IGI Logo

Weak quarter; Asset monetization key to deleveraging

Ashoka Buildcon’s (ABL) 4Q25 PAT at INR 596mn (down 35% YoY) was below JMFe/ consensus estimate of INR 886mn/INR 935mn due to lower revenue and margins. EBITDA margins at 7.3% missed JMFe of 9% due to adverse revenue mix. Backed with robust bid pipeline of c.INR 1.4tn spread across Highways, Railways and Power verticals, ABL expects order inflows of INR 100-120bn for FY26E. Due to delay in start of execution of newly won projects, ABL has lowered its revenue growth guidance from 15% to 10% for FY26E with EBITDA margins of 10%+. ABL is confident of ramping up execution in 2H26. ABL targets to complete monetization of 5 BOT assets by June-25 but only 1st tranche of payment will be received in Jul'25 while remainder will come in FY27 (earlier entire proceeds were supposed to come in FY26). It also expects to monetize 10 HAM assets in FY26 and 1 in FY27. Monetization proceeds will be used to pare debt. Given the lower execution and higher debt levels amid delay in asset monetization, we have cut EPS by 14%/5% for FY26/27E. We maintain BUY with revised SOTP based price target of INR 292.

* 4Q25 PAT missed JMFe due to lower revenue/margins: ABL’s revenue/EBITDA declined by 21%/23% YoY to INR 19.7bn/INR 1.4bn (JMFe of INR 22.5bn/INR 2bn) due to lower executable backlog. Interest costs grew by 24% YoY to INR 766mn (JMFe: INR 850mn). Gross debt remained flat QoQ at INR 20.6bn as of Mar-25 (Mar-24: INR 14.4bn). PAT declined sharply by 35% YoY to INR 596mn (JMFe: INR 886mn).

* Execution to improve in 2H26; lowers revenue guidance: ABL received order inflows of c.INR 86bn in FY25, taking its order backlog to INR 149bn (2.1x TTM revenues) as of Mar25. Backed with robust bid pipeline of c.INR 1.4tn spread across Highways, Railways and Power verticals, ABL expects order inflows of INR 100-120bn for FY26E. Due to delay in start of execution of newly won projects, ABL has lowered its revenue growth guidance from 15% earlier to 10% for FY26E with EBITDA margins of 10%+. ABL expects execution to pick-up in 2H26 and expects strong growth in FY27E.

* Asset monetization delayed; proceeds will help pare debt: ABL entered into SPA with Indian Highway Concessions to sell 5 BOT assets at equity valuation of INR 25.4bn. ABL targets to complete it by June-25 but only first tranche of payment will be received in Jul'25 while remainder will come in FY27 (earlier entire proceeds were supposed to come in FY26). It also expects to monetize 10 HAM assets in FY26 and 1 in FY27. Monetization proceeds will be used to pare debt. Given the delay in receipt of proceeds, we see higher debt levels in FY26 (vs. earlier estimate) which will reduce sharply in FY27E. Also, ABL expects to receive proceeds from monetization of 10 HAMs in FY26/1 HAM asset in FY27.

* Maintain BUY with SoTP based revised price target of INR 292: Given the lower execution and higher debt levels amid delay in asset monetization, we have cut EPS by 14%/5% for FY26/27E. We expect robust core EPS CAGR of 72% over FY25-27E mainly led by margin expansion. Currently, ABL trades at 11x/7x FY26/27E core EPS (ex-other income) after adjusting for value of assets. Current valuations at discount to peers but have room to rerate if asset monetization goes as planned. We value ABL’s EPC business at 11x FY27E core EPS, HAM portfolio at 1.3x P/B and other ABL assets at 0.5x P/B to arrive at an SOTPbased revised price target of INR 292. Maintain Buy.

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361