IDFC Securities - Ashoka Buildcon (ASHOKA) Ashoka Buildcons Q4FY19 results (Outperformer) - Strong execution; Healthy order book

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IDFC Securities

Shirish Rane

Ashoka Buildcon's Q4FY19 results (Outperformer) - Strong execution; Healthy order book

Q4FY19 result highlights

Ashoka Buildcon (ABL) reported a robust execution of Rs13.1bn, +86% yoy growth sharply above our estimates of Rs9.5bn. FY19 revenue was Rs38.2bn, + 56% yoy growth.
EBITDA grew by 125% yoy to Rs1.8bn in Q4FY19, sharply ahead our estimate of Rs1.2bn led by rise in execution. EBITDA Margin was 13.9% for Q4FY19 and 13.5% for FY19
Tax rate was high at 33% compared to 9.3% in Q4FY18 on account of absence of EPC projects which can avail 80IA tax benefits. Also, other income was lower at Rs380m (vs Rs620m in Q4FY18).
As a result, Ashoka Buildcon’s (ABL) Q4FY19 PAT was flat at Rs1.1bn, however, sharply above estimate of Rs671m led by higher execution during Q4FY19. FY 19 PAT was Rs3.3bn, a growth of 40% yoy.
Traffic growth (yoy) was weak in FY19 at 3-4% yoy in BOT projects. Traffic Growth is expected to come back to 7-8% yoy on portfolio basis in FY20E
ABL has already achieved financial closure of all five HAM projects with cost of Rs47bn. The appointed date has been received for two projects and rest of the three projects are expected in H1FY20E.
Order backlog increased by 44%yoy to Rs84bn as on Mar 2019 (5.3x TTM construction revenue). The order wins include EPC value of 5 new HAM projects worth Rs42.1bn, EPC value of ToT project worth Rs8.4bn 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 two projects.

Key negatives: Order of Tumkur Shivamogga Package III of Rs13.8bn; low traffic growth in road assets

Impact on financials (Standalone): Upgrade in FY20E by 15% to Rs3.6bn and introduce our FY21E EPS of Rs14.2/share

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 (13% tax CAGR over FY19-21E), 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 Rs38bn (14x FY20 EPS) & our overall revised SOTP based PT for ABL is Rs234. Maintain Outperformer.

29/05/2019 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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