NBCC LTD (NBCC) : Real Estate Division Shines

Result Update
August 18, 2015
NBCC Ltd (NBCC)
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Buy
| 1150
12 months
11%
Real estate division shines
Whats changed?
Target
EPS FY16E
EPS FY17E
Rating
Changed from | 994 to | 1150

Changed from | 26.2 to | 25.7
Changed from | 35.0 to | 41.6
Unchanged
Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT
Q1FY16
1,147.3
39.6
3.4
43.3
Q1FY15
834.5
34.4
4.1
32.5
YoY (%)
37.5
15.1
-67 bps
33.5
Q4FY15 QoQ (%)

1,780.3
-35.6
165.5
-76.1
9.3 -585 bps
134.0
-67.7
Key financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY14
4,008.8
224.0
247.2
18.5
FY15E
4,621.0
287.0
277.3
20.8
FY16E
5,748.2
392.0
343.3
25.7
FY17E
9,661.6
745.6
555.0
41.6
FY15E
49.7
55.3
44.3
10.4
21.0
21.6
FY16E
40.1
44.7
31.9
5.4
13.4
15.2
FY17E
24.8
27.6
17.4
4.7
18.7
25.1
Valuation summary
(x)
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)
FY14
55.7
62.0
56.2
12.3
22.1
19.9
Stock data
Particular
Market Capitalization
Total Debt
Cash
EV
52 week H/L (|)
Equity capital
Face value
Amount
| 13773.3 Crore
| 0 Crore
| 1054.2 Crore
| 12719.2 Crore
1087 / 277
| 133.3 Crore
| 10
Price performance
Return %
1M
3M
6M
12M
NCC Ltd
(4.7)
(18.7)
(2.8)
96.5
(14.5)
(18.2)
(20.0)
25.1
1.2
32.3
40.9
131.3
Simplex Infra
NBCC
| 1033
Research Analyst
Deepak Purswani, CFA
deepak,purswani@icicisecurities.com
ICICI Securities Ltd | Retail Equity Research
NBCCs revenues grew 37.5% YoY to | 1147.3 crore ahead of our

estimate of | 1038.0 crore. While the PMC division revenues grew
30.4% YoY to | 970.0 crore, the real estate division revenues grew
radically by 102.4% YoY to | 128.2 crore
The EBITDA margin contracted 67 bps YoY to 3.4% below our
estimate of 5.3% mainly on account of a one-off of | 14.1 crore as
post retirement medical benefit under employee benefit expense.
Adjusting for this, the EBITDA stands at ~4.7%
PAT grew 33.5% YoY to | 43.3 crore, below our expectation of | 58.8
crore mainly due to one-off expenses associated with post retirement
employee expenses
Robust order book providing strong revenue visibility

As on June 30, 2015, NBCCs order book has reached ~| 27,000 crore,
5.5x TTM revenues, providing strong revenue visibility, going forward.
Out of this, ~| 20,500 crore is from PMC division, ~| 3,500 crore redevelopment project (East Kidwai Nagar) while remaining is real estate
(~| 3,000 crore) and EPC division (~| 700-800 crore). Furthermore, the
management expects an order inflow of ~| 12000-13000 crore in FY16
(ex-redevelopment) and order book around ~| 30000-35000 crore (exredevelopment) by FY16E end. Furthermore, in the redevelopment space,
NBCC recently grabbed new opportunities worth ~| 8000 crore. Out of
this, ~| 6000 crore is of East Delhi Hub project by Delhi Development
Authority (DDA) a, development of lake view complex (~| 2000 crore)
and redevelopment of IIPA campus (~| 435 crore).
Key beneficiary of government initiatives

GoI recently launched three ambitious schemes Atal Mission for
Rejuvenation & Urban Transformation (AMRuT), Housing For All by 2020
and 100 smart cities mission aimed at urban development. NBCC is
already implementing a few smart townships like Kidwai Nagar and New
Moti Bagh. The company is looking to provide an all-round smart city
solution, which would include both construction and technical
(IT/Electronic) services. Consequently, NBCC has signed an MoU with IBM
and a Malaysian JV firm for the same. However, order inflows from these
initiatives would take some time to percolate into the order book as these
developments are at a nascent stage.
Not keen on FPO fund raising in near term

In May 2015, the board had approved an FPO of 10% of the post issue
equity share capital for augmenting the company's resources to fund the
business development plans, subject to the approval of Government of
India. The proceeds were to be used as seed money to fund expected redevelopment projects. However, the management is not keen on raising
funds on an immediate basis. We highlight that we have already built up
the dilution in our estimates at the current market price.
Long term story intact; maintain BUY

