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Strong set of results

Our view

Ahluwalia Contracts India Ltd (AHLU) posted stellar quarterly performance beating our and street estimate both on revenue and margin front. During FY23, company has bagged projects worth Rs50.6bn taking its order book to Rs81.6bn as on 4QFY23 (2.9x TTM revenue), providing revenue visibility for next 2?3 years. Further with strong tender pipeline of Rs30-50bn already bided / planning to bid, management expects healthy order inflow of Rs20?25bn in FY24E in addition to orders worth Rs37.5bn bagged in 1Q. For FY24E, management has given strong revenue guidance of 20% with EBITDAM of 10%

We remain positive on AHLU from a long-term perspective given its 1) sound business strategy, 2) prudent selection of orders (state and central), 3) focus on asset light business model, 4) better working capital management. On the back of a) strong order inflow, b) healthy order book and c) RM prices stabilizing we expect revenues/PAT CAGR of 17%/14% over FY23-25E. However, given the recent run-up in the stock price we downgrade it to REDUCE with a revised TP of Rs527 valuing the stock at 14x FY25E EPS

Result Highlights

* For Q4FY23, AHLU’s revenues grew by 18.1% YoY to Rs8.6bn (above our estimate of Rs7.9bn), as execution picked up.

* EBITDA reported at ~Rs1.1bn with EBITDAM witnessing an expansion of 407bps YoY to 12.8% (above YSec estimate of 11.3%). on account of lower raw material cost

* Adj PAT grew 70.5% YoY to Rs722mn (above our estimate of Rs537mn), mainly due to higher operating margins.

* With orders worth Rs10.4bn bagged in 4Q, total order inflow in YTDFY23 summed up to Rs50.7bn meeting the order inflow guidance.

* At the CMP, the stock trades at a P/E of 17.9x and 15.4x its FY24E & FY25E earnings.

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