Introduction:

Ashoka Buildcon Ltd. is one of the leading highway developers in India. The Company is an integrated EPC and BOT player. Besides construction of highways and bridges the company is also engaged in Power Transmission and Distribution on EPC basis.


Price performance:


The stock price of AshokaBuildcon has tripled in last 5 years. It has recently corrected due to concerns surrounding HAM. The current price of Rs 125 is a good opportunity to enter.

 

Investment Rationale:

1.     Robust order book



 


Note: Order book is in Rs million

The Company has a healthy order book of Rs 9764 Cr, which is almost 4x times FY18 revenues, so this gives us a visibility of next 2-3 years

2.     Diversified order book


Source: Company, Motilal Oswal

 

Of 98bn order book, 82% is in roads and 18% is in Power T&D. Being present in Power T&D gives comfort on the order book growth prospects, which can be a positive if slowdown in road orders occur. The company is targeting fresh order intake of Rs40-50bn in H2FY19

3.     D/E on a decreasing trend

 


4.   Impressive Q2FY19 performance: Revenues of the company grew 102% and profit of the company grew 124% yoy in Q2FY19. This performance is expected to continue on the back of healthy order book

 

5.   Financial closure for HAM projects: ASBL has received financial closure for all five HAM projects. ASBL expects to receive appointment of three projects by end-3QFY19, and more two projects by 4QFY19-end.

 


Valuation:

  1. The company is available <10x FY18 P/E which is cheap. 
  2. Expect standalone Revenues and Profits to grow at 25% and 15% respectively over FY18-20E. 
  3. Valuing it at 12x FY20 EPS, the target price comes out to be Rs 200, almost a 60% upside from the current market price of Rs 125 (7th Jan 2019)!!

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ASHOKA ASHOKA BUILDCON LTD.

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