Systematix's reserach report on Ahluwalia Contracts IndiaAhluwalia Contracts India Ltd (ACIL), a leading Indian EPC Company, is expected to benefit immensely from the robust rollout of civil contracts for construction of building and institutions from large government agencies like NBCC, DDA, CPWD,AIIMS etc. ACIL’s current order book of Rs41bn comprises of 65% government orders, won amid limited competition for composite contracts and with a price escalation clause (compared to the fixed price contracts earlier). This composition is expected to drive margin expansion for ACIL, from 10.8% in FY15 to 11.9%/13.2% for FY16e/17e. ACIL has reduced its exposure to private sector orders, which face severe payment challenges, and they currently stand at 35% of the order book versus 68% in FY14. Improved quality of order book provides visibility for 22%/29% Revenue/PAT CAGR over FY15-18e. We believe the lower working capital in government orders, minimal capex requirement and deleveraged balance sheet will boost RoE/RoCE to 24.6%/31.1% in FY17e. We initiate coverage on ACIL with a Buy rating and target price of Rs310 (18x FY17e).For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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