IGI Logo

Margins weak again; HAM sale near

ASBL reported a weak Q2FY27. Standalone revenue grew 4% YoY. However, EBITDA fell 24.4% YoY as margin slipped to 7.1% (9.7% in Q2FY26; our estimate 9.5%), on higher material and other expenses. Management has cut FY27 standalone revenue growth guidance for the second time, to ~5–10% (10–15% after Q1, 20% at the start of the year), and expects margin to improve by ~150bps by year-end, to ~9–9.5% in H2. Order book stands at INR 159.6bn (~2.7x TTM standalone revenue, +7% YoY) after INR 19.7bn of inflows in Q2; including INR 3.9bn won after September and INR 8.7bn where ASBL is L1, it is INR 172.2bn. Management expects a further INR 30–50bn of orders over the next 4–5 months. Post Q2FY27 we have factored weak execution, resulting in EPS cut of 9%/4% for FY28E/29E and revised TP to INR 130 (earlier INR 152). Retain rating at BUY, as valuation is closer to -1STD , PBV at 0.6/0.5x for FY28E/29E. Catalyst is closure of Sale of four HAM SPVs and margin and execution uptick in 2HFY27.

Margin miss continues in Q2FY27:

Standalone revenue rose 3.9% YoY (+2.1% QoQ) to INR 13.2bn, in-line with PLe. Road EPC made up 51.2% of revenue, power T&D 22.9%, railways 13.6%, road HAM 8.6% and buildings/others 3.7%. EBITDA fell 24.4% YoY to INR 932mn, 21.7% below our estimate, and margin fell ~265bps YoY to 7.1% (7.2% in Q1). Material cost rose to 34.1% of revenue from 30.9% a year ago, and other expenses nearly doubled to INR 572mn from INR 296mn; lower construction expenses (49.7% of revenue vs 52.6%) offset only part of this. Finance cost fell 27% YoY to INR 569mn, so PBT fell a smaller 10% YoY to INR 515mn. PAT was INR 380mn vs INR 1.39bn in Q2FY26, which included a one-time gain of INR 1.12bn on the sale of HAM stakes.

Guidance cut again; recovery pushed to H2:

Management now expects FY27 standalone revenue to grow ~5–10%, down from the 10–15% guided after Q1, as orders came in late; it still targets ~15% revenue CAGR over three years. EBITDA margin is guided to ~9–9.5% in H2 vs 7.1% in H1, as road projects in Maharashtra and international projects ramp up; over the next 2–3 years it should average 10–10.5%. Order inflow picked up to INR 19.7bn in Q2 (INR 3.6bn in Q1), and October added ~INR 12bn including the L1 position on Vadodara–Mumbai Expressway Package 9. Management guides a further INR 30–50bn of orders over the next 4–5 months. Immediate bid pipeline of INR 510bn; INR 80bn of bids (170 km) await opening

HAM sale close; debt to fall by March 2027:

Management said the sale of four HAM SPVs is “around the corner”, with a first tranche of ~INR 6bn expected within weeks. The remaining two (Baswantpur and Tumkur– Shivamogga IV) are expected in Q4FY27 or Q1FY28, taking total proceeds from the six assets to ~INR 10bn. Chennai ORR and Jaora-Nayagaon are being offered to investors, but no timeline was given (December 2026 and March 2027/H1FY28 earlier). Consolidated gross debt is INR 27.8bn and should fall to ~INR 20bn once the four assets are sold. Standalone lender debt of INR 11.7bn (the rest of the INR 20.9bn on the books is borrowing from group companies) is guided to fall to INR 6–7bn by March 2027 after new investments. Pending HAM equity is ~INR 3.4bn – INR 1.53bn in H2FY27 (largely Bowaichandi–Guskara, whose appointed date has now been received), INR 1.14bn in FY28 and INR 0.72bn in FY29 – and FY27 capex is guided at ~INR 1.25bn (INR 620mn in H1). Standalone H1 operating cash flow was INR 1.1bn, while net working capital rose to ~164 days of TTM revenue from ~149 days in March 2026 on higher contract assets and advances.

Please refer disclaimer at Report
SEBI Registration number is INH000000933