.6 4.7 (2.6) 7.3 7.7 7.7 4.3

Patel Engg 82 - Neutral 3,573 3,609 3,836 3.6 14.9 14.0 14.5 (1.1) 5.5 5.8 5.6 2.7

Punj Lloyd 51 - Neutral 10,557 11,892 13,116 11.5 2.8 1.7 3.1 5.7 18.3 29.8 16.4 2.3

Sadbhav 132 182 Buy 2,676 2,506 3,147 8.5 9.3 7.5 10.4 5.7 14.1 17.6 12.6 2.9

Simplex In. 200 265 Buy 6,019 6,732 7,837 14.1 16.8 23.5 29.4 32.2 11.9 8.5 6.8 2.5


Exhibit 11:SOTP break-up

ABL 87 32 - - 186 68 - - - - 273

CCCL 17 100 - - - - - - - - 17

HCC (6) (26) 12 53 16 73 - - - - 22

IRB Infra 98 59 - - 64 39 4 3 - - 166

ITNL 46 18 - - 180 70 - - 33 13 259

IVRCL 41 67 - - - - 20 33 - - 61

JP Assoc. 28 31 30 33 - - - - 33 36 91

L&T 1,221 79 - - - - 332 21 - - 1,553

Madhucon 12 21 2 4 30 54 - - 12 21 56

Patel Engg 44 46 17 18 16 16 - - 19 20 95

Punj Lloyd 69 100 - - - - - - - - 69

Sadbhav 83 46 - - 99 54 - - - - 182

Simplex In. 265 100 - - - - - - - - 265


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August 9, 2012 7

Company background

Nagarjuna Construction Company, starting 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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August 9, 2012 8

Profit & loss statement (Standalone)

Other operating income

% chg 19.5 15.1 6.2 3.5 10.5 12.2

Total Expenditure 3,778 4,294 4,586 4,851 5,338 5,954

Net Raw Materials 1,304 1,807 1,756 1,961 1,900 2,095

Other Mfg costs 2,084 2,066 2,335 2,463 2,913 3,268

Personnel 189 184 244 240 235 264

Other 201 237 251 187 291 326

% chg 3.9 29.4 0.9 (18.1) 16.6 20.0

(% of Net Sales) 9.0 10.1 9.6 7.6 8.0 8.6

Depreciation& Amortisation 53 53 69 83 91 104

% chg 2.8 34.5 (2.7) (24.5) 18.5 21.3

(% of Net Sales) 7.7 9.0 8.3 6.0 6.5 7.0

Interest & other Charges 162 196 257 384 382 462

Other Inc. 70 69 106 121 123 141

(% of PBT) 30.7 22.6 39.4 227.8 106.2 105.7

% chg (6.9) 33.0 (11.7) (80.2) 118.4 15.0

Extraordinary Expense/(Inc.) - (34) - - - -

Tax 74 116 97 17 37 43

(% of PBT) 32.6 34.5 36.3 32.0 32.4 32.4

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

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

Prior period items - 4 5 - - -

% chg (5.0) 30.2 (18.4) (78.0) 117.0 15.0

(% of Net Sales) 3.7 4.2 3.2 0.7 1.3 1.4

% chg (5.0) 30.2 (18.4) (78.0) 117.0 15.0

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August 9, 2012 9

Balance sheet (Standalone)

Equity Share Capital 46 51 51 51 51 51Preference Capital - - - - - -

Reserves & Surplus 1,640 2,178 2,327 2,360 2,396 2,444

Minority Interest

Total Loans 1,244 1,530 2,484 2,056 2,551 3,389

Deferred Tax Liability 19 25 31 25 25 25

Gross Block 623 756 923 1,043 1,223 1,403

Less: Acc. Depreciation 164 202 249 331 422 526

Capital Work-in-Progress 28 43 47 50 56 61

Inventories 750 754 896 1,234 1,330 1,140

Sundry Debtors 1,026 1,299 1,454 1,307 1,424 1,598

Cash 135 184 140 65 43 59

Loans & Advances 1,448 1,852 2,447 2,537 3,216 3,824

Other 3 3 9 909 13 16

Creditors/Adv/Other Liabilities 1,088 1,270 1,356 3,512 3,397 3,549

Mobilisation Adv & Others 467 480 547 - - -

Provisions 87 96 71 48 51 53

Mis. Exp. not written off 0 - - - - -

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August 9, 2012 10

Cash flow statement (Standalone)

