In FY14, Nagarjuna Construction?s order intake rose to R9,300 crore (up 121% y-o-y). The book-to-bill ratio stands at 3.4x vs the previous cyclical high of 4.4x in mid FY12. Also, new orders entail superior margins given the limited competition leading to an improvement in the pricing power in recent bids.
Thus, the management expects margins to improve to more normative levels of 8% in FY15, implying an improvement of 138 bps y-o-y. Given the order intake in FY14 was equally split (with H1 at R4,700 crore, 51% share), we expect the possibility of ~15% revenue growth in FY15 (against 6% revenue CAGR during FY10-14); and is at the upper end of the management expectations of 10-15% growth possibility in FY15.
In FY14, NCC?s standalone debt stood at Rs 2,470 crore (against R2,110 crore y-o-y); and the management expects to end FY15 debt at less than Rs 2,000 crore. The debt reduction is intended through a combination of asset monetisation and fund raising (rights issue, board approval for upto Rs 650 crore).
Given the order intake in FY14 was equally split (with H1 at Rs 4,700 crore), we expect a ~15% revenue growth in FY15. This is at the upper end of the management?s expectations of 10-15% growth possibility in FY15.
Margins in FY14 fell 146 bps to 6.6%; however, the decline is due to a one-time adjustment on the past receivables and poor margin orders. New orders entail superior margins, given the limited competition leading to improved pricing power in recent bids.
Motilal Oswal Fin Services
