Ashoka Buildcon Ltd. share price target

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

ABL has delivered strong 2QFY20 performance still the stock is languishing at lows. Concerns on ABL going for cash settlement in an event of SBIM stake in ACL getting distressed valuation, is key overhang. Though there is no mandatory cash settlement, at best asset swap, which may be stake dilutive and incur non-cash diminution of investment value for ABL in ACL. Standalone debt has reduced by Rs 1.2bn QoQ to Rs 4.6bn. We maintain BUY. Key risks (1) Delay in SBI Macquarie deal closure; (2) Dip in traffic revenue from BOT projects; (3) Delay in ADs. ABL delivered 2QFY20 Rev/EBIDTA/APAT beat of 1/20/39% respectively. We maintain BUY on ABL with a reduced SOTP of Rs 206/sh (vs. Rs 220/sh earlier). TP cut is driven by our re-classification of interest income on ABL funding support to ACL as non-recurring over long term. We value the EPC business at 12x FY21E EPS.

ABL's orderbook (OB) was at | 7,485.5 crore in Q2FY20, implying OB-to-bill ratio of 1.8x TTM revenues, giving comfort on execution ahead. Of this, | 3,814.5 crore BOT, | 1,809.3 crore EPC, | 716.2 crore power T&D;, | 1,067.7 crore railway & | 77.8 crore CGD projects. This OB does not include TumkurShivamoga P-IV HAM project worth | 869.6 crore, recently won | 1,079.5 crore Bundelkhand Expressway and | 313.7 crore SRIT India (Smart City) project. Expecting ordering activity to pick up from December, 2019, the company is targeting order inflow (OI) of | 4,000-6,000 crore in FY20E. On the execution front, it has received appointed date (AD) for seven HAM...

Ashoka Buildcon's (ASBL) Q2FY20 execution remained muted due to the extended monsoons, with revenue growth at 7.6% YoY.

Over last 3M, ABL has underperformed CNXINFRA by 18%. The concerns surrounding SBIM stake sale and likely event of ABL giving cash exit (in case of distress valuation) may have led to this underperformance. ABL as per exit term has no mandatory cash settlement clause. At best there could be asset transfer which may be stake dilutive for ABL and result in investment write down. Going by consensus ACL valuation impact could be Rs 7.3bn (Rs 26/sh). We maintain BUY. Key risks (1) Delay in SBI Macquarie deal closure; (2) Dip in traffic revenue from BOT projects; (3) Delay in ADs. We maintain BUY on ABL with reduced SOTP of Rs 220/sh. We have cut our standalone EPC multiple from 15x to 12x to factor in concerns surrounding ACL monetization and likely impact on ABL stake dilution in ACL below 61%, in case of suboptimal valuation bids.

Currently looking to bid for | 50,000 crore road projects ABL's orderbook (OB) stood at | 8,168.3 crore in Q1FY20, implying OB-tobill ratio of 2.0x TTM revenues, giving comfort on execution ahead. This OB consists of | 4,169.6 crore BOT, | 2,066.1 crore EPC, | 828 crore power T&D;, | 1,095.0 crore railway & | 9.6 crore CGD projects. The company is currently intending to bid for road projects worth ~| 50,000 crore and targets Order Inflow (OI) to the tune of | 4,000-6,000 crore in FY20E. On the execution front, with appointed date (AD) for Belgaum-Khanapur HAM project received on March 7, 2019, execution on the project has started. With this, three of...

Ashoka Buildcon's (ASBL) Q1FY20 revenue grew 28% YoY to Rs 8.8bn, below our estimate of Rs 11.8bn due to delayed execution of power T&D;/ railways projects.

Strong performance in a challenging environment: Revenue grew 30% YoY in 1QFY20, which is commendable in a challenging operating environment (liquidity crunch and slowdown amid the election period of around two months). We note that ASBL's revenue growth was strongest among our coverage universe companies. The key positive surprise was the sequential decline in interest expense to INR214m, attributable to a fall in gross debt by INR1.4b. Overall, net profit grew 23% YoY to INR647m (in-line). Dependency on new ordering might increase at such high execution rate:...

Ashoka Buildcon Ltd (ASBL) has reported extremely good set of result for 4QFY19 with revenue of Rs13bn, +86% YoY, vs. our expectations of Rs9.1bn. The beat was driven by better execution among most under construction HAM projects, TOT EPC project (along with another EPC project in Maharashtra) and power projects in Bihar and Uttar Pradesh. The management has guided for 25-30% growth in FY20 which has upside potential depending on the order inflow in this year. We are building in 21% revenue and 14% EBITDA CAGR over FY19-21 in our estimates. Given the clarification by the management that there is a two year extension in closing the deal with PE investor, we believe that near term stock...

ABL's orderbook (OB) was at a strong | 9,658 crore as of Q4FY19, implying orderbook-to-bill ratio of 2x, giving comfort on execution ahead. This OB includes orders worth | 1,264 crore against which the company has received LoI for RVNL Punjab and HAM for Tumkur IV package. Balance OB worth | 8,394 crore consists of | 6,744 crore order for roads (| 4,620 crore BOT and | 2,124 crore EPC), | 913.9 crore for Power T&D;, | 720 crore for railways and | 16.1 for CGD projects. The management has targeted OI to the tune of ~| 6,000 crore in FY20E (~| 4,000 crore from roads, | 1,600-2,000 crore...