TOP PICKS: LT, KNR, PNC Infra, Ashoka, NCC, Capacite Infra, ITD and KPTL. HDFC Securities Institutional Equities (HSIE) hosted the 4th Annual Infrastructure Investors Forum on 18/19th Feb 2021, though virtual this time. We had attendees from 12 large listed Industrials/Infrastructure companies represented by Promoters, CEO/CFO/IR teams. After almost a decade, there is strong/consensus optimism building up for the Indian Infrastructure story. Ordering has moved beyond roads with focus now on health, education, portable water, renewable energy, manufacturing expansion, uptick in real estate cycle and all this is coinciding with relatively lower crude prices, lowest interest rate and improving GDP/Tax collection. Companies remain bullish whilst valuation is still at 40-50% discount to cross cycle mean. We maintain constructive as envisaged in our thematic On Road to Rerating and Triggering a New Cycle.

With major due diligence done and binding offers received, negotiations & documentation of SBI Macquarie stake sale expected to conclude by Mar'21. ASBL's 3Q performance was muted with revenues and margins coming below our and street estimates, mainly due to delayed commencement of 3 major projects. ASBL now received long-awaited AD in Kandi Ramsanpalle HAM...

ABL's order book (OB) at the end of Q3FY21 was at | 9,152 crore (OB-to-bill ratio of 2.5x TTM revenues) spread across roads - HAM (| 3,923 crore), roads - EPC (| 2,988 crore), power T&D; and others (| 1,466 crore), railways (| 692 crore), and CGD (| 83 crore) segments. During Q3FY21, the company has secured projects from a) NTPC Renewable Energy worth | 503 crore for EPC package of 150 MW solar PV project in Rajasthan and b) smaller contracts in power segment worth ~| 300 crore in Uttar Pradesh and Bihar. Going forward, the management has guided for order inflow of | 2,000-2,500 crore...

ASBL's 3QFY21 revenue came in flat YoY, in line with our estimate. Revenue would have been higher as execution of three projects was delayed and shifted to 4QFY21. EBITDA stood 15% below our estimate as an adverse revenue mix led to 180bp YoY decline in EBITDA margin (120bp below our expectation). As a result of lower depreciation and interest cost, coupled...

Negotiations restarted for SBI Macquarie stake sale with prospective buyers and deal progressing in right direction as per management. ASBL reported decent quarterly performance with execution ramping up (6% YoY growth) across its project sites led by rise in labour availability. Margins...

Ashoka Buildcon (ASBL) has reported good set of numbers for 2QFY21 compared to our estimates. Net revenue at Rs8.78n grew by 6.7% YoY compared to our estimate of Rs7.07bn. EBITDA was up by 6.6% YoY at Rs1.3bn and EBITDA margin was higher by 62bps QoQ (flat YoY). Adj. PAT increased by 44% YoY to Rs1.05bn primarily due to higher other income and lower finance costs, depreciation and tax expenses. The company has recently won two road projects under the Bharatmala scheme worth Rs13.9bn. For ASBL, debt at the standalone level has been much lower for some time and stood at Rs2.25bn as of Sept 2020, but the consolidated debt due to road assets still weighed heavily at Rs56.4bn. The payments from the central government are...

We are impressed by ABL's continued improvement in leverage at standalone levels and execution recovery. However, the SBI-Macquarie stake exit stays the key overhang on the company. We believe asset monetisation will be key for rerating of EPC business multiples. We conservatively build in construction revenue growth at 4.7% CAGR to | 4,316 crore in FY20-22E. We maintain HOLD rating on the stock with an...

Negotiations restarted for SBI Macquarie stake sale with prospective buyers and deal progressing in right direction as per management. ASBL reported decent quarterly performance with execution ramping up (6% YoY growth) across its project sites led by rise in labour availability. Margins...

Ashoka Buildcon's (ABL) performance was a mixed bag in Q1FY21. Revenues de-grew ~35% YoY to | 572.4 crore on account of weaker-thanexpected execution during the quarter owing to Covid-19 led challenges such amid lockdown and labour shortage. Reported EBITDA margin was up 180 bps YoY to 14.3%, mainly on account of release of contingencies on account of project completion. RPAT grew 11.9% YoY to | 68.1 crore on account of higher other income (driven by insurance claim and restructuring of equipment loans) and higher reported EBITDA. Order book at | 8,617 crore as of Q1FY21...

Ashoka Buildcon (ASBL) has reported good set of numbers for 1QFY21 compared to our as well as consensus estimates. Given the COVID related lockdown and labour migration, we were expecting a weak quarter for the company but we believe that the recovery in execution has been much swifter. As a result of better than expected execution, revenue and EBITDA were 51.8% and 155.4% ahead of our estimates, respectively. Net revenue at Rs5.72bn declined by 34.7% YoY due to COVID induced lockdown, lower availability of labour etc. EBITDA declined by 25.2% YoY to Rs819mn and EBITDA margin was higher than expected at 14.3% (+182bps YoY). Adj. PAT increased by 6.8% YoY to Rs691mn primarily due to higher other income and lower finance costs,...

