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Last Updated : May 28, 2018 03:38 PM IST | Source: Moneycontrol.com

Buy Ashoka Buildcon, target Rs 290: Akash Jain

"We expect a target of Rs 290 by FY19 end and is one of our top picks in the infrastructure space owing to its strong execution capabilities and recent order wins in the EPC segment," says Akash Jain, Vice President - Equity Research at Ajcon Global.

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Akash Jain

Ashoka Buildcon is one of our top picks in the infrastructure space owing to its strong execution capabilities (witnessed strong execution in EPC model) and recent order wins in the EPC segment.

The company is one of the major beneficiaries of Bharatmala project of Government of India. Around 40,000 kms of road construction projects to be awarded in 4 years under Bharatmala, which comes to around 10,000 kms per year. Awarding of projects has shifted from build operate and transfer (BOT) to engineering, procurement and construction (EPC) and hybrid annuity model (HAM). Toll operate and transfer model (TOT) is another opportunity for the company.


We expect a target of Rs 290 by FY19 end. In Q3FY18, the company witnessed strong EPC revenue growth of 25 percent and adjusted toll revenue growth of 18 percent. The growth in toll collection was led by low base effect, GST implementation, pick up in mining activity, Haldia port witnessing higher business activity. There was no tariff hike on toll in Q3FY18.

In Q3FY18, Ashoka Buildcon’s revenue from operations witnessed YoY growth of 25.8 percent to Rs 658.92 crore as against Rs 524 crore in Q3FY17, beating the consensus estimate of Rs 619.5 crore. The company’s EBITDA margin has increased by 24bps YoY to 12.1 percent as against 11.8 percent. The company reported EBITDA at Rs 79.56 crore, in-line with consensus estimate of Rs 79.8 crore. The company’s PAT increased by 21.5 percent YoY to Rs 51.99 crore as against Rs 42.77 crore, beating the consensus estimate of Rs 48.13 crore.

Out of the total order backlog of around Rs 7,000 crore, BOT accounts for 33 percent, EPC accounts for 43 percent and Power T&D accounts for 25 percent.

Recently, Ashoka Buildcon’s wholly owned subsidiary Ashoka Infrastructure Limited, which had executed Pune Shirur Road Project in Maharastra, has received an Arbitral Award of Rs 383.80 crore, against various claims filed by the SPV.

Pune Shirur Road Project was awarded by Government of Maharashtra for Four Laning and Strengthening of Pune Ahmednagar Road SH 60 in km 10/600 to 64/00. The toll collection at the said project had been stopped since August 8, 2014.

Earlier this month, another wholly owned subsidiary Ashoka Infraways Limited, which executed Dewas Bypass Road Project in Madhya Pradesh was awarded 1384 additional toll days and an Arbitral Award of Rs 37.71 crore along with 18 percent interest towards the compensation for loss of toll on account of closure of two Toll Plazas.

Recently, the company has emerged as the lowest bidder for electrification works projects in Uttar Pradesh under Dakshinachal Vidyut Vitaran Nigam Ltd (DVVNL) under Saubhagya Yojana (Pradhan Mantri Sahaj Bijli Har Ghar Yojana). For the electrification work in Ethan and Kashiram Nagar (Kasgani) District – Rs 320.92 crore. For the electrification work in Kannoj, Farrukhabad and Etawa District – Rs 438.92 crore.

The company quoted an aggregate cost of Rs 759.84 crore for above 2 projects. Ashoka Buildcon's subsidiary Ashoka Concessions has emerged as the lowest bidder for the National Highways Authority of India (NHAI) HAM road project. The project entails six lane of Khairatunda to Barwa Adda section of NH-2 in Jharkhand on Hybrid Annuity Mode.

The company quoted a bid project cost of Rs 860 crores. Ashoka Buildcon is the preferred Operation & Maintenance (O&M) Partner and also has won the EPC orders for the projects in which Macquarie Asia Infrastructure Fund – II (MAIF-II) has emerged highest bidder for Toll operate Transfer (TOT) mode for projects comprising of nine National Highway Stretches (Bid value worth Rs 9,681 crore, concession period – 30 years) worth Rs 1,025 crore which is to be executed over two years. There is no equity to be committed by Ashoka Buildcon in these TOT projects.

Disclaimer: The author is Vice President - Equity Research, Ajcon Global. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on May 28, 2018 03:38 pm