IDFC Securities - Ashoka Buildcon (ASHOKA) Ashoka Buildcons Q1FY20 results (Outperformer) - Better execution in Q1

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IDFC Securities

Shirish Rane

Ashoka Buildcon's Q1FY20 results (Outperformer) - Better execution in Q1

Q1FY20 result highlights

Ashoka Buildcon (ABL) reported a robust execution of Rs8.8bn in Q1FY20, +28% yoy ahead of our estimates of Rs8.1bn. The execution picked up with appointment date being received for five projects.
EBITDA grew by 35% yoy to Rs1.1bn in Q1FY20, ahead of our estimate of Rs946m led by better execution. EBITDA Margin was 12.5% for Q1FY20 (vs 11.9% in Q1FY19)
However, Tax rate was high at 33% compared to 26% in Q1FY19 on account of depletion of EPC projects which can avail 80IA tax benefits. Also, depreciation was higher at Rs266m (vs Rs136m in Q1FY19).
As a result, Ashoka Buildcon’s (ABL) Q1FY20 PAT grew by 1.3% at Rs647bn, slightly below our estimate of Rs670m.
Gross toll collection was Rs2.3bn in Q1FY20, declined by 1.4% in a quarter led by general economic slowdown and elections.
ABL has already achieved financial closure of all five HAM projects with cost of Rs47bn. The appointed date has been received for three projects and rest of the two projects are expected in next six months.
Order backlog stood at Rs90bn as on June 2019 (2.3x book to bill ratio on trailing basis). The order wins include EPC value of 5 new HAM projects worth Rs42.1bn, EPC value of ToT project worth Rs8.0bn and 4 power T&D EPC projects (incl railways) worth Rs16bn.
Guidance: FY20 Revenue: 25-30% yoy growth, Capex- FY20: Rs1.5bn (Rs2bn during FY19) and FY20 EBITDA margin: 12-12.5%.

Key positives: Strong execution and appointed date for one project

Key negatives: Low traffic growth in road assets

Impact on financials (Standalone): Maintain our earnings estimates for FY20E/FY21E

Valuations & view

We expect revenue growth to remain strong given the contribution from newer projects driving 25% revenue CAGR over FY19-21E. ABL offers an attractive combination of strong earnings growth, low leverage & attractive valuations. ABL trades at 11x/10x FY20E/FY21E standalone earnings without adjusting for value of its assets. We value EPC business at Rs36bn or Rs129/share (12x FY20 EPS) & our overall revised SOTP based TP for ABL is Rs213. Maintain Outperformer

20/08/2019 1 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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Analysts

Shirish Rane

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Ashoka Buildcon's Q1FY20 results (Outperformer) - Better execution in Q1

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

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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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