Buy Ahluwalia Contracts; target of Rs 265: HDFC Securities

HDFC Securities' research report on Ahluwalia Contracts

Ahluwalia is well placed to counter near term COVID related execution challenges owing to robust order book and strong BS. Execution efficiency now stands at ~25% and will normalise only by 4QFY20 ramping up gradually (May-15%, June-25%, July-35-40%, Aug-50%. We continue to remain patient as execution has started across all projects and will pick up full steam only by Sep-20, with overhang of stuck projects & write-offs now largely behind. While Parivahan/Gardanibagh/Mohammadpur projects are in preparatory stage with all approvals now in place and work having started, Rs 5.5bn Charbagh Station redevelopment has been foreclosed due to environment hurdle. Rs ~1.5bn Delhi Govt order has also been cancelled. The Robust balance sheet, net cash status and better than peers RoE/RoCE are other comforting factors, even as EBIDTA margins have trended downwards on one offs.

Outlook

We maintain BUY on AHLU with unchanged TP of Rs 265 (10x FY22E EPS) despite 20% 3QFY20 miss on APAT. We downgrade our FY21E EPS by 68% to factor in higher than earlier envisaged COVID impact on execution, esp. in urban centres like MMR/NCR. We retain FY22E estimate.

Ahluwalia Contracts 03072020-hdfc

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