MOSL: ASHOKA BUILDCON (Buy)-Operating performance below expectation
​Ashoka Buildcon: Operating performance below expectation
(ASBL IN, Mkt Cap USD0.6b, CMP INR208, TP INR260, 25% Upside, Buy)
- EPC biz impacted by project-specific issues, contract renegotiations: Revenue fell 14% YoY to INR3.9b in 2QFY18, below our estimate of INR4.9b, led by: a) work disruption for 50 days at the eastern peripheral highway project, b) contract renegotiations with vendors post GST rollout (impacted supply for power T&D projects), and c) flood situation in Bihar (hurt project execution). ASBL, however, expects revenue to recover in 2HFY18. EBIDTA declined 22% YoY to INR614m, in line with our estimate of INR618m. PAT fell 28% YoY to INR327m, 10% below our estimate of INR364m.
- Order backlog healthy at INR61b; provides revenue visibility for two years: ASBL's order backlog stands healthy at INR61b, providing revenue visibility of the next two years. Order inflow in 2QFY18 remained absent, given weak order awarding activity in the road and power T&D segments. Road sector constitutes 72% of order backlog and power T&D for the rest. ASBL expects ordering activity to pick up in 2HFY18.
- BoT exhibits healthy revenue growth: ASBL's BoT portfolio grew strongly by 16% YoY in 2Q, led by a pick-up in Belgaum Dharwad (+17% YoY), Dhankuni Kharagpur (+16% YoY), Jaora Nayagaon (+18% YoY), and Sambalpur (+16% YoY). During the year, Belgaum, Dhankuni and Sambalpur has taken a tariff hike of 4% YoY, along with Jaora Nayagaon (7%) and Bhandara and Durg (3.5%). Bhandara and Durg continue to witness muted growth. Equity investment of INR700m will be infused by ASBL for the road projects. Anandpuram Ranastalam road projects have achieved financial closure.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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