ICICI Direct's research report on Ashoka Buildcon
Ashoka Buildcon’s (ABL) performance was a mixed bag in Q1FY21. Revenues de-grew ~35% YoY to Rs 572.4 crore on account of weaker-than-expected execution during the quarter owing to Covid-19 led challenges such amid lockdown and labour shortage. Reported EBITDA margin was up 180 bps YoY to 14.3%, mainly on account of release of contingencies on account of project completion. RPAT grew 11.9% YoY to Rs 68.1 crore on account of higher other income (driven by insurance claim and restructuring of equipment loans) and higher reported EBITDA.
OutlookWe are impressed by ABL’s continued improvement in leverage at standalone levels. However, the SBI-Macquarie stake exit remains the key overhang on the company. We believe asset monetisation will be key for rerating of EPC business multiples. We conservatively build in construction revenue growth at 4% CAGR to Rs 4,248 crore in FY20-22E. We maintain HOLD re on the stock with an SoTP-based target price of Rs 70.
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