We remain positive on NBCCs business model given the huge
opportunities in the redevelopment and real estate space and its cash rich
balance sheet. Hence, we have a BUY recommendation on NBCC with an
SOTP based target price of | 1150 (implying 27.6x FY17 EPS and ~0.7x
FY15-17E PEG ratio). We also highlight that we have now revised our
dilution arising from FPO at the current market price in our estimates.
Variance analysis
Q1FY16
1,147.3
Q1FY16E
1,038.0
Q1FY15
834.5
YoY(%)
37.5
Q4FY15
1,780.3
QoQ(%)
-35.6
31.2
25.9
24.7
26.0
35.3
-11.7
22.0
35.8
971.7
66.8
13.7
64.3
0.0
853.3
51.9
13.5
42.6
5.5
701.4
48.7
10.6
-48.4
554.9
38.5
37.3
29.4
107.8
62.6
1,408.5
47.0
15.0
-79.6
-42.8
-31.0
42.2
-8.6
EBITDA
EBITDA Margin (%)
39.6
3.4
54.9
5.3
34.4
4.1
15.1
-67 bps
165.5
9.3
-76.1
-585 bps
Depreciation
Interest
PBT
Taxes
PAT
0.6
7.6
62.5
19.2
43.3
0.3
0.0
80.5
21.7
58.8
0.8
6.4
51.9
19.5
32.5
-19.9
NM
20.4
-1.4
33.5
0.5
8.7
191.6
57.7
134.0
34.2
NM
-67.4
-66.7
-67.7
Net Sales
Other Income
Material Consumed
Changes in Inventories of WIP
Expenditure in Piece rate Work
Employee Benefit Expenses
Other Expenses
Comments
Revenues grew 37.5% YoY to | 1147.3 crore ahead of our estimate of |
1038.0 crore). While, PMC division revenues grew 30.4% YoY to | 970.0
crore, the real estate division revenues grew radically by 102.4% YoY to |
128.2 crore
EBITDA margin contracted 67 bps YoY to 3.4% below our estimate of 5.3%
mainly on account of a one-off expenses of | 14.1 crore as Post Retirement
Medical Benefit under Employee Benefit Expenses. Adjusting for this,
EBITDA margin stood at 4.7%
PAT grew 33.5% YoY to | 43.3 crore below our expectation of | 58.8 crore
mainly due to one off expenses relating to employee post retirement medical
expenses
Source: Company, ICICIdirect.com Research
Change in estimates
Particulars
Revenue
EBITDA
EBITDA Margin %
PAT
EPS
Old
5,748.2
400.8
7.0
350.0
26.2
FY16E
New % Change
5,748.2
0.0
392.0
-2.2
6.8
-15 bps
343.3
-1.9
25.7
-1.9
Old
8,011.6
615.6
7.7
467.2
35.0
FY17E
0
New % Change 0 Comments
9,661.6
20.6
745.6
21.1
7.7
3 bps
555.0
18.8
41.6
18.8 We have now incorporated better than expected orderinflow in FY16E which led to
Assumptions for PMC division

Current
Earlier
Comments
| crore
Order inflow
FY16E
32,398
FY17E
23,200
FY16E
27,398
FY17E
18,050
Order Backlog
44,424
58,814
39,424
50,314
Average Execution
16.5%
17.3%
17.9%
16.3%
We have now incorporate the order inflow of |12,000 crore (exredevelopement) in line with management guidance of |12,000-|15000
crore in FY16
Page 2
Company Analysis
Strong order book and consistent order inflow
NBCCs order book has grown at 28.7% CAGR in FY04-14. The order book
as on Q1FY16 is at ~| 27,000 crore i.e. 5.5x order book to bill ratio,
providing strong revenue visibility over the next couple of years. The
current order book comprises the PMC business of~| 20500 crore, redevelopment business worth ~| 3500 crore, EPC business ~ | 700-800
crore and real estate business of ~| 3000 crore. Also, in the same period
of FY04-14, order inflows have grown at ~26% CAGR.
Going forward, the management has guided that order inflows will
increase substantially primarily due to opportunities arising from
redevelopment of old colonies in New Delhi. Therefore, we expect order
acquisition and execution to remain healthy. We have built in 86% CAGR
in the order book during FY15-17E.
Exhibit 2: Strong order book and consistent order inflow
70000.0
6.1
40000.0
3.4
30000.0
2.3
1.8
20000.0
2.3
2.2
2.6
2.4
2.4
6985.6
7728.8
7657.8
8162.2
FY09
FY10
FY11
FY12
2.1
1205.4
1768.1
2691.7
3430.1
4233.3
FY04
FY05
FY06
FY07
FY08
58814.0
3.8
3.8
12163.2
15427.0
3.6
(x)
(| crore)
50000.0
10000.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
7.7
60000.0
44424.0
17000.0
0.0
Order Book
FY13
FY14
FY15
FY16E
FY17E
Order Book to Bill ratio
PMCeconomic moat for NBCC!!!

