IDFC Securities - Ashoka Buildcon (ASHOKA) Ashoka Buildcons Q3FY19 results (Outperformer) - Robust execution continuesâ€¦

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IDFC Securities

Ashoka Buildcon's Q3FY19 results (Outperformer) - Robust execution continuesâ€¦

Q3FY19 result highlights

Ashoka Buildcon’s (ABL) Q3FY19 performance was better than our estimates led by strong execution and higher margins. Adjusted PAT grew by 117% yoy to Rs1bn (est: Rs615m). However, reported PAT growth was lower at 32.3% yoy to Rs622m due to provision of Rs398m for outstanding exposure of Rs806m towards GVR Infra which is under NCLT.
Revenue grew 61.6% yoy to Rs10.7bn (est: Rs8.2bn) due to incremental revenues from execution of the Vadodara-Kim HAM project as well as initial mobilisation and utility shifting revenue from other new HAM projects. EBITDA doubled yoy to Rs1.5bn (est: Rs1bn). EBITDA margins expanded 270bp yoy to 14.0% (est: 12.3%) due to favourable project mix.
ABL’s standalone debt rose sharply from Rs3.9bn in Sept-18 to Rs5.9bn in Dec-18 due to higher capex & upfront working capital requirement in new HAM projects.
In respect with search proceedings carried out in April 2016, ABL received income tax assessment orders for FY11-17 with additional tax payable worth Rs539m (including interest). ABL has treated it as contingent liability. Authorities disallowed certain sub-contractors’ payments by treating them as not genuine. However, ABL has clarified it has underlying documents to substantiate genuineness of work performed by these sub-contractors & no incriminating documents were found during search proceedings.
Gross Toll collections on a like-to-like basis grew just 2% yoy to Rs2.36bn due to a general slowdown in traffic movement and specifically for Jaora Nayagaon project due to on-going construction on a connecting stretch.
Order backlog as on December 2018 stood at Rs95.4bn (3x TTM revenues).

Key positives: Strong execution and robust order backlog position.

Key negatives: IT tax demand notice and provision for GVR exposure.

Impact on financials: 9.5% earnings upgrade in FY19. 6.9% downgrade in FY20 earnings due to delay in appointed dates for new HAM projects.

Valuations & view

We expect revenue growth to remain strong given the contribution from newer projects driving 37% revenue CAGR over FY18-20E. ABL offers an attractive combination of strong earnings growth (26% pre-tax CAGR over FY18-20E), low leverage & attractive valuations. ABL trades at 11.4x/10.6x FY19E/FY20E standalone earnings without adjusting for value of its assets. We value EPC business at Rs38bn (14x FY20 EPS) & our overall revised SOTP based PT for ABL is Rs219. Maintain Outperformer.

05/02/2019 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 Q3FY19 results (Outperformer) - Robust execution continuesâ€¦

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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