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  • CMP : 185.9 Chg : 0.05 (0.03%)
  • Buying Range : 90-93.5
  • Target : 108.0 (17.71%)
  • Stoploss : 83.0
  • Target Period : 3 Month

02 Feb 2023

Breakout from multi year resistance trend line confirms structural turnaround….

NCC weekly

TECHNICAL_INFOGRAPHIC_1
Technical Outlook
The infra sector has seen rejuvenation of upward momentum after multi year’s underperformance. Within the space, we remain constructive on NCC as it logged a resolute breakout from three years downward slanting resistance trend line, indicating a structural turnaround. Hence, it offers a fresh entry opportunity

The current up move is captured in a well defined upward sloping channel wherein buying demand emerged from lower band of the channel coinciding with the 50 day’s EMA, highlighting inherent strength

We expect the stock to resolve higher and gradually head towards ₹ 108 levels in coming months as it is the upper band of rising channel coinciding with 80% retracement of May 2018 to April 2020 decline (₹ 137-16)
 
On the oscillator front, weekly MACD has been inching northward while sustaining above its nine period’s average, indicating acceleration of upward momentum

Fundamental Outlook

NCC is one of the leading construction companies in India with a presence across varied verticals of the infrastructure space such as buildings, roads, water, mining and electrical with order book at ₹ 40,020 crore as on Q2FY23. Well-diversified order backlog, robust execution capabilities and strong focus on debt reduction, working capital are expected to characterise NCC over the next few years
 
The company has secured orders worth ₹ 5033 crore in Q3FY23, with inflows of ~₹ 12150 crore in 9MFY23. We note that NCC’s order book at the end of Q2FY23 on a standalone basis was at an elevated ₹ 40,020 crore (3.4x order book to TTM bill ratio). The management has guided for ~₹ 16,000 crore of order inflows during FY23, which is on track
 
 In terms of execution, the company’s topline guidance is ~30% YoY growth during FY23 (with 45.7% YoY growth reported in H1FY23) to be driven by higher executable order book and improved operating efficiency with margins likely to improve to 10% in H2FY23, up 40 bps from Q2FY23 level
 
Strong execution and management guidance of continued traction along with margin improvement make us maintain our constructive view on the company. Government capex allocation increased by 37% to ₹ 10 lakh crore or 3.3% of GDP, which will  boost key EPC segment players like NCC involved in segments such as road EPC, water and urban development

Follow up summary of Gladiator Stocks

Other product open recommendations

Date Product Scrip Name Market Strategy RP Target Stoploss Time Frame
31-01-2022 Momentum Pick CYIENT Cash Buy 878 949 827 14 Days
01-02-2023 Momentum Pick JK Lakshmi Cement Cash Buy 770 815 730 14 Days
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Source: Company, ICICI Direct Research

Disclaimer

We/I, Dharmesh Shah, Nitin Kunte, Ninad Tamhanekar, Pabitro Mukherjee, Vinayak Parmar Research Analysts, authors and the names subscribed to this report, here by certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensations, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this... 

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