Nov 23, 2012, 11.21 AM | Source: Moneycontrol.com
Emkay Global Financial Services is bullish on Ashoka Buildcon and has recommended buy rating on the stock with a target price of Rs 340 in its November 21, 2012 research report.
, Emkay Global Financial Services |
“Ashoka Buildcon, public works department, PWD(Maharashtra) has withdrawn the toll collection rights from ABL for Ahmednagar Karmala road project. Improvements to the Ahmednagar- Karmala Road State High Way No. 141 Km 0 to 80 kms, Ahmednagar District Border under BOT Scheme (with toll rights) prematurely, which were to expire on November 04, 2015. Ahmednagar Karmala project was envisaged in 1991 with reference interest rate linked to RBI published rate. Based of a index of lending rates (published by leading banks) which have been in downward trend, PWD has recalculated the concession termination date as Nov 4, 2012. Toll collection effective Saturday has already been discontinued. The notification states that the lending interest rates have been changed by the RBI and consequently as per contract provisions, the concession period in view of new lending rates reworked, has ended before Nov 14, 2012.”
“Project contributes ~4.5% or Rs 16/share in our overall fair value of Rs 350/share. It commands ~8% in current market price. The project has an expected toll collection of Rs 275mn in FY13E which is 8.6% of the overall toll collection for Ashoka Buildcon, APAT from this project for FY14E stood at Rs 200mn which is ~13% of FY14E consolidated APAT. Considering it was a debt free mature project in its portfolio the profit contribution to the overall consolidated PAT is much higher. PWD (Maharashtra) is in the process of expanding the existing 2 laned state highways network at 10 or 11 stretches to 4 laning. PWD(Mah) already awarded a part of Ahmednagar Karmala Tembhurni stretch to Supreme infrastructure in Dec-10 for expanding the stretch to 4 laning. Management indicated that there are two more projects in its portfolio which are based on similar concession agreement i.e. Pune Shirur and Sherinallah put together commands another Rs 10/share or ~3% of value in our SOTP. Total Value at risk owing to such a decision is 7.5% of overall SoTP owing to such a move. We maintain our Buy rating based on cheap valuation with a TP of Rs 340,” says Emkay Global Financial Services research report.
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