Motilal Oswal has given Buy recommendation for Ashoka Buildcon with a target price of Rs. 145 in its research report issued on Feb 08, 2021

Motilal Oswal’s research report on Ashoka Buildcon

ASBL’s 3QFY21 revenue came in flat YoY, in line with our estimate. Revenue would have been higher as execution of three projects was delayed and shifted to 4QFY21. EBITDA stood 15% below our estimate as an adverse revenue mix led to 180bp YoY decline in EBITDA margin (120bp below our expectation). As a result of lower depreciation and interest cost, coupled with higher other income, adjusted PAT stood flat YoY at INR856m and was 19% above our estimate.  ASBL received a large EPC order worth INR5b in the solar segment. Execution will be completed in 3-4 years, with EBITDA margin expected to be in 10-11% range. Order book stood strong at INR91.5b, up 13% YoY, with an OB-to-revenue ratio at 2.6x. Strong execution over the past two years is commendable. However, the pending PE exit in the asset portfolio is an overhang on the stock. We have increased our FY21E EPS by 7% on higher other income. Strong order book and continuous improvement in the Balance Sheet augurs well for ASBL. Maintain Buy with a revised TP of INR145/share (v/s INR125/share earlier).

Outlook

Strong order book and continuous improvement in the Balance Sheet augurs well for ASBL. Our TP of INR145/share (v/s INR125/share earlier) is based on the SoTP methodology. We value the: a) EPC business at 6x Mar’23E EPS, and b) BOT business on a NPV basis. At the CMP, adjusted for the valuation of the BOT business, the stock is trading at FY22E/FY23E P/E of 4.4x/3.6x. Maintain Buy.

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