Ashoka Buildcon Ltd. share price target

ASBL 3QFY17 Revenue, EBIDTA and PAT estimates were 5.5/6.8/35.4% ahead of our estimates on account of execution pickup and savings in depreciation, interest and tax. EBITDA margins expanded ~59bps YoY to 12% (20bps ahead of our estimates) led by increase in other op income to Rs 35mn YoY (largely scrap sales).

ICICI Securities Ltd | Retail Equity Research Ashoka Buildcon (ABL) reported its Q3FY17 results on a standalone basis. Hence, they were not comparable with our estimates Revenues grew 18.2% YoY to | 524.0 crore due to strong execution EBITDA margins expanded 50 bps YoY to 11.8% mainly on account...

ABL 2QFY17 standalone financial performance was above expectations as EBITDA ( 7.0% YoY) came 25.4% ahead of our estimates, mainly on account of Rs 160mn saving achieved on six month early completion of Bihar T&D project. EBITDA margins expanded ~187bps YoY to 15.8% (~337bps ahead of our estimates) led by ~382bps YoY contraction raw material costs (Bihar project).

Standalone EBITDA grew 7% YoY (Rs 698 mn) due to 180 bps YoY margin expansion to 15.8% (savings in overheads [Rs 150 mn] in T&D; project in Bihar due to early completion).We consider ~12% as maintainable margin (in line with the management).

Ashoka Buildcon (ABL) reported Q1FY17 results on a standalone basis due to Ind-AS. Hence, it was not comparable with our estimates • ABL’s revenues de-grew 1.4% YoY to | 468.4 crore .The EBITDA margin contracted 160 bps YoY to 12.7% .The bottomline de-grew 32.7% YoY to | 30.8 crore mainly on account of a higher effective tax rate (35.5% in Q1FY17 vs. 27.0% in Q1FY16) and EBITDA margin contraction.

Valuation: ICICI Securities Limited maintain their HOLD recommendation on the stock with a revised SOTP based price target of | 160/share as they have now incorporated reduction in standalone debt which led to increase in our target price by ~|10/share.

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.

 

Results were impacted by multiple non-recurring items write-back of Rs 586mn on termination of the PNG project, higher share of profit from associates due to PNG termination, higher other operating income and higher other income. Adjusting for all...

ABL reported a loss of | 7.3 crore on account of an exceptional item of ~| 57 crore owing to termination of concession agreement of PNG Tollway (a subsidiary of ABL) with NHAI. Adjusting for this,...

Over the past six months, Ashoka Buildcon Ltd. (ABL) has outperformed BSE midcap by 5.2%. New roads EPC order wins, pick-up in toll revenue and BOT?s debt refinancing at lower interest rate have played a supporting role. While subdued mining/agricultural segments continue to be key toll traffic growth headwinds, new orders provide tailwinds for earnings growth.