Shares of NBCC (India) Ltd lost 9.5% last week after the company reported another quarter of disappointing results. With the latest fall, the stock is down 39% in the last six months.

Revenue at the stand-alone level jumped 40% in the September quarter. But operating margin halved to the lowest level in five years, according to analysts at SBICAP Securities Ltd. As a result, operating profit or Ebitda (earnings before interest, tax, depreciation and amortization) dropped 30%.

The management attributed the fall in profitability to the change in accounting norms. Even so, the drop in profitability is too sharp for the market’s comfort. With profitability taking a hit for the second consecutive quarter, some analysts have pared their earnings estimates.

“Due to issues relating to the tree-cutting ban in the national capital region and subdued 1HFY19 performance, we are cutting our earnings estimates for FY19/FY20 by 7.9%/4.3%," Emkay Global Financial Services Ltd said in a note.

The September quarter disappointment notwithstanding, the management maintained strong double-digit revenue growth guidance for the current fiscal year. The confidence emanates from strong order inflows and contract awards (for execution). NBCC (India) awarded almost half of the total order book of 80,000 crore to contractors.

The approval to start construction work in two large redevelopment projects in Delhi is expected to aid execution and revenue growth. “Even with the work at the Delhi redevelopment colonies delayed by a month due to the tree felling issues, the management is confident of a significant ramp up in execution and may achieve this target (30-35% topline growth for FY19E)," said ICICI Securities Ltd in a note.

Even so, as the steep fall in the NBCC (India) share price last week suggests, investors remain sceptical. The wait for a pickup in execution has been rather long for investors. The recent acquisition activity is clouding the earnings outlook. The company is yet to consolidate the recently acquired entity’s (Hospital Services Consultancy Corp. India’s) finances.

Also unclear is the impact of the acquisition of the stuck real estate projects in the National Capital Region. NBCC (India) is constructing stalled projects of Amrapali Group and has reportedly shown interest in taking over projects of the troubled Jaypee Infratech.

“Although management has confidence in the execution of its existing order book, there remains uncertainty and concern on the deal structure for JP Infratech asset acquisition and its likely impact on the balance sheet," said Sharekhan Ltd in a note.