Why NBCC India Share Price is Rising

India's real estate sector is having its day in the sun.

Fuelled by affordability, the sentiment is so strong that even rising interest rates can't bring down the user-end demand.

The sector has witnessed a remarkable recovery, with the Nifty Realty index surging almost 100% in FY24.

Now, we know about the prominent players like Phoenix Mills, Oberoi Realty or Prestige Estates, that made a big mark in FY24 and logged in market beating performance.

However, one under-the-radar player that does not get much attention is NBCC (India), which is a government of India company operating in this segment.

In fact, NBCC India is one of the few real estate and construction players that have carried on their business without zero debt on their books over the years.

NBCC has not taken any debt on its books since 2008, with its debt-to-equity ratio being nil for the past 15 years.

In recent months, shares of the company have seen a sharp spike and currently trading near multi-year highs.

In the past one year, NBCC India share price has moved up by over 260%!

In fact, the sentiment around this stock is so strong that NBCC has logged in over 65% gains in 2024 already.

Let's find out the key triggers that have helped the stock move up and what lies ahead for this real estate player.

Why NBCC Share Price is Rising

# Recent Order Wins

In early March 2024, NBCC's subsidiary received an order worth Rs 920 million (m).

Before that, the company bagged three orders worth Rs 3.7 bn in February 2024.

It also received a work order of Rs 1.4 bn for HSCC India Ltd to procure lab equipment to install in the upcoming Himachal Pharma testing lab.

NBCC is one of the very few public sector companies that are engaged in the business of project management consultancy services for civil construction projects.

There were several such small orders that the company won in 2023. The company's strong order book has put the realty player in a sweet spot.

Going forward, NBCC is expecting around Rs 200 bn worth of order inflows in FY25, with a focus on PMC and redevelopment projects.

As of February 2024, NBCC had an order book of over Rs 500 bn.

# Government's Affordable Housing Push

The other reason why shares of NBCC (India) have surged is owing to government's affordable housing push in this year's interim Budget.

In February 2024, finance minister Nirmala Sitharaman announced building two crore more houses for the rural poor in the next five years under the PM Awas Yojana (Grameen).

Sitharaman further announced a scheme to help deserving sections of the middle class, living in rented houses or slums, or chawls and unauthorized colonies, to buy or build their own houses.

These announcements have spurred big interest in pure play infra companies like NBCC.

Strong Financial Position

For the first nine months of FY24, the company posted a 63% growth in its total income to Rs 65.7 bn and a 66% growth in its net profit as well.

In the first nine months, the company secured business orders worth Rs 100 bn and completed the Amrapali project, which contributed to around Rs 11.7 bn of turnover.

It has ambitious plans to take the turnover to Rs 250 bn in the next five years.

If the company does manage to achieve the guidance laid by its management, it will be significantly higher than the growth rate seen in the past five years.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	99,430	80,871	69,534	76,906	87,544
Growth (%)	18%	-19%	-14%	11%	14%
Operating Profit	7,948	5,516	5,189	5,713	7,371
OPM (%)	8%	7%	7%	7%	8%
Net Profit	3,752	782	2,257	2,243	2,667
Net Margin (%)	4%	1%	3%	3%	3%
ROE (%)	21.9	6.8	15.5	14.0	15.0
ROCE (%)	44.2	36.9	33.2	29.0	30.3
Dividend (Rs)	0.7	0.1	0.5	0.5	0.5
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

What Next?

At present, the company is focused on redevelopment projects like Nauroji Nagar, Netaji Nagar, and Sarojini Nagar. All these projects are in completion phases.

NBCC India is also looking to diversify into a new segment and plans to secure projects in the Metro Railways sector.

The company has also planned monetization of land this year. It expects revenue generation of Rs 15 bn from the existing land bank.

Moreover, NBCC also has its eye on overseas business, with focus in African countries, and 2-Tier cities.

With all these growth levers in place, NBCC is currently in a sweet spot. It truly stand out with an impressive cash position that dwarfs many of its peers. Most of its cash is earmarked for specific projects and cannot be used for other purposes.

The company's business model entails execution of PMC (project management consultancy) projects against customer advances.

Despite being in the highly working capital-intensive construction space, the working capital cycle of the company is moderate.

NBCC transfer most of the risks with respect to execution, cost pass-through, etc. to sub-contractors through back-to-back arrangements and bank guarantees. This also leads to sizeable liquid surplus, generating sizeable non-operating cash flow.

Going forward too, NBCC does not plan to take on any debt.

How NBCC Share Price has Performed Recently

In the past 5 days, NBCC share price has gone up by 4%. In the past one month, shares are up 12%.

NBCC has a 52-week high of Rs 177 touched on 5 February 2024 and a 52-week low of Rs 37 touched on 11 April 2023.

In the past one year, NBCC shares are up over 260% while in 2024 so far, shares are up 66%.

Here's a table comparing NBCC with its peers -

Comparative Analysis

Company	NBCC	Bigbloc	DLF	Macrotech	Prestige Estates
ROE (%)	14.9	49.3	2.9	4.1	11.2
ROCE (%)	30.3	35.5	4.7	4.2	13.2
Latest EPS (Rs)	2.1	3.9	9.6	16.4	42.5
TTM PE (x)	66.6	58.1	94.4	70.9	30.4
TTM Price to book (x)	11.8	16.7	5.9	7.1	4.6
Dividend yield (%)	0.4	0.2	0.4	0.2	0.1
Industry PE	107.4
Industry PB	4.9

Data Source: Ace Equity, Equitymaster

About NBCC (India)

NBCC is a government of India Navratna Enterprise under the Ministry of Housing and Urban Affairs.

It operates in three major segments - project management consultancy, engineering procurement & construction, and real state.

To know more, check out NBCC's latest factsheet and quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...