Ashoka Buildcon Ltd. share price target

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 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...

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.