Buy Ahluwalia Contracts; target of Rs 489: HDFC Securities

HDFC Securities' research report on Ahluwalia Contracts

AHLU 1QFY19 net revenue at Rs 4.0bn was 3.5% below our estimates (Rs 200mn miss in CPWD redevelopment project in Delhi – tree felling issue and Rs 150mn in West Bengal NBCC project – redesigning). EBITDA at Rs 0.5bn was 1.6% below estimates. EBIDTA margins expanded 238bps YoY to 13.0%. APAT at Rs 282mn was 14.0% below our estimate due to lower execution. AHLU has already met the earlier order inflow guidance of Rs 20bn in YTDFY19 (YTD book at ~Rs 47.0bn) and is not desperate to add more projects (~Rs 4.0bn incrementally in rest of 9MFY19E). Focus will be on improving margin profile. AHLU envisages further opportunities in the commercial realty segment. Balance sheet remains robust with gross debt of Rs 340mn and a net cash of ~Rs 0.6bn. AHLU may outperform its annual order inflow guidance.

Outlook

We maintain BUY with a SOTP of Rs 489/sh (EPC segment at 476sh (EPC segment at 10x Mar-20E EV/EBITDA, Kota BOT – 1x P/BV).