2QFY22 results of Ashoka Buildcon Limited
According to the brokerage “Ashoka Buildcon (ASBL)’stopline grew 5% YoY to INR9.2b in 2QFY22 and was 8% below our estimate. It de-grew 9% on a QoQ basis. The EBITDA margin was down 341 bps YoY and came in at 11.5% in 2QFY22 (in line with our estimate). EBITDA/PAT fell 19%/9% YoY to INR1.1b/INR0.96b (v/s our estimate of INR1.2b/0.8b). Other income grew 19% YoY to reach INR590m in 2QFY22.”
Motilal Oswal has stated that the company’s “OB stood at ~INR119b, with an OB/revenue ratio of ~2.8x, providing comfort on revenue growth. The management’s major focus in the future would be on Roads/Railways, which has 70% share of the order book. The Building, Power T&D, and other segments account for a 30% share. The pending exit of the private equity investor in its asset portfolio would be a key monitorable. A strong order book – coupled with a healthy ordering outlook and continuous improvement in the balance sheet – augurs well for ASBL”
Key highlights from management commentary according to Motilal Oswal
- The management has revised the revenue growth guidance for FY22 to 20%, from 25% provided earlier, due to delays witnessed in commencing various projects.
- The total equity requirement for the 10 HAM projects is INR13.4b, of which INR9.4b has already been invested.
- For FY22/FY23, the incremental equity requirement is INR1.6b/INR1.4b.
- In 2QFY22, the BOT division recorded toll collections of INR2.4b (against INR2.2b in 2QFY21).
- The management has renegotiated the terms of the shareholder agreement with SBI Macquarie; the commitment to the investors has been revised from INR15.3b to INR11b, with a cap of INR12b.
Buy Ashoka Buildcon Limited with a target price of Rs 175
Motilal Oswal has said the company’s “current OB remains strong (~INR119b). The book-to-bill ratio stands strong (~2.8x), which provides comfort and revenue visibility for more than two years. Net debt-to-equity at the standalone level stood at 0.1x in FY21. ASBL is well placed to fund its equity commitment. We expect net debt-to-equity to remain at 0.1x/0.01x for FY22E/FY23E, making it one of the strongest Road players in the sector.”
In its research report, the brokerage has claimed that “A strong order book and continuous improvement in the Balance Sheet augurs well for ASBL. Our TP of INR175/share is based on the SoTP methodology. We value the: a) EPC business at 5x Mar’23E EPS, and b) BOT business on an NPV basis. We maintain our Buy rating.”
The stock has been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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