NCC Shares Drop 12% Amid Heavy Selling as Q3 Profit and Margin Decline
NCC Share
NCC Shares Fall 12.6% Amid Heavy Selling Due to Decline in Profits and Margins in Q3
Shares of NCC Limited, a prominent player in India’s construction sector, took a severe hit on February 7, 2025, as the stock plummeted by up to 14.5% during intraday trading.
At its lowest point, the stock price dropped to Rs 202.85 on the Bombay Stock Exchange (BSE), before recovering slightly to close at Rs 207.50, reflecting a loss of 12.6% by the end of the trading session.
This steep decline in the company’s stock price was primarily attributed to the release of its quarterly financial results, which revealed a significant drop in profits, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), and margins for the October-December 2024 period.
Q3 Financial Performance: Profit and Margin Woes
For the December 2024 quarter, NCC Limited reported a substantial dip in its net consolidated profit, which fell by approximately 11% on a year-on-year basis, settling at Rs 205.86 crore.
This marked a sharp contrast to the same period in 2023 when the company had posted a profit of Rs 230.96 crore.
Furthermore, the profit attributable to the company’s shareholders also dropped to Rs 193.18 crore, down from Rs 220.65 crore a year ago.
This decline in profitability has raised concerns about the company’s future prospects, triggering a wave of heavy selling from investors.
In addition to the reduction in net profit, NCC’s EBITDA also showed a downward trend. The company reported an EBITDA of Rs 420.9 crore, which represents a significant 16.6% decline compared to Rs 504.4 crore in the same quarter of the previous year.
This sharp drop in EBITDA was accompanied by a contraction in the EBITDA margin, which fell to 7.9% from 9.6% during the corresponding period last year.
The lower EBITDA margin reflects the company’s struggle with cost pressures, potentially driven by inflationary pressures, rising raw material costs, and labor-related challenges.
Stock Performance in 2025: A Steep Decline
The negative quarterly results have had a severe impact on NCC’s stock performance, with the share price declining by a staggering 25% since the start of 2025.
This sharp depreciation in the stock price has led to a decline in the company’s overall market capitalization, which now stands at approximately Rs 13,000 crore.
This fall in stock value is particularly concerning for investors, as it comes after a period of relative stability.
The market’s reaction to the earnings report indicates a lack of confidence in the company’s ability to maintain its profitability, particularly given the challenging environment in the construction and infrastructure sectors.
Rekha Jhunjhunwala, a well-known investor and shareholder in NCC, is also facing the impact of this decline.
While the long-term outlook of the company could change depending on future performance, the current financial results have certainly raised alarm bells for many stakeholders.
As of December 2024, the promoters of the company held a 22.02% stake in NCC Limited, which means that they, too, are experiencing the repercussions of the stock’s poor performance.
Stock Performance Highlights: A Roller Coaster Ride
The current decline in NCC’s share price comes after a relatively strong performance in the stock market in the past year.
The stock reached its 52-week high of Rs 364.50 on July 31, 2024. However, the current downturn has taken the stock to a more precarious position, with the 52-week low recorded at Rs 200.95 on March 14, 2024.
These significant fluctuations in the stock price highlight the volatility of the company’s shares, which are sensitive to both the broader market trends and the company’s internal financial performance.
The company’s stock has also hit the lower circuit limit on multiple occasions, with the stock price capped at Rs 201.90 as the lower circuit limit, while the upper circuit limit is set at Rs 249.35.
Circuit breakers are designed to prevent excessive price fluctuations in a short period, and hitting the lower circuit limit indicates the extreme level of selling pressure faced by the stock.
The price movement of NCC shares in the near future will likely depend on the company’s ability to address the factors driving its reduced profitability and margins.
Revenue and Expense Insights: A Mixed Picture
While the decline in profits and margins has dominated the discussion around NCC’s financials, the company has shown some positive performance in terms of revenue growth. NCC’s consolidated revenue from operations for the December 2024 quarter rose by a modest 1.6%, amounting to Rs 5,344.52 crore, compared to Rs 5,260.08 crore during the same period in 2023.
While this increase in revenue is a positive development, it has not been sufficient to offset the impact of rising costs, which have put a strain on profitability.
Expenses have seen a marked increase, rising from Rs 4,964.02 crore in Q3 FY2023 to Rs 5,122.94 crore in the latest quarter. This 3.2% rise in expenses highlights the challenges that NCC faces in controlling costs, particularly in the context of rising raw material prices, labor costs, and inflationary pressures.
The construction industry, in particular, is highly susceptible to these macroeconomic factors, which can lead to significant pressure on margins and profitability.
The cost escalations also underscore the difficulties faced by companies like NCC in maintaining their competitive edge in a highly cost-sensitive market.
Outlook and Market Sentiment: Investor Concerns Mount
The current downturn in NCC’s stock price, coupled with its disappointing financial results, has cast a shadow over the company’s prospects in the near term.
Investors are growing increasingly concerned about the company’s ability to improve its profit margins and sustain revenue growth in a challenging economic environment.
The company will likely need to take decisive steps to address its operational inefficiencies, reduce costs, and find new avenues for growth in order to restore investor confidence.
Despite these concerns, NCC’s long-term potential remains a subject of debate among analysts and market observers.
The company operates in the infrastructure sector, which continues to be a critical component of India’s economic growth strategy.
Given the government’s focus on infrastructure development and urbanization, NCC could benefit from the ongoing demand for construction and engineering services in the coming years.
However, the company will need to navigate its current challenges effectively to capitalize on these opportunities.
In conclusion, NCC Limited faces significant headwinds following its weak financial performance in Q3 2024.
The stock’s steep decline, combined with reduced profits, margins, and rising expenses, has triggered a wave of selling by investors.
While the company may still have long-term potential, its near-term outlook will heavily depend on its ability to address the issues that have led to its current struggles.
For now, investors will likely remain cautious as they await further developments from the company’s management and any signs of a turnaround in its financial performance.
