Buy Ashoka Buildcon Ltd For Target Rs.142 - Yes Securities
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Our view
Ashoka Buildcon Ltd (ASBL) 1QFY24 results were in-line overall where revenues grew 3% YoY at Rs19.3bn supported by 7% growth in construction segment. EBITDA margins contracted ~134bp YoY at 24.5% due to 1) de-growth in toll revenue and 2) higher raw material prices. Order book (OB) remains strong at stands at Rs169.2bn (~2.1x TTM revenue). The balance equity requirement for HAM assets as of June’23 stands at Rs1.7bn, of which Rs 1.1/0.6bn would be infused in FY24E/25E. For ASBL the key deliverable is monetization of HAM portfolio and the sale of BOT asset to meet the SBI Macquire obligation. Further with the newly awarded projects yet to receive AD, management has reduced revenue guidance to 15% growth with EBITDAM in the range of 8-8.5.
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 (Rs169.2bn as at 1QFY24) and foray into new verticals- Railways (8% of order book), Power T&D and EPC buildings. We expect ASBL to post a revenue / EBITDA CAGR of 7%/10% over FY23-25E. On account of delay in receipt of A.D. we have lowered our revenue estimates for FY24E/FY25E by 2%/4% and PAT estimates by 19%/21% respectively. At the CMP, the stock trades at an EV of 2.9x/ 2.8x FY23E/ FY24E EBITDA. We maintain ‘BUY’ rating on the stock with a revised SoTP based TP of Rs142.
Result Highlights
* For Q1FY24, ASBL’s revenues grew 3% YoY at Rs19.3bn (our estimates of Rs19.4bn) with growth of 7% in construction revenue while BOT segment witnessed degrowth of 2% YoY.
* EBITDA grew 22% YoY to Rs4.7bn (our estimate of Rs4.8bn), with EBITDAM softening 134bps to 24.5% (in line with our estimate of 24.5%). The margins contracted on account of de-growth in BOT revenue.
* On the bottom-line front, Adj. PAT came in at Rs718mn (below our estimate of Rs842mn) on account of higher interest cost.
* During 1Q, ASBL bagged orders worth Rs22.8bn.
* At the CMP, the stock trades at an EV of 2.1x and 2.0x FY24E and FY25E EBITDA
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