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Strong performance led by revenue beat

Ordering activity and toll collection to gain momentum

* ASBL’s demonstrated strong operating performance, with 1QFY22 revenue growth of ~77% YoY (38% ahead of our estimate). EBITDA came in at INR1.2b, 49% ahead of our estimate, led by a higher revenue and EBITDA margin (90bp above our expectation). As a result of lower depreciation and higher other income v/s our estimate, adjusted PAT came in at INR1b, 123% ahead of our expectation.

* Including L1 orders of INR10.3b, OB stood ~INR105b, with an OB/revenue ratio of ~2.5x, providing comfort on revenue growth. The management’s major focus in the future will be on Roads/Highways, with a share of 70-75% of the order book and 25-30% for Building and other segments.

* The strong execution over the past two years is commendable. The pending exit of the private equity investor in its asset portfolio is an overhang on the stock. A strong order book, coupled with a healthy ordering outlook and continuous improvement in the Balance Sheet, augurs well for ASBL. We increase our FY22E/FY23E EPS estimate by 24%/23% and TP to INR160/share. We maintain our Buy rating.

Robust order book

* 1QFY22 snapshot: Revenue stood at INR10.1b, up 77% YoY and 38% above our estimate, on account of strong execution. EBITDA stood at INR1.2b, with EBITDA margin at 11.9% (est. 11%). Other income stood at INR472m (est. INR200m). PBT stood at INR1.4b. Adjusted PAT came in at INR1b (est. INR454m).

Highlights from the management commentary

* Awarding remained muted during Apr-May’21. NHAI’s strong order pipeline and ease of financing is expected to lead to robust ordering in FY22. ASBL is targeting orders worth INR40b during 9MFY22, of which ~INR30b would pertain to Highways and ~INR10b to other segments.

* With the current order book, the management expects ~25% revenue growth in FY22. EBITDA margin is expected to stand at 12.5-13%.

* Asset monetization: The management said it is on the verge of completing its diligence process (10 HAM assets, five BOT assets, and one Annuity asset). COVID-19 has led to certain delays (in terms of data sharing and discussions). It aims to close the deal by the end of CY21.

Valuation and view

* ASBL’s strong execution over the past two years has been a surprise. The pending exit of the private equity investor in its asset portfolio is an overhang on the stock. There have been frequent delays in deal closures, testing the patience of investors. Faster closures hold the key for a stock rerating.

* A strong order book and continuous improvement in the Balance Sheet augurs well for ASBL. Our TP of INR160/share is based on the SoTP methodology. We value the: a) EPC business at 5x Mar’23E EPS, and b) BOT business on an NPV basis. We maintain our Buy rating.

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