Buy Ashoka Buildcon; target of Rs 160: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Ashoka Buildcon

Ashoka Buildcon’s engineering procurement construction (EPC) execution has seen a muted start in FY19 (revenue decline of 3% YoY in 1QFY19), given the early onset of monsoons and lower availability of projects for execution. Ashoka Buildcon (ABL); however, is maintaining its 30% revenue growth target for FY19, given the progress it has witnessed on the new Hybrid Annuity Mode (HAM) projects (EPC order book of INR42b) on the financial closure front, and on momentum pick-up in the existing EPC order book. EPC execution is expected to pick up momentum from 2HFY19 as the recently won HAM projects should receive an appointed date by end-1HFY19, and heavy monsoon in 2QFY19 has restricted execution of the existing order book.

We have valued ABL’s EPC business on a P/E basis, assigning 10x P/E multiple on FY20E basis, given a) a strong and diversified order book of INR108b, providing 4.2x its FY18 revenue visibility, b) healthy balance sheet with standalone net debt: equity ratio of 0.1x:1, providing enough room to provide equity support if required to bid for the BoT projects, c) self-sufficient BoT portfolio of ACL, limiting capital infusion requirement, and d) robust EPC revenue CAGR of 36% over FY18-20E; earnings CAGR of 16%, given a higher tax rate (33% v/s 18% in FY18). We value the company on an SOTP basis, with a target price of INR160.

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