Project management consultancy (PMC), which accounted for ~83% of
total revenues in FY15, is the cash cow business for NBCC. Its PWO status
helps in getting contract on nomination basis. As a result, NBCC gets 7080% contract on a nomination basis from various ministries. In Q1FY16,
the PMC division grew 30.4% YoY to | 970 crore with EBIT margin of
4.9%.
80.0
Q1FY15
Total Revenue
Q2FY15
Q3FY15
Q4FY15
Revenue from PMC
970.0
1147.3
1420.1
1780.3
974.4
1101.8
778.5
904.4
744.1
0.0
40.0
100.0
0.0
% Contribution of PMC
9.3
10.0
8.0
6.3
5.4
5.0
4.9
6.0
4.0
50.0
20.0
Q1FY16
Source: Company, ICICIdirect.com, Research
(| crore)
60.0
1000.0
834.5
(| crore)
1500.0
500.0
150.0
100.0
0.0
2.0
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
EBIT from PMC
(%)
84.5
47.4
79.8
132.1
88.4
48.9
86.1
41.7
89.2
(%)
2000.0
Exhibit 4: EBIT and EBIT margin from PMC division
46.6
Exhibit 3: Revenue contribution from PMC division
0.0
EBIT Margin of PMC
Source: Company, ICICIdirect.com, Research
Page 3
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
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
200.0
FY16E
FY17E
-429.8
-426.2
17.3
0.0
(| crore)
-200.0
-178.7
-400.0
-272.1
-346.9
-600.0
-500.9
-550.8
-800.0
-607.2
-613.9
-678.0
-717.7
-891.3
-1000.0
-820.6
Working Capital Requirement
1000.0
-ve due to increase in

land inventory
800.0
Inventory
Debtors
-200.0
FY13
FY14
FY15
FY16E
596.1
600.1
828.6
831.6
27.9
34.0
-364.9
0.0
-365.4
200.0
119.2
FY16E
400.0
121.5
FY15
(| crore)
FY14
2382.3
1417.4
1968.6
4376.0
FY13
3308.8
6946.1
1145.7
1704.1
3279.1
600.0
996.7
1316.4
2919.6
8000.0
7000.0
6000.0
5000.0
4000.0
3000.0
2000.0
1000.0
0.0
Exhibit 7: OCF & FCF remain healthy except FY14
632.4
830.3
2633.7
(| crore)
Exhibit 6: Major components of WC
FY17E
-400.0
FY17E
-600.0
Creditors
CFO
FCFF
Opportunities galoregrowth drivers for PMC
Visible opportunities
Re-development of Netaji Nagar
| 5,000 crore
Redevelopment projectsnew thrust to growth
Re-development of Kasturba Nagar
| 5,000 crore
Re-development of Thyagaraj Nagar
| 5,000 crore
Greenfield project in Ghitorni
| 15,000 crore
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.
Re-development on land owned by Sick PSU
| 1,000 crore
Modernization of printing press across India
| 1,000 crore
Source: Company, Press Reports, ICICIdirect.com Research
Recently, 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
FY15, NBCC had entered into an agreement with the Rajasthan
government for re-development works. On similar basis, NBCC is in close
Page 4
negotiations with Odisha government and also with the Uttar Pradesh,
West Bengal governments for other redevelopment projects
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. Also, NBCC has received the go-ahead from the MoUD
to redevelop three colonies viz. Netaji Nagar, Kasturba Nagar and
Thyagaraj Nagar in the heart of South Delhi spread over ~185 acres at an
estimated project cost of ~ | 15,000 crore.
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.
Also, the company is in the process of sending a Cabinet note for
redevelopment of 18 government presses across India wherein presses
will be modernised and the rest of the land will be used for commercial
exploitation. Recently, in the state budget speech, the Rajasthan Chief
Minister announced the formation of a JV with NBCC to execute various
redevelopment works and construction projects in Rajasthan.
Real estate value additive business

