NCC execution recovery faces cautious growth guidance despite Rs 71,312 crore order book

Investment View and Valuation

ICICI Securities’ August 10, 2026 result update on NCC Limited highlights an improvement in execution in Q1 FY27 after about 1.5 years of weak growth. However, the broker remains cautious because management’s FY27 growth guidance was below its expectations. NCC operates across building, roads, water, mining and electrical infrastructure.

ICICI Securities downgraded NCC to HOLD from BUY and reduced its target price to Rs 165 from Rs 180. The revised target values NCC at 12 times FY28E EPS, compared with the earlier valuation multiple of 13 times.

Q1 FY27 Financial Performance

On a standalone basis, NCC reported year-on-year growth in net sales and EBITDA during Q1 FY27, although adjusted PAT declined due to lower other income and higher depreciation and interest costs. The report does not explicitly characterise the quarterly results as a beat or miss versus estimates.

Order Book Supports Medium-Term Execution

The major support to the investment case is NCC’s order book. Standalone order book stood at Rs 71,312 crore at Q1 FY27, equivalent to 3.96 times trailing-twelve-month revenue. Management is targeting FY27 order inflows of Rs 22,000 crore to Rs 25,000 crore from a prospective bidding pipeline of about Rs 2.5 lakh crore.

The consolidated order book is distributed across the following segments:

Growth, Margins and Cost Outlook

Management’s FY27 revenue-growth guidance of 8% to 10% was viewed by ICICI Securities as underwhelming given the recovery in Q1 FY27 execution. Management guided for an FY27 EBITDA margin of 8.5% to 9.0%.

Steel and cement prices were broadly stable, while prices of petroleum products, aluminium, copper and OFC cables increased. Approximately 81% of NCC’s contracts contain price-escalation clauses, offering partial protection to profitability. However, higher OFC cable prices could reduce profitability in fixed-price BharatNet contracts, although management did not expect these contracts necessarily to make a loss.

ICICI Securities forecasts an 11.6% revenue CAGR between FY26 and FY28E. FY27E revenue, EBITDA and PAT estimates were increased by 2.5%, 2.5% and 3.8%, respectively, while FY28E estimates were broadly unchanged.

Smart-Meter Projects

Management expects three smart-meter projects to cover 7 million to 8 million meters. Around 45% had been installed by Q1 FY27, with most of the remainder expected to be completed in FY27. Management estimates annual smart-meter operations and maintenance revenue of around Rs 70 crore to Rs 80 crore once installation is complete.

Working Capital and Leverage

Working-capital indicators improved sequentially. Trade receivables declined to Rs 3,055 crore from Rs 3,336 crore at March 31, 2026, while debtor days reduced to 68 from 73.

Financial leverage remains a concern. Standalone gross debt increased to Rs 2,410 crore in Q1 FY27 from Rs 2,251 crore in Q4 FY26. Consolidated net debt rose to Rs 3,513 crore, mainly due to a fresh Rs 1,350 crore loan for smart-meter special-purpose vehicles.

Key Risks

• Delays in receivable collections could affect cash flows and working capital.
• Increasing debt, including borrowings for smart-meter SPVs, remains a financial risk.
• Higher OFC cable prices could pressure profitability in fixed-price BharatNet contracts.
• FY27 revenue-growth guidance of 8% to 10% is below ICICI Securities’ expectations despite the Q1 FY27 execution recovery.