Buy Ashoka Buildcon; target Rs 304: Angel Broking

“Ashoka Buildcon Ltd (ABL) reported a good set of numbers with revenue (for 1QFY2013) and EBITDA coming broadly in line with our estimates but earnings were higher owing to higher other income and one off depreciation write back (Rs 8cr) in an associate of ABL. The order book as of 1QFY2013 stood at Rs 4,625cr (2.7x FY2013E E&C revenue), providing revenue visibility. We maintain our Buy rating on the stock.

The company’s top-line witnessed a healthy growth of 19.8% to Rs 466cr marginally higher than our estimate of Rs 453cr. The engineering and construction (E&C) segment contributed revenue of Rs 395cr (including other income) and the build-operate-transfer (BOT) segment reported a revenue of Rs 80cr (including other income) for the quarter. On the EBITDAM front, ABL’s margins came at 22.0%, a dip of 210bp on a y-o-y basis and in line with our estimate of 22.1%. The interest cost came in at Rs 38cr, a jump of 52.1% on a y-o-y basis. At the earnings front as well, ABL reported a decent growth of 27.4% to Rs 41cr.

ABL has been successful in diluting stake (34%) for Rs 700cr to SBI-Macquarie in Ashoka Concessions Ltd (ACL) valuing ACL at Rs 2,060cr. Further, SBI-Macquarie will invest additional Rs 650cr for future bids as well. This development is positive for ABL as not only it takes care of equity requirement for the current portfolio but also provides comfort for future bids. ABL has also managed to achieve financial closure for the Cuttack Angul project, however owing to pending environment clearances ABL has not received an appointed date by NHAI. Hence, the execution on the project will start after six to nine months. We maintain our Buy recommendation on the stock with a SOTP target price of Rs 304,” says Angel Broking research report.

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