SPA has recommended hold rating on Ahluwalia Contracts India with a target price of Rs 312 in its research report dated November 24, 2015.
SPA's reserach report on Ahluwalia Contracts India
ACIL's quarterly numbers were largely in-line with our estimates driven by improved execution in some of its key projects. While revenues improved by 17.3% in Q2FY16, operating margins improved by 56 bps to 12.5%, owing to better margins orders booked over the past 18 months. Order inflows have revived as ACIL booked orders of INR 12.2 bn (FY15 INR 13.8 bn) in H1FY16. This coupled with book to bill of 3.6x (Order Backlog - INR 40.0 bn) provides strong growth visibility. We continue to retain our "BUY" rating on the stock with a target of INR 312.
ACIL is well placed to benefit from increasing opportunities in construction space owing to its superior execution capabilities. Robust order backlog of INR 41.2 bn coupled with upcoming opportunities of +INR 15 trn provides the company with a great platform to achieve healthy growth. Declining share of fixed price contracts along with increasing share of government orders and limited competition for composite EPC contracts will ensure improved margins. Moreover easing working capital cycle and minimal capex would result in net debt free balance sheet in FY17. We continue to retain our "BUY" rating on the stock with a target of INR 312.
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