Ashoka Buildcon Ltd. (ABL), 1QFY17 financial performance was impacted by delays in execution pickup in recent order wins, resulting in lower EPC revenue (-3.4% YoY). EBITDA margins declined ~150bps YoY to 12.8% led by ~293bps YoY contraction in EPC margins to ~10.9%.ABL’s YTDFY17 order inflow stood at Rs 20.9bn i.e. ~59% of our FY17E order inflow estimate. Recent project wins are an indication of ABL’s conservative stance, with its bids being not only ~1-6% above NHAI’s benchmark costs but also within 2-9% range of L2 bidder. Consequently, we expect ABL’s FY17E EPC EBITDA margins recovery to ~12.1% primarily on account of the new order crossing margin recognition threshold. ABL didn’t recognize margin on Rs 400mn of revenue during 1QFY17 as margin threshold was not met. Maintain BUY with SOTP-based TP of Rs 202/share.

Valuation: They maintain BUY on ABL with TP of Rs 202/share. We value the (1) Standalone EPC business at Rs 111/share (15x one-year forward FY18 EPS) and (2) ABL BOT projects at Rs 76/share (3) land at historical costs at Rs 15/share.