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Asset monetization remains an overhang

Our view

Ashoka Buildcon Ltd (ASBL) reported a mixed set of numbers, with a strong revenue growth of 25% YoY to Rs24.5bn led by robust execution under construction projects while EBITDA margins remained under pressure. The margin is expected to remain in the range of 8.5 – 9.3% in FY24E, owing to new orders bagged at competitive pricing. The sale of five ACL BOT projects has been terminated due to delays in NHAI approval for Dhankuni Karagpur project. The other three asset monetization deals are likely to be completed by FY24E, with only a few stakeholders approvals pending. On the back of strong order inflows, order book stands at Rs158.1bn (2x FY23 revenue). The standalone gross/net debt decreased marginally to Rs8.8/6.9bn as on Mar’23 vs Rs 8.5/5.8bn as of Dec’22. Management has guided FY24E revenue growth of 22- 25% YoY

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 (Rs158bn as at 4QFY23) and foray into new verticals- Railways (9% of order book), Power T&D and EPC buildings. We expect ASBL to post a revenue / EBITDA CAGR of 9%/11% over FY23?24E. At the CMP, the stock trades at an EV of 1.8x FY24E EBITDA. We maintain ‘BUY’ rating on the stock with a SoTP based TP of Rs148

Result Highlights

? For Q4FY23, ASBL’s revenues grew 25.1% YoY at Rs24.5bn (beating our estimates of Rs20.9bn) with healthy growth of 1x in construction segment while BOT revenue reported a de-growth of 28%1

? EBITDA grew 4.3% YoY to Rs5.6bn (our estimate of Rs5.1bn), with EBITDAM softening 453bps to 22.7% (below our estimate of 24.5%). The margins contracted on account of steep rise in raw material prices.

? On the bottom-line front, Adj. PAT came in at Rs1.1mn (below YSec estimate of Rs1.7bn) on the back of Lower other income

? During 4Q, ASBL bagged orders worth Rs42.6bn.

? At the CMP, the stock trades at an EV of 1.8x FY24E EBITDA

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