IDFC Securities - Ashoka Buildcon (ASHOKA) Ashoka Buildcons Q1FY19 results (Outperformer) - Strong growth ahead

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IDFC Securities

Ashoka Buildcon's Q1FY19 results (Outperformer) - Strong growth ahead

Q1FY19 result highlights

Ashoka Buildcon’s (ABL) Q1FY19 performance was operationally weak as against estimate due to lower EPC revenue. However, PAT grew 12.2%yoy to Rs639m (est: Rs597m) led by higher than expected other income.
Revenue declined 3.5%yoy to Rs6.8bn (est: Rs7.6bn) due to completion of the older EPC projects in Q4FY18 and with newer EPC/HAM projects yet to contribute materially to the revenue.
EBITDA declined 12.3%yoy to Rs813m and was below estimate of Rs935m mainly due to lower revenue. EBITDA in both comparable periods includes impact of Rs50m on account of notional finance charge on stake adjustment liability towards ACL. EBITDA margin declined 120bp yoy to 11.9% (est: 12.3%) due to adverse revenue mix (higher Power T&D) and lower revenue. While Q1FY18 EBITDA was supported by reversal of excess costs, Q1FY19 EBITDA includes impact of favourable claim of Rs112m. Adjusted EBITDA margin in Q1FY19 stood at 10.4%.
Other income grew 4x yoy to Rs366m and includes dividend of Rs54m from Wainganga project, share of profit of Rs85m from the Maldives project, interest income of Rs50m on loans to ACL & Chennai ORR project and interest income on loans to SPV’s. Interest costs grew 32.3%yoy to Rs171m (est: Rs125m) led mainly by increased interest on mobilisation advances and higher BG/LC charges.
Standalone external debt grew Rs70m qoq to Rs1.1bn as on June 2018. Consolidated gross debt grew Rs185m qoq to Rs46.5bn.
Traffic growth (yoy) across key projects: Dhankuni; 9.1%, Sambalpur; 19.3%, Bhandara; 2.3%, Durg; -2.0%, Belgaum; 2.7% and Jaora; 4.6%.
Order backlog as on June 2018 stood at Rs107.8bn (4.4x TTM revenue). Order inflow for Q1FY19 was at Rs55.7bn (nil last year).

Key positives: Strong order backlog position.

Key negatives: Weak execution.

Impact on financials: No material change in earnings.

Valuations & view

We expect revenue contribution from newer projects to pick up pace from H2FY19 onwards driving 45% revenue CAGR over FY18-20E. A strong execution track record and well-capitalized balance sheet (consolidated net D/E of 2.2x in FY18) are ABL’s key strengths. ABL offers an attractive combination of strong earnings growth (31% pre-tax CAGR over FY18-20E), low leverage and attractive valuations. ABL trades at 15x/11.6x FY19E/FY20E standalone earnings without adjusting for value of its assets. We maintain our Outperformer rating with a revised SoTP based target price of Rs267.

23/08/2018 7 EN

Underlying

Ashoka Buildcon

Ashoka Buildcon Ltd.. Ashoka Buildcon Limited is an India-based infrastructure development company. The Company is engaged in construction and maintenance of roads, and supporting services to land support-operation of toll roads and others. The Company operates through three segments: Construction and Contract related activities; BOT Projects, and Sales of Goods. Its Construction and Contract related activities segment consists of execution of engineering and construction projects to provide solutions in civil and electrical engineering (on turnkey basis or otherwise) to core/infrastructure sectors. The Company's BOT Activity relates to execution of projects on long-term basis comprising developing, operating and maintaining the infrastructure facility. The Sales of Goods segment includes the activity of selling of ready mix concrete (RMC), plain cement concrete (PCC) poles, software and bitumen. The Company has projects under construction in the States of Tamil Nadu, Karnataka, Odisha and West Bengal.

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INE442H01029 National Stock Exchange of India India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Ashoka Buildcon's Q1FY19 results (Outperformer) - Strong growth ahead

With a more favourable environment, ASHOKA BUILDCON improves to Slightly Positive

Monthly LMI Update Independent Investment Research

Ashoka Buildcon's Q3FY20 results (Outperformer) - Slow execution impacts profitability

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Ambuja Cement's Q4CY19 results (Outperformer) - In line; cost efficiencies at play

Event update: Aurobindo Pharma (Outperformer) - Unit IV receives EIR; positive outcome

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