Originally posted by master
1. NCCL is, and perceived by the market, more as a construction & real estate play. Contribution of its BOT, port & power projects to overall valuation is insignificant. Gautami power may commence this year and likely to give it some visibility.
2. FPCs of the order of 30-35% impact it severely. Even some of the upcoming projects, including those in middle east where they are L1 bidders, are on FPC basis - doesn't help when employee costs are on rise, input costs are all over the place. Marginal interest costs will further dent
3. Debtors and inventory turnover have considerably worsened compared to FY07 position.
4. Promoter's stake will increase by about 1% post conversion of warrant at 217.
5. Was seeing projections for the co - due to increasing costs, EBITDA margins as well as net margins for FY10E are actually getting depressed compared to what it was for FY08.
Although it may offer upside from present beaten down levels, do you really expect a re-rating on fundamental grounds (of course, markets have other grounds too!)
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Basant has this interesting signature line which could be appropriate here I guess
"If you could tell the future from a Balance Sheet then accountants and mathematicians would be the richest people in the world."
I guess regarding future of a stock, we can always flip a coin since even the patricians and the plebians are all equally clueless in the markets. The biggest things that NCCL has going for it as a business is its execution strength and expertise across various projects which is the thing that people look for nowadays when awarding big projects. No wonder it has bagged a slew of orders recently including airports in Karnataka and Metro Rail in Hyderabad, either alone or through a consortia of other bidders. They even bagged an order to build a road in the gulf a year or two ago which had strict delay penalties in the contract. Normally infra companies don't like to take orders with delay clauses in them and only companies confident in their execution strengths even think of applying for projects such as these.
If you want an interesting insight into NCCL and its functioning style and its key strenghts, I would love to direct you to this old article in Forbes which caught my attention in the first place. This article was in 2006, and the basic strenghts of Nagarjuna still remain the same as was mentioned. This was the article that first brought NCCL to my attention as I am a regular reader of Forbes.
Lastly, whenever one sees a robust business model which has successfully replicated itself across various markets, one should look for reasons to buy. If the reasons to buy are plentiful and are cogent and present a strong case, then it makes a good case for a buy. The correct reasons are usually found in the way a company operates, how it is making money now, how it plans to make money in the future, and who is in charge. They are not always found in the balance sheets.
Edited by shankar - 02/Oct/2008 at 10:23pm
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