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 across 12 states in India. Going ahead, it is looking to
plough back 50% of its annual profit in the land to explore opportunities
in the real estate division and looking to raise its contribution to 20-25%
over the next three to five years from 15-16% currently.
Hence, revenue from the real estate business has grown at ~39% CAGR
to | 496.8 crore during FY12-15. Also, its contribution to overall revenue
has reached 11%. The management envisages greater than 25%
contribution from the real estate division to overall revenue in the next
couple of years, which would lead to higher operating margins.
Real Estate
633.0
849.2
1071.7
EPC
Unallocated
75.4
80.9
120.8
854.2
552.8
565.0
Total
950.7
1127.3
1338.4
Source: Company, Press Reports, ICICIdirect.com Research
Exhibit 8: Revenue contribution from real estate division
Exhibit 9: EBIT and EBIT margin from real estate division
2000.0
Q1FY15
Total Revenue
% Contribution of Real Estate
Q3FY15
1147.3
128.2
270.7
Q4FY15
Q1FY16
27.7
23.8
0.0
0.0
30.0
20.0
15.1
15.0
20.0
10.0
35.0
25.0
19.0
30.0
5.0
Revenue from Real Estate
32.6
40.0
(| crore)
10.0
1780.3
67.9
1101.8
94.9
Q2FY15
15.0
(%)
11.2
6.2
904.4
0.0
63.4
500.0
10.5
7.6
50.0
20.0
15.2
834.5
(| crore)
1500.0
1000.0
60.0
25.0
(%)
-419.2
10.0
35.5
FY15
-355.6
51.4
FY14
-611.9
10.2
FY13
PMC
30.9
(| crore)
15.1
Capital employed
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
EBIT from Real Estate
5.0
0.0
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 4.3% 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.
Exhibit 11: EBIT and EBIT margin from EPC division
Total Revenue
Revenue from EPC
Q1FY16
% Contribution of EPC
18.8
16.5
20.0
15.0
(%)
6.0
10.0
4.0
0.0
Q1FY15
Q2FY15
Q3FY15
Q4FY15
EBIT from EPC
5.0
2.6
1.3
2.0
16.8
49.1
1147.3
89.5
Q4FY15
15.2
10.6
Q3FY15
1780.3
59.6
1101.8
31.0
Q2FY15
4.3
10.0
8.0
25.0
17.7
5.1
Q1FY15
3.4
904.4
0.0
27.0
500.0
3.2
834.5
(| crore)
1000.0
5.0
12.0
4.1
5.4
1500.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
(%)
2000.0
(| crore)
Exhibit 10: Revenue contribution from EPC division
0.0
Q1FY16
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. Currently, only 1-2% of the total revenue is
contributed by international projects. Going ahead, the management is
expecting the contribution to go up to 10-12%.
Page 6
Revenues to grow at CAGR of 44% during FY15-17E

We expect revenue to witness robust growth of 44% CAGR
to | 8011.6 crore during FY15-17E
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 FY16E and FY17E. Considering the current order book and its ongoing
projects, we expect revenues to witness robust growth at 44% CAGR to
| 9661.6 crore in FY15-17E.
Exhibit 12: Revenue growth momentum to continue
12000.0
9661.6
10000.0
8000.0
5748.2
6000.0
4000.0
2982.0
3126.8
3447.7
3198.5
FY10
FY11
FY12
FY13
4039.8
4662.1
2000.0
0.0
FY14
FY15
FY16E
FY17E
EBITDA to grow at 61.2% CAGR during FY15-17E

We expect an EBITDA margin expansion by 150 bps to
7.7% in FY17E. Consequently, EBITDA is expected to grow
at 61.2% CAGR to | 745.6 crore during FY15-17E
We expect revenues from the high margin real estate business to increase
substantially during FY15-17E. Also, the companys strategy to focus on
high value projects in the PMC division will further boost EBITDA margins
as they have lower percentage of overhead cost. Hence, these will lead to
an overall EBITDA margin expansion by 150 bps to 7.7% in FY17E.
Consequently, EBITDA is expected to grow at 61.2% CAGR to | 745.6
crore during FY15-17E.
Exhibit 13: EBITDA and EBITDA margin trend
800.0
CAGR - 46.4%
700.0
(| crore)
600.0
500.0
400.0
300.0
3.2
3.6
4.4
5.0
5.5
6.2
10.0
7.7
6.8
6.0
4.0
113.2
151.0
159.3
224.0
287.0
392.0
745.6
0.0
95.5
200.0
100.0
8.0
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
EBITDA
2.0
0.0
EBITDA Margin
Page 7
PAT to grow at 41.5% CAGR during FY15-17E

We envisage PAT will post healthy growth of 41.5% CAGR
during FY15-17E to | 555.0 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 healthy growth at 41.5% CAGR during FY15-17E to | 555.0 crore
aided mainly by the strong topline performance.
Exhibit 14: PAT growth trend
600.0
500.0
(| crore)
400.0
6.1
5.5
3.9
8.0
CAGR -41.5%
6.5
5.9
6.0
5.7
4.5
300.0
6.0
4.0
200.0
247.2
FY12
FY13
FY14
PAT
555.0
207.5
FY11
343.3
190.2
FY10
277.3
140.3
0.0
116.5
2.0
100.0
FY15
FY16E
FY17E
0.0
PAT Margin
Consistent dividend payer.

