Nagarjuna Construction Company (NCC), one of the prominent players in the infrastructure space, has secured two orders aggregating to Rs481 crore.
The major order worth Rs449 crore is secured from the State of Bihar, and is relating to the restoration of a Canal Work, to be completed over a time frame of 25 months.
The second order worth Rs32 crore is relating to the construction works of a Radial tyre plant in Medak district in Andhra Pradesh, and is to be completed over a period of 6 months.
The accretion of these orders takes the outstanding order book position to Rs14,920 crore, which is 3.0x its FY2010E revenues.
At Rs134, the Stock trades at 13.1x its FY2011E EPS and at 1.6x FY2011E P/BV.
We have arrived at an SOTP-based fair price of Rs142 for the stock, valuing NCC’s core Construction business at Rs111 (10x its FY2011E EPS), the BOT business at Rs15.0 and the Real Estate arm at Rs16.4.
We continue to maintain our NEUTRAL view on the stock, in light of the current valuations and overhang – order cancellations, tie up with Maytas Infra for a number of projects, and losses at the subsidiary levels.