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Our view

Ahluwalia Contracts (AHLU) reported decent set of numbers with revenue in line with our estimate, while EBITDAM came below our estimates at 10.8% on account of higher employee cost. During 1QFY24, the company has bagged projects worth Rs43.8bn taking its order book to Rs82bn (2.7x TTM revenue) thereby providing revenue visibility for next 2-3 years. Further with strong tender pipeline of Rs20-25bn already bided / planning to bid, management expects additional order inflow of Rs25- 30bn in FY24E. Given robust execution, strong order inflow, management has retained its revenue guidance of 20% with EBITDAM of 11% in FY24E. We like AHLU 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. However, with the current orderbook, the execution outlook beyond FY24E looks difficult. 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 SELL with a TP of Rs578 valuing the stock at 15x FY25E EPS.

Result Highlights

* For Q1FY24, AHLU’s revenues grew by 25.3% YoY to Rs7.6bn (our and street estimate of Rs7.4bn / Rs7.7bn), on account of robust execution.

* EBITDA reported at ~Rs827mn (our estimates of Rs819mn) with EBITDAM witnessing an expansion of 88bps YoY to 10.8% (our estimate of 11.1%). Margins were better on account of lower RM cost & subcontracting expenses.

* Adj PAT grew 31.6% YoY to Rs497mn (inline with our estimate of Rs501mn), due to better operating margin.

* At the CMP, the stock trades at a P/E of 23.7x and 19.9x its FY24E & FY25E earnings.

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