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

Centrum's research report on Ahluwalia Contracts (India)

Ahluwalia Contracts (India) Ltd (ACIL), for Q1FY19, reported muted numbers, mainly on the back of one-offs. Revenue declined by ~20% YoY to 404 crore, on the back of slow execution in few projects (impact of 35 crore – Delhi CPWD project – tree cutting issue, and NBCC Kolkata – design issue). EBITDA declined by 2% to 53 crore. Lower raw material cost (down 1,099bps to 43.5% of Q1FY19 sales) was partly offset by higher employee cost (up 258bps to 8.9%) and other expenses (up 603 bps to 34.6%) leading to EBITDA margin expansion of 238bps to 13%. Net profit declined by ~5% to 28 crore.

Outlook

We thus change our rating to BUY, maintaining our target price of 418 (16x FY20E EPS).