IDFC Securities - Ashoka Buildcon (ASHOKA) Ashoka Buildcons Q2FY20 results (Outperformer) - Beats in estimates led by margin

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IDFC Securities

Shirish Rane

Ashoka Buildcon's Q2FY20 results (Outperformer) - Beats in estimates led by margin

Q2FY20 result highlights

Ashoka Buildcon (ABL) reported steady revenue of Rs8bn in Q2FY20, +8% yoy below our estimates of Rs8.4bn. The execution was slow on account of unprecedented rains. Note that ABL has received appointment date for four HAM projects.
EBITDA margin came in at 14.9% (+138 bps yoy) higher on account of higher margin on projects nearing completion (than earlier estimates). As a result, EBITDA grew by 18.5% yoy to Rs1.2bn in Q2FY20, ahead of our estimate of Rs1.1bn led by better margins.
Adjusted Profit for Q2FY20 was Rs865m (vs our estimate of 635m), +17% yoy. Profit has been adjusted for write off of deferred tax asset of Rs89m led by company opting for lower taxation regime. Note that other income increased to Rs392m, +149% yoy led by interest on loans given to HAM subsidiaries in lieu of equity.
ABL has already achieved financial closure of all five HAM projects with cost of Rs47bn. The appointed date has been received for four projects and last one project is expected in next 3 months.
ABL is L1 in a project in Bundelkhand Expressway Limited worth Rs11bn.
Order backlog stood at Rs98bn as on Sep 2019 (2.4x book to bill ratio on trailing basis). The order wins include EPC value of 5 new HAM projects worth Rs42.9bn and Rs11bn EPC order when ABL is L1.
Guidance maintained: FY20 Revenue: 25-30% yoy growth, Capex- FY20: Rs1.5bn (Rs2bn during FY19) and FY20 EBITDA margin: 12-12.5%.

Key positives: Received appointed date for two projects

Key negatives: Lower Traffic growth in road assets

Impact on financials (Standalone): Increase in our earnings estimates by 5%/3% as ABL has opted for lower taxation regime of 25.2%

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 7x/6x FY20E/FY21E standalone earnings without adjusting for value of its assets. We value EPC business at Rs30bn or Rs105/share (10x FY20 EPS) & our overall revised SOTP based TP for ABL is Rs189 (revised EPC PE multiple to 10). Maintain Outperformer

19/11/2019 8 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 Q2FY20 results (Outperformer) - Beats in estimates led by margin

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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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