Accumulate Ahluwalia Contracts (India); target of Rs 418: Centrum Research

Centrum Research's research report on Ahluwalia Contracts (India)

Ahluwalia Contracts (India) Ltd (ACIL), for Q4FY18, reported mixed numbers. Revenue declined by 5% YoY to Rs447 crore, mainly due to slow execution and GST impact. EBITDA grew ~25% to Rs53 crore. Lower raw material cost and construction expenses led to EBITDA margin expansion of 286bps to 12%. Net profit grew 54% to Rs31 crore, on the back of lower interest cost. As of Mar’18, ACIL has reduced debt to Rs30 crore (vs Rs90 crore in Mar’17). ACIL has declared a dividend of Rs0.3/share, for the first time in the last 6 years.

Outlook

Given the government’s focus on buildings, healthy bid pipeline and opportunities in the higher ticket size orders (Rs500 crore+), we anticipate ACIL to be a beneficiary of the same. We maintain our Accumulate rating and value the company at 16x FY20E EPS giving a target price of Rs418.