12 August 2020 Ashoka Buildcons (ASBL) 1QFY21 results were robust. Top line decline was limited to INR5.7b (18% above est.). On account of one-off items as well as release of contingencies, EBITDA and PAT came in well above expectations. A key surprise was the reduction in gross debt to INR2.4b (v/s INR4b at end- FY20), indicating strong focus on cash flow management. Strong execution over the past two years is commendable. However, the pending PE exit in the asset portfolio is an overhang on the stock. We have increased our FY21E EPS by 16%, but FY22E EPS remains broadly unchanged. Strong order book and continuous improvement in the balance sheet augurs well for ASBL. Maintain with revised TP of INR88. Revenue declined 35% to INR5.7b and was 18% above our expectations. EBITDA was down 25% YoY to INR819m (ahead of est.

SBI Macquarie stake sale deal continues to be an overhang on the stock, negotiations to likely restart with prospective buyers. ASBL reported resilient operational performance in a tough scenario with revenues falling 34% YoY due to Covid-19 pandemic, impacting construction...

We revise our FY21E/FY22 EPS by 6/34% and increase our TP to Rs 141/sh (vs Rs 134/sh earlier). We maintain BUY on Ashoka Buildcon with revised TP of Rs 141/sh. Adjusting for ~Rs 1bn release of contingencies in revenue from some of the projects, ABL missed our earnings estimate by 18% on account of weak execution and lower than expected EBITDA margin. Labour availability is 50-65% as of now and sites are working at 50-65% efficiency. Tolling has reached 85% of pre-Covid-19 level within three week of resumption. NWC days improvement, low net D/E of 0.04x and comfortable liquidity insulates ABL from COVID-19 headwinds.

Ashoka Buildcon (ASBL) has reported good set of numbers for 4QFY20 compared to estimates. Click Here EPC business continues to do well Net revenue at Rs12.5bn declined by 4% YoY and was marginally ahead of consensus estimate. However, EBITDA increased by 26.2% YoY to Rs2.3bn as EBITDA margin was higher than expected at 18.2% (+437bps YoY). Adj. PAT increased by 67.6% YoY to Rs1.6bn primarily due to lower finance expenses. Revenue, EBITDA and PAT were 8%, 68.7% and 94.1% ahead of consensus estimates, respectively. For FY20, ASBL has reported standalone revenue of Rs39.4bn, up 3.1% and EBITDA of Rs5.9bn, up 13.7%. EBITDA margin at 14.9% was up by 139bps. Adj. PAT at Rs3.9bn...

SBI-Macquarie stake exit remains the key overhang on the company. The monetisation could hit a roadblock in the near term given the overall economic challenges. Moreover, we expect ABL's execution to be impacted by Covid-19 impact. We conservatively build in construction revenue growth at 4% CAGR to | 4,248 crore in FY20-22E. We reinstate our ratings (earlier...

Post relaxations in lockdown almost all projects have commenced operations and are operating at ~60% efficiency with 50-65% labour availability. ASBL reported strong performance in 4Q with healthy execution in its key projects leading to meagre ~4% YoY (PLe: -35% YoY) fall in revenues, despite...

were moving at a steady pace until 15th Mar'20 with timely collection of come to halt due to a) directive and strict implementation of nationwide lockdown, b) stoppage of work requested by clients, c) labour related issues who were unable to return post Holi holidays and d) concerns towards health...

ABL's orderbook (OB) was at | 8,092.4 crore, implying OB-to-bill ratio of 2.0x TTM revenues, giving us comfort on execution ahead. Of this, road projects comprise | 5,981 crore, (HAM projects: | 3,411 crore, EPC projects: | 2,570 crore), power T&D; ~| 1,046 crore, Railways | 993 crore, and CGD | 73 crore. This OB does not include Tumkur-Shivamogga P-IV (TSP-IV) HAM project worth | 869.6 crore and recently won Kandi Ramsanpalle HAM project worth | 586.0 crore. The company has identified projects worth | 30,000 crore for bidding in the next two months and expects | 3,000-4,000 crore order inflow...

Hampered by the prolonged monsoons and delayed AD in HAM projects, Ashoka Buildcon's (ASBL) Q3FY20 revenue declined 8% YoY.

3QFY20). Equity requirement in HAM Projects would be ~Rs4.5bn over next two-three years which the management believes would be funded through internal accruals. ASBL is one of the few companies in infra space successfully diversifying into new verticals such as Railways (13% of order book) and smart cities (maiden order Rs3.2bn) over a period of time. In our view, ACL's asset monetisation would a key monitorable and if concluded within a year would remove the overhang on the stock. At CMP, the stock trades at an EV of 5.8x/5.7x FY20E/FY21E EBITDA. We maintain BUY rating...