looking at Diversification plans, infrastructure involvement, good order booking size & strong financials of company, it can be one of the safe money earning mid term investment opportunity
Nagarjuna Construction Company (NCC)
Research: Angel Broking
Rating: Buy
CMP: Rs 113
NCC is on track to emerge as a diversified infra heavyweight with SPVs and real estate accounting for 20% of our sum-of-the-parts (SOTP) target price.
It is also diversifying into the metals, oil and gas and power sectors. We believe our new business model allows it to capitalise on the substantial ongoing infrastructure capex in the country. We expect to clock a CAGR of 31% in topline over FY2008-10E.
However, we expect bottomline to witness subdued growth to a mere 16%, over the mentioned period, primarily due to higher interest costs.
At Rs 113, the stock is trading at valuations of 7.7x FY2010E EPS of Rs9.5 post adjusting for the BOT projects and real estate, which is attractive in view of the good order book position (Rs14,500cr) and positive outlook on the infrastructure sector.
We maintain a buy on the stock, with a revised 12-month target price of Rs 154.
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