NBCC pays out ~20-25% of its earnings as dividends to
investors. We expect a similar payout ratio, going ahead
NBCC pays out ~20-25% of its earnings as dividends to investors as

reinvestment requirements are small given the asset-light nature of the
business. At the current market price, the dividend yield for FY15
(dividend of | 5.5/share) was 0.7%. According to the letter bearing
reference no: DO No. 3(4)-B(S)/2007 dated October 5, 2007 issued by the
Department of Economic Affairs, Ministry of Finance, GoI, all profit
making public sector enterprises with a majority holding of GoI are
required to declare a minimum dividend on equity of 20% or a minimum
dividend pay out of 20% of post tax profits, whichever is higher.
Exhibit 15: Dividend payout track record
35.0
30.0
25.0
23.4
23.3
FY10
FY11
25.7
25.2
FY12
FY13
31.1
29.8
29.8
29.8
FY14
FY15
FY16E
FY17E
(%)
20.0
15.0
10.0
5.0
0.0
Page 8
Healthy return ratios

The average RoE and RoCE of NBCC during FY10-15 have remained at the
level of 22.1% and 18.2%, respectively, on the back of a strong
bottomline show. Going forward, we expect asset turnover to remain at
the same level as that of FY15. However, we would like to highlight that
we have incorporated equity dilution by | 1000 crore at | 750 per share in
FY16E. Hence, we expect RoE and RoCE to decline in FY16E.
Nonetheless, we expect RoE and RoCE to bounce back from FY17E
onwards on account of expected bottomline growth.
Exhibit 16: RoE and RoCE (%) trend
30.0
27.0
(%)
24.0
25.1
23.9
21.3
21.9
21.8
21.5
20.9
21.0
18.0
15.0
16.9
16.8
FY10
FY11
19.9
18.3
18.8
21.6
13.4
16.7
15.2
12.0
FY12
FY13
FY14
RoE
FY15
FY16E
FY17E
RoCE
Exhibit 17: PAT margin to drive future RoE

8.0
15.0
6.5
5.5
(x)
12.0
9.0
3.9
6.0
5.5
5.9
6.0
5.7
4.5
6.0
4.0
4.8
4.4
1.0
1.0
FY10
FY11
3.0
0.0
6.1
3.4
3.7
3.6
1.0
1.0
1.0
1.0
2.3
1.0
FY12
FY13
FY14
FY15
FY16E
PAT Margin (PAT/Sales)
Leverage (Asset/Equity)
3.3
1.0
(%)
18.0
2.0
0.0
FY17E
Asset Turnover (Sales/Asset)
Page 9
Conference call highlights
There were order inflows worth ~| 4500 crore during the quarter and
the current order book stands at ~| 27000 crore. The current order
book comprises the PMC business ~| 20500 crore, re-development
business worth ~| 3500 crore, EPC business ~ | 700-800 crore and
Real Estate business of ~| 3000 crore
With respect to smart city mission of GoI, the company has entered
into MoU with IBM and a Malaysian JV firm to provide for complete
solution including both construction and Technical (IT/Electronic)
solutions
Inventory of ~| 250-300 crore is left at Okhla and management is not

keen on reducing the prices and is quite confident of sale of this
inventory at current price points
Revenues worth ~| 200 crore were realised from Kidwai Nagar

project during the quarter and management expects it to improve in
the coming quarters
The management is expecting to execute projects worth ~| 6000

crore by FY16 end and expects the execution rate to increase
subsequently in coming years
The estimated cost for the Karkarduma project with an area of 10 mn

sq ft is ~| 6000 crore. The company will be funding only the seed
money worth ~| 200 crore and rest of the project will be funded from
the money collected from pre-booking of flats. NBCC will be realising
10% of the construction as agency charges and 1% of sales as
marketing charges
Page 10
Outlook and Valuation

