MOSL: ASHOKA BUILDCON (Buy)-Superior execution drives operational beat

Ashoka Buildcon: Superior execution drives operational beat

(ASBL IN, Mkt Cap USD0.6b, CMP INR228, TP INR290, 27% Upside, Buy)

• Execution pick-up in EPC biz supports revenue growth: Standalone revenue grew 26% YoY to INR6.8b in 3QFY18, ahead of our estimate of INR6.2b, led by a pick-up in execution of EPC projects in hand. EPC revenue grew 26% YoY to INR6.2b. We note that standalone revenue in 2QFY18 was impacted by a) work disruption at the eastern peripheral highway project, b) contract renegotiations with vendors post GST rollout and c) flood situation in Bihar. EBIDTA grew by a robust 31% YoY, the margin expanding 50bp YoY to 14.2%. PAT rose 22% YoY to INR520m, meaningfully ahead of our estimate of INR415m.
• Order inflow muted, but prospects promising: ASBL’s order inflow in 3QFY18 stood muted at INR4.5b, given weak ordering activity in the road and power T&D segments. However, order backlog stands healthy at INR59.4b, providing revenue visibility of the next two years. Business opportunity too appears promising from the near- to medium-term perspective, as ASBL has participated in tenders worth INR600b which are supposed to be finalized by March 2018. Road sector constitutes 71% of order backlog and power T&D for the rest.
• BoT exhibits healthy revenue growth: ASBL’s BoT portfolio grew strongly by 18% YoY in 3Q, led by a pick-up in Belgaum Dharwad (+23% YoY), Dhankuni Kharagpur (+23% YoY), Jaora Nayagaon (+17% YoY) and Sambalpur (+29% YoY). Traffic growth at Sambalpur and Belgaum project was led by a pick-up in mining activity, whereas traffic growth at Dhankuni was supported by traffic from Haldia port. ASBL expects traffic growth momentum to be maintained in FY18.