Nagarjuna Construction (NCC) the Rakesh Jhunjunwala company, registered strong execution in Q4FY14 with revenues at INR19.1bn improving 28% sequentially. EBITDA margins declined by 350bps YoY to 5.5% owing to ~INR570mn debtor write offs / provisioning. In spite of this, NCC managed to post PAT of INR321mn (our estimate INR55mn loss), aided by high other income and tax writeback.
Buoyant order intake (~INR94bn orders in FY14 as against INR48bn in FY13) has improved growth prospects. In addition, debt levels also declined by INR2.5bn aided by stake sale in power asset. While operating margins may remain volatile for couple of more quarters, potential monetisation of road/power assets and improving EPC business prospects makes us bullish on NCC and have led us to revise our target price to INR 100 on EPS expectation of Rs 2 and Rs 5 for FY 2015 and FY 2016