At the CMP, the stock is trading at 24.8x FY17E P/E and 4.7x FY17E P/BV.
Given the healthy order book in the PMC division and cash rich balance
sheet, NBCCs revenues have grown at a CAGR of 10.6% during FY12-15
despite the challenges being encountered by the industry. Going ahead,
we expect NBCCs next leg of growth to come from redevelopment of
government properties in Delhi. Hence, we anticipate NBCCs revenues
and net profit will grow at a sturdy CAGR of 44.6% and 41.5%,
respectively, during FY15-17E. We also like NBCC due to its cash rich
balance sheet and healthy return ratio profile.
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 12.7% for the PMC
business and 14% for the redevelopment space. We have also rolled over
our valuation to FY17E and considered a terminal growth rate of 4% for
both businesses. Based on these assumptions, we have valued NBCCs
PMC business at | 451/share and re-development opportunities at
| 589/share. The real estate business has been valued at | 90/share (at 1x
FY16 P/BV) while the EPC business has been valued at | 20.4/share (6x
FY17EV/EBIT). Overall, we ascribe target price of | 1150/share for NBCC
based on SOTP methodology.
Exhibit 18: SoTP valuation summary
SOTP valuation
Equity Value (| crore)
| per share
Comments
PMC Business
5842
451
DCF based valuation
Re-development Opportunity
7643
589
DCF based valuation
Real Estate Business
1173
90
at 1x FY16 P/BV
264
20.4
at 6x FY17E EV/EBIT
14922
1150
EPC
Total
Page 11
Exhibit 19: One year forward P/E

1,400
1,200
1,000
Price (|)
800
600
400
200
Price
12x
16x
20x
24x
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
28x
Source: Bloomberg, ICICIdirect.com Research
Exhibit 21: One year forward EV/EBITDA
1,400
13,000
1,200
11,000
1,000
9,000
800
7,000
600
5,000
Price
2x
4x
6x
8x
EV
10x
28x
24x
20x
16x
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
-3,000
Jan-13
1,000
-1,000
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
3,000
Oct-12
200
Jul-12
400
Apr-12
EV (| Cr)
Price (|)
Exhibit 20: One year forward P/BV
12x
Exhibit 22: Valuation
FY14
FY15E
FY16E
FY17E
Sales
(| cr)
4008.8
4621.0
5748.2
9661.6
Growth
(%)
25.8
15.3
24.4
68.1
EPS
(|)
18.5
20.8
25.7
41.6
Growth
(%)
19.1
12.2
23.8
61.7
PE
(x)
55.7
49.7
40.1
24.8
EV/EBITDA
(x)
56.2
44.3
31.9
17.4
RoNW
(%)
22.1
21.0
13.4
18.7
RoCE
(%)
19.9
21.6
15.2
25.1
Page 12
Company snapshot
1,400
Target Price | 1150
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
Jul-16
Apr-16
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
May-15
May-15
Jun-15
Jun-15
Jun-15
Jun-15
Jul-15
Jul-15
Aug-15
Aug-15
Event
NBCC signs MoU with National Waqf Development Corporation (NAWADCO) for the development of four Waqf Board properties as institutional and commercial
projects at an estimated cost of | 398 crore
The board has approved the FPO of 10% of the post issue equity share capital for augmenting the company's resources to fund the business development plans,
subject to the approval of Government of India
The company has secured the business amounting ~| 2,000 crore from various clients during May, 2015
NBCC has formed strategic partnership with a Malaysian joint venture firm for exploring areas for re-development around New Delhi Railway Station
NBCC procures 7,613 sq meter plot in Jaipur for a real estate project
DDA gave NBCC a project for development of Lake View Complex on 25 acres DDA land at Trilokpuri with estimated cost of ~| 1500 crores.
NBCC got PMC orders worth of | 914.5 crore in June 2015
NBCC signed pact to redevelop Indian Institute of Public Administration campus for | 435 crore
NBCC bags orders worth | 541 crore in July,2015
NBCC signs pact with Mahanadi Coalfields Limited (MCL) for infrastructure development of medical college and hospital at Talcher. MCL wants to set up a 500 bed
state-of-the-art Mahanadi Institute of Medical Sciences and Research at an investment of | 492 crore
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Name
Government of India
Allianz Global Investors Asia Pacific Limited
Tata Asset Management Limited
Norges Bank Investment Management (NBIM)
L&T Investment Management Limited
Capital Investment Trust Corporation
HSBC Global Asset Management (India) Private Limited
Kotak Mahindra Asset Management Company Ltd.
Amundi Hong Kong Limited
IDFC Asset Management Company Private Limited
Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
30-Jun-15 90.00
108.00
0.00
31-Mar-15 0.68
0.81
0.02
30-Jun-15 0.39
0.47
0.13
31-Dec-14 0.30
0.36
0.36
31-May-15 0.25
0.30
0.00
31-Dec-14 0.18
0.21
0.21
31-May-15 0.13
0.15
0.00
31-May-15 0.09
0.11
0.01
31-Mar-15 0.08
0.10
0.00
30-Jun-15 0.07
0.08
(0.01)
(in %)
Promoter
FII
DII
Others
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

