HDFC Securities is bullish on Ahluwalia Contracts has recommended buy rating on the stock with a target price of Rs 486 in its research report dated June 01, 2018.
HDFC Securities' research report on Ahluwalia Contracts
AHLU 4QFY18 net revenue came in at Rs 4.5bn (-5.3%YoY, +23.7%QoQ) which was only marginally below our estimates. Company delivered strong 13.3% EBITDA margins in FY18 (vs. 12.2% YoY). This has been achieved by mix of better cost control and improvement in labour market supply. AHLU is continuously striving to become leaner and is working on increasing productivity and efficiency. We remain hopeful of a further 50-100bps margin expansion over the next 2 years. Balance sheet is robust with a negligible gross debt of Rs 290mn which translates into a net D/E of -0.2x. With stable execution growth, healthy margins, negligible finance costs and low capex intensity we expect healthy FCFE generation over FY19-20E. AHLU has declared a dividend for the 1st time in 6 years and this could be a visible trend in the future.
We maintain BUY with a SOTP of Rs 486/sh (EPC segment at 486/sh (EPC segment at 10x Mar-20E EV/EBITDA, Kota BOT – 1x P/BV).
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