Hold Ahluwalia Contracts; target of Rs 135: Sushil Finance

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Hold Ahluwalia Contracts; target of Rs 135: Sushil Finance

Sushil Finance has recommended hold rating on Ahluwalia Contracts (India) (ACIL) with a target of Rs 135, in its March 14, 2011 research report.

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Sushil Finance has recommended hold rating on Ahluwalia Contracts (India) (ACIL) with a target of Rs 135, in its March 14, 2011 research report.

"Ahluwalia Contracts (India) (ACIL), During Q3FY11, ACIL's net sales registered a de-growth of 16.6% YoY to Rs 3795.8 million. This was on account of several reasons viz. 1) sluggish demand in residential and commercial projects, which disturbed the cash flow of real estate developers & thereby impacted their execution, 2) Delay in new orders outflow from Government 3) Substantial increase in uncertified work & delay in payments, forcing ACIL to slow down its execution. Its EBITDA de-grew by 33.8% YoY to Rs 335.6 million and EBITDA margins decreased by 229 bps YoY to 8.8%. This was mainly due to higher sub-contracting, staff cost. It expects the margins to recover in next two quarters. Its Interest cost increased by 19.7% YoY to Rs 47.5 million and depreciation cost increased by 15.9% YoY to Rs 87.1 million. Its PBT (including other income) decreased by 46.3% YoY to Rs 215.8 million. APAT stood at Rs 141.4 million registering a de-growth of 46.5% YoY."

"ACIL has bagged a DBOT project from Rajasthan State Road Transport Corporation (RSRTC), to build a bus terminal along with commercial complex, at Kota, Rajasthan. The project has faced delays and ACIL now expects to complete & deliver the bus terminal in next 6-7 months. ACIL's unexecuted order book stands at Rs 34 billion. Out of its order book, about 28% orders are from government & the rest from private sector. It has received order inflow of about Rs 16 billion, during 9MFY11. Further it has an order pipeline of Rs 15 billion. Of the unexecuted order book, about 1.7% of orders are from BOT projects, 12.3% from commercial projects, 3.5% from hospital projects, 9.3% from hotel projects, 11.1% from urban infrastructure projects, 39.1% from residential projects, 1.2% from retail projects & 4.1% from power, 10.8% from institutional projects and 6.5% from industrial projects."

"ACIL has a strong order book position giving a decent business visibility for the 4 to 6 quarters. On back of lower than expected earnings in Q3FY11, certain amount of project remaining uncertified and slowdown in real estate projects, we have reduced our revenue estimates for FY11 & FY12 to Rs 15.7 billion and Rs 18.0 billion. We have reduced our earnings estimates to Rs 12 (lower by Rs 5) and Rs 13.5 (lower by Rs 7.4) during FY11 and FY12. At the CMP of Rs 123, the stock is trading at 10.2x its FY11E & 9.1x its FY12E EPS of Rs 12.0 & Rs 13.5, respectively. We revise our rating to HOLD on the stock with a revised target price of Rs 135 (i.e. 10x its FY12E earnings)," says Sushil Finance research report.

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To read the full report click on the attachment