90.00 90.00 90.00 90.00 90.00
1.12
1.98
2.19
2.72
2.23
0.90
0.53
0.98
0.93
0.98
7.98
7.49
6.83
6.35
6.79
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Norges Bank Investment Management (NBIM)
Capital Investment Trust Corporation
Tata Asset Management Limited
Allianz Global Investors Taiwan Ltd.
Allianz Global Investors Asia Pacific Limited
Value
4.73m
2.78m
1.78m
0.52m
0.35m
Shares
0.36m
0.21m
0.13m
0.04m
0.02m
Sells
Investor name
Reliance Capital Asset Management Ltd.
DSP BlackRock Investment Managers Pvt. Ltd.
TCW Asset Management Company
PineBridge Investments (Taiwan)
Value
-8.74m
-2.19m
-0.65m
-0.09m
Shares
-0.93m
-0.57m
-0.04m
-0.04m
Page 13
Financial summary
Profit and loss statement
(| Crore)
Net Sales
Other Operating Income
Other Income
Total Revenue
Raw Material Expenses
Employee Expenses
Expenditure in Piece rate Work / Consult
Other Expenses
Provisions & Write-offs
EBITDA
Growth (%)
Interest
PBDT
Depreciation
PBT
Total Tax
PAT
Growth (%)
EPS
| Crore
FY14
4,008.8
31.0
133.3
4,173.0
425.8
182.1
3,153.2
54.7
0.0
224.0
39.8
22.4
334.9
1.3
333.5
86.4
247.2
19.1
18.5
FY15E
4,621.0
41.1
146.6
4,808.7
288.9
195.1
3,834.8
56.3
0.0
287.0
28.1
40.2
393.4
2.3
391.0
113.7
277.3
12.2
20.8
FY16E
5,748.2
0.0
129.3
5,877.5
356.2
234.2
4,728.2
37.7
0.0
392.0
36.6
49.4
471.9
1.7
470.2
127.0
343.3
23.8
25.7
FY17E
9,661.6
0.0
97.7
9,759.4
598.6
281.0
7,947.2
89.2
0.0
745.6
90.2
81.3
762.1
1.9
760.2
205.3
555.0
61.7
41.6
| Crore
FY14
FY15E
FY16E
FY14
247.2
1.3
22.4
270.9
-921.5
285.2
-365.4
-13.9
0.5
116.6
0.0
0.0
-0.4
-76.9
-22.4
-99.6
-348.4
1,537.7
1,189.3
FY15E
277.3
2.3
40.2
319.9
-642.7
356.8
34.0
3.8
-6.1
-49.8
0.0
0.0
0.0
-79.1
-40.2
-119.3
-135.1
1,189.3
1,054.2
FY16E
343.3
1.7
49.4
394.4
-683.1
1,120.3
831.6
0.0
-3.0
-1,463.8
13.3
0.0
0.0
-97.9
-49.4
852.7
220.6
1,054.2
1,274.7
FY17E
555.0
1.9
81.3
638.1
-2,689.7
2,651.6
600.1
0.0
-4.0
-818.2
0.0
0.0
0.0
-158.3
-81.3
-239.5
-457.7
1,274.7
817.0
FY14
FY15E
FY16E
FY17E
18.5
18.6
84.0
16.8
89.2
20.8
21.0
98.9
21.5
79.1
25.7
25.9
192.3
29.4
95.6
41.6
41.8
222.1
55.9
61.3
5.5
8.3
6.1
72
95
94
6.2
8.4
5.9
91
120
86
6.8
8.2
6.0
90
135
120
7.7
7.9
5.7
90
125
115
22.1
19.9
21.0
21.6
13.4
15.2
18.7
25.1
55.7
56.2
3.1
3.6
3.4
12.3
49.7
44.3
2.8
3.5
3.0
10.4
40.1
31.9
2.2
2.2
2.4
5.4
24.8
17.4
1.3
3.3
1.4
4.7
1.3
1.0
1.3
1.0
1.2
0.9
1.1
0.7
120.0
1,198.8
1,318.8
-19.5
1,299.3
133.3
2,430.9
2,564.2
-19.5
2,544.7
133.3
2,827.6
2,960.9
-19.5
2,941.4
37.5
15.0
22.5
43.6
17.3
26.2
46.6
19.0
27.5
50.6
20.9
29.7
113.5
0.0
161.0
0.0
1,621.8
0.0
2,436.0
0.0
Inventory
Debtors
Loans and Advances
Cash
Other Current Assets
Total Current Assets
Creditors
Provisions
Other Current Liabilities
Net Current Assets
996.7
1,316.4
512.2
1,189.3
10.2
4,024.8
942.0
144.0
1,977.6
961.3
1,145.7
1,704.1
612.3
1,054.2
16.2
4,532.4
1,514.0
141.2
1,765.1
1,112.1
1,417.4
1,968.6
759.2
1,274.7
16.2
5,436.0
1,811.1
164.7
2,564.9
895.4
2,382.3
3,308.8
1,143.7
817.0
16.2
7,668.0
2,911.7
246.1
4,034.4
475.7
Application of funds
1,097.2
1,299.3
2,544.7
2,941.4
Key ratios
FY17E
120.0
1,000.6
1,120.6
-23.3
1,097.2
Investments
Other non-current assets
(| Crore)
Profit after Tax
Add: Depreciation
Add: Interest Paid
Cash Flow before WC changes
Net Increase in Current Assets
Net Increase in Current Liabilities
Net Cash Flow from Operating Activities
Inc/ (Dec) in Deferred Tax Liability
(Purchase)/Sale of Fixed Assets
Net Cash flow from Investing Activities
Proceeds from issues of Equity Shares
One time adj. in P&L Appropriation
Adj. in General Reserves
Dividend and Dividend Tax Paid
Interest Paid
Net Cash flow from Financing Activities
Net Cash flow
Opening Cash / Cash Equivalent
Closing Cash / Cash Equivalent
| Crore
Balance sheet
(| Crore)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Deferred Tax Liability
Source of Funds
Assets
Total Gross Block
Less: Accumulated Depreciation
Net Block
Cash flow statement
Per share data (|)