Profit before tax (excl MI) 228 337 268 53 116 133

Depreciation 53 53 69 83 91 104Change in Working Capital 435 477 768 (405) 110 440

Less: Other income 70 69 106 121 123 141

Direct taxes paid 132 116 97 17 37 43

(Inc.)/ Dec. in Fixed Assets (7) (148) (170) (123) (186) (185)

(Inc.)/ Dec. in Investments (175) (201) (260) (39) (348) (348)

Other income 70 69 106 121 123 141

Issue of Equity - 361 - - - -

Inc./(Dec.) in loans 350 286 954 (428) 496 838

Dividend Paid (Incl. Tax) 35 39 30 42 42 42

Others 55 (6) (9) 33 - -

Inc./(Dec.) in Cash (98) 49 (44) (75) (22) 17

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August 9, 2012 11

Key ratios

P/E (on FDEPS) 6.5 5.0 6.1 27.9 12.9 11.2P/CEPS 4.8 4.0 4.3 8.4 5.9 5.2

P/BV 0.6 0.5 0.4 0.4 0.4 0.4

Dividend yield (%) 2.8 3.3 2.6 3.6 3.6 3.6

EV/Sales 0.5 0.5 0.7 0.6 0.6 0.7

EV/EBITDA 5.7 4.9 6.9 7.5 7.5 7.8

EV / Total Assets 0.7 0.6 0.7 0.7 0.7 0.7

Order Book to Sales 2.9 3.2 3.8 3.8 3.8 3.7

EPS (Basic) 6.5 8.4 6.5 1.4 3.0 3.5

EPS (fully diluted) 6.0 7.8 6.4 1.4 3.0 3.5

Cash EPS 8.1 9.9 9.0 4.6 6.6 7.6

DPS 1.1 1.3 1.0 1.4 1.4 1.4

Book Value 65.7 86.9 92.7 94.0 95.4 97.2

EBIT margin 7.7 9.0 8.3 6.0 6.5 7.0

Tax retention ratio 0.7 0.7 0.6 0.7 0.7 0.7

Asset turnover (x) 1.6 1.5 1.2 1.1 1.2 1.2

ROIC (Post-tax) 8.5 8.8 6.4 4.7 5.4 5.7

Cost of Debt (Post Tax) 10.2 9.3 8.1 11.5 11.2 10.5

Leverage (x) 0.5 0.6 0.8 0.9 0.9 1.2

Operating ROE 7.6 8.5 5.0 (1.5) (0.0) (0.1)

ROACE (Pre-tax) 11.8 12.8 9.7 6.7 7.9 8.3

Angel ROIC (Pre-tax) 12.7 13.4 10.0 6.9 8.0 8.4

ROAE 9.4 10.2 7.1 1.5 3.2 3.6

Asset Turnover (Gross Block) 6.5 6.9 6.0 5.3 5.1 5.0

Inventory / Sales (days) 57 57 59 74 81 69

Receivables (days) 83 89 99 96 86 85

Payables (days) 137 126 131 188 217 195

WC cyc (ex-cash/mob.adv)(days) 120 139 176 183 156 154

Net debt to equity 0.7 0.6 1.0 0.8 1.0 1.3

Net debt to EBITDA 3.0 2.8 4.8 5.0 5.4 6.0

Interest Coverage 2.0 2.2 1.6 0.8 1.0 1.0

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August 9 2012 12

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.

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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%)

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