Buy Ahluwalia Contracts; target of Rs 450: Dolat Capital

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Dolat Capital's research report on Ahluwalia Contracts

ACIL posted 5.3% YoY de-growth in Q4FY18 revenue to `4.5bn (8.7% below estimates) due to muted execution. EBITDA margin expanded by 286bps YoY to 11.9% (110bps below estimates), primarily due to lower construction cost which is down by 360bps YoY to 78.2% of revenue. Adj. PAT grew by 54.0% YoY to `310mn (15.4% below estimates) due to strong operating performance coupled with lower interest cost and lower tax rate (down 333bps). ACIL has declared a dividend of 15% (`0.3 per share) after a period of six years.

Outlook

ACIL to be remain net cash company and have one of the highest average RoCE/ RoE of 34.4%/ 23%, respectively, over FY18-20E among peers. We remain positively biased on business model backed by quality management and healthy return ratios. It looks attractive at 15.3x/ 12.4x FY19E/ FY20E EPS and hence we reiterate ‘BUY’ with an upward revised TP of `450 (15x FY20E EPS).

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