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NCC eyeing EBITDA margin of over 11%, topline growth of 40-45% in FY22

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Y D Murthy, Exec VP-Finance of NCC is of the belief that the third and fourth quarters are going to be even better than the first two quarters of the current year, and is confident of topline growth of around 40 to 45 percent in FY22.

NCC reported its second-quarter numbers. Profits was up 76.3 percent year-on-year (YoY), and revenue too was up 51.1 percent. The YoY earnings before interest, taxes, depreciation and amortisation (EBITDA) was up 14.6 percent but EBITDA margin was lower at 10.3 percent versus 13.6 percent. The company reported a one-time gain of Rs 31.1 crore.
To discuss the numbers in detail and the outlook going forward, CNBC-TV18 caught up with YD Murthy, Executive VP-Finance, NCC.
Murthy is of the belief that the third and fourth quarters are going to be even better than the first two quarters of the current year.
"We are confident of topline growth of around 40 to 45 percent in FY22," said Murthy.
The dip in margins both in the first quarter and the current quarter is mainly due to an increase in commodity prices, said Murthy, adding that for the full last year the company had reported an EBITDA margin of 11.7 percent. This year for the two quarters they reported margins of around 10.5 percent or so, but are expecting improvement in the margins for the third and fourth quarters. EBITDA margins will be in double-digits, he added.
He further said the order tender is looking good mainly because the central government and various state governments are focusing on developing the physical infrastructure across the country.
"There are a lot of activities going on in the national infrastructure pipeline and we being a frontline company, are nicely positioned to bag those orders. Therefore, the order accretion should be good for the current year," said Murthy, adding that they are expecting more orders in the third and fourth quarters than in the first and second quarters.
"We already have an orderbook of Rs 39,000 crore," he said.
“As far as margins are concerned, the absorption of raw material price increased at the gross profit margin level. We have taken a beating of about 1 percent in the first two quarters. But now, when we are bidding for projects, we take into account the current market prices of these commodities, that is, steel and cement, and pipes and based on that we are bidding. So, we will be able to absorb higher raw material prices,” said Murthy, adding that there may not be any further increase in raw material prices.
Moreover, the company has escalation clauses in up to 70 to 75 percent of the order book. So, that also will give them some compensation from the client in terms of increasing the raw material prices, said Murthy.
“All in all, we are confident the EBITDA margin for the third quarter will be far better than in the second quarter. We can easily end the year with EBITDA margin of 11 percent plus,” said Murthy.
Watch the accompanying video for the full interview
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