Buy Ahluwalia Contracts ; target of Rs 312: SPA research

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SPA Research report on Ahluwalia Contracts 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 20.0% in Q3FY16, operating margins improved by 294 bps to 12.4%, owing to better marginsorders booked over the past 18 months & reducing share of low margin legacy orders. Order inflows have revived as ACIL booked orders of INR 13.3 bn (FY15 INR 13.8 bn) in 9MFY16. This coupled with book to bill of 3.4x (Order Backlog -INR 38.3 bn) provides strong growth visibility. We continue to retain our "BUY" rating on the stock with a target of INR 312.Outlook & ValuationsACIL is well placed to benefit from increasing opportunities in construction space owing to its superior execution capabilities. Robust order backlog of INR 38.3 bn coupled with upcoming opportunities of +INR 15 trn provides the company with a great platform to achieve healthy growth. Declining share of fixed pricecontracts 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.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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