Reduce Ashoka Buildcon: target of Rs 215: ICICI Securities

ICICI Securities recommended reduce rating on Ashoka Buildcon with a target price of Rs 215 in its research report dated August 19, 2024.

Broker Research

August 22, 2024 / 16:48 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Securities's research report on Ashoka Buildcon

Ashoka Buildcon’s (Ashoka) pivot to diversifying its orderbook is not yielding the warranted results. In Q1FY25, operating margin declined 180bps YoY. As a result, despite revenue growth of >20% YoY, profit fell 44% YoY. In Q1, it received order inflow of INR 34bn, leading to rise in orderbook by 6% QoQ or book-to-bill ratio of 1.7x. Margin has been impacted in the last 2-3 years due to hike in input prices, execution of aggressively bid projects and diversification into new segments. Also, working capital has deteriorated, resulting in increase in working capital loans. Moreover, it has been unable to exit the existing PE investors. It has entered into an agreement to sell assets but approvals are awaited.

Outlook

We expect the bidding to pick up in FY25E post general elections in Apr-Jun’24. Owing to low order book, increased debt and deteriorating working capital, we downgrade to REDUCE recommendation. Our SoTP-based target price is INR 215 per share (vs INR 204 earlier), valuing its EPC business at 8x FY26E PE; BOT at 1.4x NPV of FCFE; HAM portfolio at 1.3x equity investment; and obligation to PE of INR 14bn.Downgrade to REDUCE with TP of INR 215.

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