Ahluwalia Contracts - 3QFY17 Result Update - Strong Performance on All Parameters - Reliance Securities

Ahluwalia Contracts (ACIL) has delivered a healthy performance in 3QFY17 on the backdrop of pick-up in execution post monsoon notwithstanding the impact of demonetization. Its top-line grew by ~12% YoY and 23% QoQ to Rs3.57bn (vs. our estimate of Rs3.5bn) mainly owing to pick-up in execution after seasonal overhang. Operating profit surged by ~18% YoY (+19% QoQ) to Rs463mn (vs. our estimate of Rs452mn). EBITDA margin rose by 65bps YoY to 13.0%, while net profit zoomed by strong ~23% YoY to Rs244mn. Looking ahead, we believe that ACIL is set to witness a healthy traction on the backdrop of healthy order book, sound return ratios, improving balance-sheet amid positive indications on macroeconomic front. Retaining our earlier earnings estimates for forward years, we reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs330.

Healthy Performance on Execution Ramp-up

Amidst challenging environment led by demonetization, ACIL's revenue and EBITDA grew by 12% YoY and 18% YoY, respectively. We believe that least exposure to private residential projects (23% of total order backlog) aided execution even during the phase of demonetization marked with cash crunch. We foresee ACIL's performance would remain healthy in ensuing quarters owing to healthy order book and quality order inflow.

Robust Order Book Bodes Well

ACIL's current orders backlog stands at Rs40.13bn, (3.0x TTM revenue), which suggests a promising revenue visibility. Notably, after securing projects worth Rs15.3bn in FY16, ACIL added projects worth ~Rs14.5bn in 9HFY17. The Company is presently bidding orders worth ~Rs12.0bn and is likely to bid few large-ticket projects in coming months. ACIL maintains its order inflow guidance of Rs16.0bn for FY17E and Rs20.0bn for FY18E. Notably, government projects account for 68% of ACIL's total order book.

Outlook and Valuation

ACIL continues to remain our preferred bet in construction space owing to: (1) healthy order book and disciplined order-mix; (2) strong balance-sheet (D/E at 0.2x); (3) best in class return ratios; (4) no equity commitment unlike several other construction companies; and (5) likely increase in commercial contribution from Kota Bus project. At CMP, the stock trades at 19.9x & 14.5x of FY17E & FY18E earnings, respectively. Retaining our earlier earnings estimates for forward years, we reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs330.

Shares of AHLUWALIA CONTRACTS (INDIA) LTD. was last trading in BSE at Rs.297 as compared to the previous close of Rs. 295.45. The total number of shares traded during the day was 4783 in over 169 trades.

The stock hit an intraday high of Rs. 298.6 and intraday low of 293. The net turnover during the day was Rs. 1413784.

Source : Equity Bulls

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