National Buildings Construction Corporation (NSE: NBCC) a major PSU stock declines by over 30% in last 1 week. The share made an all time high of ₹176.85 on 5th of February 2024.
Highly volatile construction stock NBCC has experienced a bullish rally, returning 279% to its shareholders in the last one year. However, due to negative market sentiments and a strong sell pressure in PSU stocks, NBCC also saw a decline by 17% in the last 7 trading days.
Today February 14th, the trend of the company has again changes in short term to bullish which you may check from NBCC tomorrow’s forecast values.
Why share price if NBCC is rising?
Shares of NBCC have been steadily climbing ,supported by multiple positive factors. The company posted improved return on equity and return on capital employed in its results. This demonstrates more efficient use of investments and resources to generate profits. NBCC’s rising ROE and ROCE shows its effective management and makes it more attractive to value focused investors.
NBCC’s sales grew from ₹7,690 Crores in 2022 to ₹8,754 Crores in 2023 which is a growth of 13.8% year on year. This growth number indicates strong demand and revenue momentum for NBCC which helps in share price appreciation.
Infra PSU company NBCC also offers regular dividend income as well. Companies who regularly pay dividends are generally ones with sound financial stability.
Additionally, rising institutional ownership reflects growing confidence in NBCC’s future outlook. All these combined reason led to bullish rally in shares of NBCC
Is NBCC fairly valued?
For assessing if NBCC is fairly valued, we used discounted cash flow model and comparative valuation metrics like the price-to-earnings (P/E) ratio. The discounted cash flow analysis indicates NBCC may be overvalued, trading at a premium to the estimated fair value of ₹59.
However, looking at NBCC’s current P/E ratio of 67.58 which is below industry averages of 90.52 suggesting possible undervaluation relative to construction sector companies.
Valuation can be very subjective and evaluating NBCC just based on PE ratio or DCF model may not be the best. Until the growth is constant, getting the stock at a fairly valued price may be next to impossible looking at the rising high PE multiple investors are looking to pay for PSU stocks like NBCC.
NBCC - Will it continue to rally?
As the Indian economy rises, Infra stocks like NBCC will keep on delivering returns for its investors. In short term however, PSU stocks are experiencing profit booking. While Fii’s are closing their positions in Indian markets from most of the sectors, they have been steadily increasing thier stakes in NBCC.
I personally feel, the rally will further continue. Safe investors can use techniques like Pyramiding to build their positions.
NBCC's Shareholders data for Dec 2023
| Category | Percentage |
|---|---|
| Promoter | 61.8% |
| FII | 4.5% |
| DII | 10.4% |
| Public | 23.4% |
| Others | 0.0% |
NBCC Shareholders data for Sep 2023
| Category | Percentage |
|---|---|
| Promoter | 61.8% |
| FII | 4.1% |
| DII | 10.2% |
| Public | 23.9% |
| Others | 0.0% |
NBCC Shareholders data for June 2023
| Category | Percentage |
|---|---|
| Promoter | 61.8% |
| FII | 3.8% |
| DII | 10.4% |
| Public | 24.1% |
| Others | 0.0% |
Conclusion
NBCC has been investors favourite stock in last few months. But now as Vix is rising, Investors fear have increased. When market enteres ‘Fear Zone‘, selling pressure rises which results in sharp downmoves.
Investors with long term outlook should keep a watch on experts forecast about NBCC’s growth and check how the company stands on estimates. Crossing estimated forecast will further boost investors confidence and price will further rally upside.
