NCC Limited shares experienced a minor uptick following the company’s announcement of winning several high-value contracts in October 2024, totaling Rs 3,496 crore. These projects span across the Building, Electrical, and Water divisions, awarded by central and state government agencies as well as private firms. With a well-diversified order book and strong execution capabilities, NCC has outpaced broader market returns, making it one of HDFC Securities' top Diwali picks with a target price of Rs 363. This report delves into NCC’s contract wins, stock performance, and growth prospects amid India’s infrastructure expansion.

New Contracts Boost NCC's Order Book

Total Contract Value: NCC secured contracts worth Rs 3,496 crore in October 2024, marking a significant addition to its already robust order book.
Diverse Awarding Bodies: These contracts were awarded by central and state government agencies, along with private companies, reflecting NCC’s versatile market reach and competitive positioning in multiple sectors.
Project Segments: The Building Division led with contracts valued at Rs 2,694 crore, followed by the Electrical Division at Rs 538 crore, and Water and Other Divisions at Rs 274 crore.

Execution Timelines and Compliance

Contract Duration: The execution timelines for these projects range from six months to six years, suggesting a steady revenue stream for NCC over the coming years.
Transparency in Dealings: NCC clarified that neither the promoters nor the promoter group hold any interest in the entities awarding these contracts, ensuring no related-party transactions, thus upholding transparency and compliance in its operations.

Stock Performance and Market Sentiment

Intraday Movement: At 11:02 am, NCC shares were trading slightly higher at Rs 312 on the NSE, touching an intraday high of Rs 317.70. However, due to a broader bearish market sentiment, the stock traded nearly flat by the time of publication.
Year-to-Date Gains: NCC’s stock has surged approximately 85% year-to-date, outperforming the Nifty's return of 10%, and gained 103% over the past 12 months, effectively doubling investors' capital.
Broader Market Comparison: In the past year, Nifty registered a 23% increase, highlighting NCC’s exceptional performance relative to broader market trends.

HDFC Securities Endorses NCC as a Top Pick

Diwali Stock Pick: HDFC Securities identified NCC as a top pick for the Diwali season with a target price of Rs 363, citing the company’s diversified order book and strong operational capabilities.
Strength in Segment Diversity: NCC’s portfolio spans multiple segments, including building, mining, railways, electrical, water, and environment. This diversity is seen as a major advantage, enabling the company to tap into various infrastructure opportunities.

Growth Drivers and Positive Market Tailwinds

Experience and Execution Capabilities: NCC’s extensive experience and proven execution capabilities allow it to capitalize on rising opportunities in the buildings, water infrastructure, transportation, metros, defense, and airport sectors.
Government Support for Infrastructure: HDFC Securities emphasized that NCC will benefit from positive tailwinds as the Indian government continues to prioritize infrastructure development through various schemes, supporting the company's long-term growth trajectory.

Financial Projections and Investment Rationale

Revenue and Profit Growth: HDFC Securities projects NCC’s revenue, EBITDA, and PAT to grow at a compound annual growth rate (CAGR) of 16%, 21%, and 39.6% respectively over FY24-26E, reflecting robust financial prospects.
Investment Guidance: HDFC Securities recommends buying NCC in the price band of Rs 273-303, targeting Rs 363 (18x FY26E EPS) by next Diwali, underscoring the stock’s potential for continued gains driven by strong fundamentals and a solid order book.
Disclaimer: Investors are advised to conduct their own due diligence and consider financial goals and risk tolerance before making investment decisions.