Buy Ashoka Buildcon - Angel

For 3QFY2012, on a consolidated basis, Ashoka Buildcon (ABL) reported a healthy set of numbers on all fronts, in-line with our estimates. Order book as of 3QFY2012 stood at Rs.4,312cr (4.2x FY2011 E&C revenue) with the company bagging a BOT project (Rs.1,100cr) and power T&D order (Rs.400cr) during the quarter. We maintain our Buy rating on the stock.

Robust performance as expected: ABL's top line witnessed robust growth of 49.3% to Rs.352.9cr, in-line with our estimate of Rs.360.6cr. The E&C segment witnessed strong yoy growth of 52.8% to Rs.300.4cr, higher than our expectation of Rs.268.4cr, while the BOT segment reported 30.1% yoy growth to Rs.66.3cr, lower than our estimate of Rs.92.2cr. On the EBITDAM front, ABL's margins came at 19.6%, lower than our estimate of 21.3%, owing to lower margins in the BOT segment, led by major and regular maintenance work in two projects. Interest cost came in at Rs.27.3cr, a jump of 70.6% yoy/10.9% qoq. Despite lower EBITDAM, ABL posted decent performance at the earnings level, owing to robust top-line growth and reported PAT growth of 17.3% to Rs.19.5cr, in-line with our estimate of Rs.21.0cr.

Outlook and valuation: NHAI has done a commendable job by handing out ~4,500km so far in the current fiscal and is looking on track to achieve 80% of its target of awarding, ~7,300km in FY2012. Further, in the long run, the road segment continues to offer a number of opportunities for road-focused players such as ABL. We have valued ABL on an SOTP basis - by assigning 5.0x EV/EBITDA to its standalone business (Rs.104/share) and valued its BOT projects on NPV basis (Rs.141/share) to arrive at a target price of Rs.245, which implies an upside of 26.4% from current levels.

Source : Equity Bulls

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