EPS
Cash EPS
BV
Operating profit per share
Cash Per Share
Operating Ratios (%)
EBITDA Margin
PBT Margin
PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Sales / Equity
Market Cap / Sales
Price to Book Value
Solvency Ratios (x)
Current Ratio
Quick Ratio
Page 14
ICICIdirect.com coverage universe (Construction)

Sector / Company
NCC (NAGCON)
NBCC (NBCC)
Simplex Infra (SIMCON)
CMP
M Cap
EPS (|)
P/E (x)
EV/EBITDA (x)
P/B (x)
RoE (%)
(|) TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
78
90 Hold 4,308
2.0
2.6
3.7 38.5 29.5 20.8 9.5
9.8
8.4 1.3
1.3
1.2
3.5
4.4
5.9
1,033 994
Buy 13,773 20.8 25.7 41.6 49.7 40.1 24.8 44.3 31.9 17.4 10.4
5.4
4.7 21.0 13.4 18.7
321 463
Buy 1,594 12.6 15.0 34.3 27.1 22.7
9.9 7.8
7.1
5.9 1.2
1.1
1.0
4.4
5.0 10.6
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
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Page 17

NBCC LTD (NBCC) : Real Estate Division Shines

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NBCC LTD (NBCC) : Real Estate Division Shines

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Result Update

August 18, 2015

NBCC Ltd (NBCC)

Real estate division shines

Changed from | 994 to | 1150

Q4FY15 QoQ (%)

ICICI Securities Ltd | Retail Equity Research

NBCCs revenues grew 37.5% YoY to | 1147.3 crore ahead of our

Robust order book providing strong revenue visibility

Key beneficiary of government initiatives

Not keen on FPO fund raising in near term

Long term story intact; maintain BUY

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Assumptions for PMC division

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Order Book to Bill ratio

Source: Company, ICICIdirect.com Research

PMCeconomic moat for NBCC!!!

Revenue from PMC

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com, Research

EBIT from PMC

Exhibit 4: EBIT and EBIT margin from PMC division

Exhibit 3: Revenue contribution from PMC division

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

-ve due to increase in

Exhibit 7: OCF & FCF remain healthy except FY14

Exhibit 6: Major components of WC

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Opportunities galoregrowth drivers for PMC

Redevelopment projectsnew thrust to growth

Re-development of Kasturba Nagar

Re-development of Thyagaraj Nagar

Greenfield project in Ghitorni

Re-development on land owned by Sick PSU

Modernization of printing press across India

Source: Company, Press Reports, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Recently, the government started focusing on redevelopment of

Real estate value additive business

Exhibit 8: Revenue contribution from real estate division

Exhibit 9: EBIT and EBIT margin from real estate division

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Revenue from Real Estate

EBIT from Real Estate

EBIT Margin of Real Estate

Source: Company, ICICIdirect.com Research

EPCwell poised to take on new opportunities in infrastructure sector

Revenue from EPC

Source: Company, ICICIdirect.com Research

EBIT from EPC

Exhibit 10: Revenue contribution from EPC division

EBIT Margin of EPC

Source: Company, ICICIdirect.com Research

Navratna status opens up new set of opportunities