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Sharp margin miss and guidance reset

Ahluwalia reported a sharp Q1FY27 earnings miss. Revenue grew 12% YoY to INR 11,258 mn, broadly in line with estimates, while EBITDA declined 44% YoY to INR 482 mn, with margin collapsing to a historic low of 4.3% vs 8.6% YoY. The margin pressure was driven by three key factors: ~260bps impact from a one-off reduction in the AIIMS Jammu bill, ~150bps impact from an unexpected 35–40% increase in NCR labour costs, and elevated staff and IDC costs related to mobilisation for large projects. Management has lowered FY27 guidance, with revenue growth now pegged at 12–15% vs 15–20% earlier, ruling out a double-digit EBITDA margin, while order inflow guidance has been cut to INR 40–50 bn vs INR 80 bn earlier. It also flagged potential NGT-related risks in Q3, though management expects margins to recover to ~8.6% over the coming quarters and return to double-digit levels in FY28. Following the results, we cut our revenue and margin estimates, resulting in a 24%/11% reduction in FY27/FY28 EPS estimates and a revised TP of INR 930 vs INR 1,045 earlier. We retain BUY, as the stock trades at ~15x revised EPS, below its 10-year average of ~18x, while the debt-free balance sheet and strong order book of INR 206.6 bn (~4.6x TTM revenue) provide comfort on mediumterm growth.

Decent revenue; sharp profit miss:

Standalone revenue grew 12% YoY to INR 11,258 mn, in line, but EBITDA fell 44% YoY to INR 482 mn with margin at 4.3% (vs 8.6% YoY / 9.3% QoQ). PAT dropped 78% YoY to INR 114 mn, further weighed by higher depreciation (INR 322 mn, now recurring on the capital expansion of recent years) and finance cost (INR 164 mn, up on the Central Vista mobilisation advance). The margin compression was threefold: the AIIMS Jammu bill finalization cost ~260bps (no further hit expected; arbitration to follow), NCR labour added ~150bps at the company level, and higher staff and IDC costs made up the balance.

Guidance reset:

Management lowered FY27 revenue growth guidance to 12-15% and ruled out a double-digit EBITDA margin for the year, targeting a gradual return to Q1FY26-type margins over the next three quarters - though NGT action in Delhi/Haryana is an explicit Q3 risk it cannot yet size. The FY27 order inflow target was cut to INR 40-50 bn as the company turns selective on bidding amid material and labour volatility. Encouragingly, forward bids now embed near-doubled shuttering/steel rates and higher staff and safety loadings, and the company is pursuing item-rate compensation claims with large NCR clients (expected to play out over two quarters, though not contractually assured) - both supportive of the margin-recovery narrative into FY28.

Execution and balance sheet:

Key drivers are ramping - Central Vista is guided to ~INR 7,000 mn of billing in FY27 (and ~INR 10,000 mn in FY28, completion FY29), while CSMT, after a slow start (INR 700 mn billed in Q1), is guided to INR 4,000-5,000 mn in FY27. India Jewellery Park begins groundwork in Q3, and Dalias and DLF Downtown resume after design-change delays. The balance sheet remains a standout - debt-free with INR 9,200 mn cash - and working capital (~119 days) should ease as Assam receivables normalise, with FY27 capex trimmed to INR 2,200-2,600 mn

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