MOSL: ASHOKA BUILDCON (Buy)-Operational performance below expectations due to weak execution

Ashoka Buildcon: Operational performance below expectations due to weak execution

(asbl IN, Mkt Cap USD0.7b, CMP INR254, TP INR290, 15% Upside, Buy)

• Execution pick-up in EPC biz supports revenue growth: Standalone revenue grew 15% YoY to INR7.0b in 4QFY18, below our estimate of INR7.3b. Sales growth was driven by robust execution of orders in hand. EBIDTA grew by a robust 27% YoY, but came in below our estimate of INR1.0b. Operating margin stood at 11.5% (+110bp YoY). PAT rose 61% YoY to INR1.1b, meaningfully ahead of our estimate of INR619m, led by higher other income (received profit contribution of INR200m from the Maldives project) and a lower tax rate (9.3% v/s est. of 21.8%).
• Order backlog provides robust revenue visibility: ASBL’s order backlog as on Mar’18 stood at a healthy INR58.5b, post which it has incrementally bagged orders worth INR61b, taking the outstanding order backlog to INR119b. This provides revenue visibility of 4.8x its FY18 EPC revenue. Business opportunity, too, appears promising from the near- to medium-term perspective, as ASBL believes ordering is likely to remain robust in the roads sector due to a healthy bid pipeline from the NHAI (INR900b). Road sector constitutes 71% of order backlog, while power T&D accounts for the rest.
• BoT exhibits healthy revenue growth: ACL’s BoT portfolio grew strongly by 14% YoY in 4Q, led by a pick-up in Belgaum Dharwad (+16.6% YoY), Dhankuni Kharagpur (+15.6% YoY), Jaora Nayagaon (+12.1% YoY) and Sambalpur (+28% YoY). Traffic growth at Sambalpur and Belgaum projects was led by a pick-up in mining activity, while that at Dhankuni was supported by traffic from the Haldia port. ASBL expects to maintain traffic growth momentum in FY19.