NBCC (India): The Delhi Connection
NBCC is a perfect example of perceived competitive advantages. Nomination can never be the sustainable right to win as seen with multiple state organisations. Multiples based on incalculable opportunities ignore the possibility (and probability) that even the current order book has multiple reasons to disappoint. Stagnating and retiring talent, fragmented vendor ecosystem and implausible quantum of real estate to sell in Delhi are worrisome. Undoubtedly, the company should post high earnings growth over FY16-20 but present valuation implies 17% EBITDA CAGR for 15 years (!). Our stance is at risk from order news-flow from unknown corners but fortunes are susceptible to inevitable competition and unpredictable political whims. Sell it early before real(i)ty sinks in; our TP implies 16x FY19E EPS. (Utsav Mehta, CFA, +91 22 3043 3209)
NBCC is a perfect example of perceived competitive advantages. Nomination can never be the sustainable right to win as seen with multiple state organisations. Multiples based on incalculable opportunities ignore the possibility (and probability) that even the current order book has multiple reasons to disappoint. Stagnating and retiring talent, fragmented vendor ecosystem and implausible quantum of real estate to sell in Delhi are worrisome. Undoubtedly, the company should post high earnings growth over FY16-20 but present valuation implies 17% EBITDA CAGR for 15 years (!). Our stance is at risk from order news-flow from unknown corners but fortunes are susceptible to inevitable competition and unpredictable political whims. Sell it early before real(i)ty sinks in; our TP implies 16x FY19E EPS. (Utsav Mehta, CFA, +91 22 3043 3209)
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