Buy Ashoka Buildcon Ltd For Target Rs.141- Yes Securities
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Strong execution
Our view
Ashoka Buildcon Ltd (ASBL) reported a mixed set of numbers, with strong revenue growth of 36% YoY to Rs19.6bn led by robust execution while EBITDA margins remained under pressure. The margin is expected to remain in the range of 9 - 10% in FY23E, impacted by the project mix. The sale of five ACL BOT is Rs13.4bn and the consideration of the same has been extended to Q2FY24E as approvals from various authorities is yet to receive. The Chennai ORR sale deal with NIIF is expected to fetch Rs4.5bn and is targeted to be completed by FY23 and the consideration of the same is expected to be received in Q4 which will be utilized to reduce the debt level thereby strengthening the balance sheet. ASBL has bagged orders worth Rs80.5bn in 9M taking the orderbook to Rs161.4bn. With strong order book position and healthy execution, management has maintained its revenue guidance of 20-25% growth in FY24E.
We remain positive on the company given a) its excellent blend of diversified EPC orders and asset b) stable EPC margins and c) healthy order book (Rs161bn as at 3QFY23) and foray into new verticals- Railways (9% of order book), Power T&D and EPC buildings. At the CMP, the stock trades at an EV of 2.9x FY23E EBITDA. We maintain ‘BUY’ rating on the stock with a SoTP based TP of Rs141.
Result Highlights
* For Q3FY23, ASBL’s revenues grew 35.8% YoY at Rs19.6bn (beating our estimates of Rs16.2bn) with healthy growth of 37% in BOT revenue and construction segment saw growth of 34% YoY.
* EBITDA grew 23% YoY to Rs4.9bn (YSec estimate of Rs4.8bn), with EBITDAM softening 261bps to 25% (below YSec estimate of 29.4%). The margins contracted on account of steep rise in raw material prices.
* On the bottom-line front, Adj. PAT came in at Rs1.4mn (below YSec estimate of Rs1.6bn) on the back of higher depreciation.
* During 3Q, ASBL bagged orders worth Rs24.2bn and has monetized JaoraNayagaon toll project for a total consideration of Rs6.9bn (1.1x book value).
* At the CMP, the stock trades at an EV of 2.9x and 2.8x FY23E and FY24E EBITDA.
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