Maintain BUY on Ahluwalia Contracts - Q2FY21 - Significant beat on execution - HDFC Securities

Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities

Ahluwalia (AHLU) surprised positively on execution front (1.5x our estimate), despite the shortage of labour and restriction on operation in projects within city limits, as it focused on off-site execution. Labour availability has improved from ~60% to ~80% QoQ. AHLU won new orders worth Rs 12.4bn FYTD21, taking the order book to Rs 82bn (Rs 75bn as on 2QFY21). Gross debt increased marginally to Rs 440mn from Rs 430mnQoQ. With cash balance at Rs 2.2bn, AHLU remains a net cash company. We have tweaked our FY21/FY22 estimates and maintain BUY on AHLU with a slightly increased target price of Rs 382 (13x Sep-22E EPS), given its robust order book, strong balance sheet, and better RoE/RoCE than peers.

Strong execution leads to significant beat: 2QFY21 revenue reported at Rs 4,345mn (+4/+74% YoY/QoQ, 52% beat). EBITDA stood at Rs 342mn (- 11/+85% YoY/QoQ, 48% beat). EBITDA margin: 7.9% (-130bps/45bps YoY/QoQ). RPAT came in at Rs 180mn (+43%/92% YoY/QoQ, 63% beat). Adjusting for Rs 50mn of provisions and Rs 30mn write-back of liabilities, APAT came in at Rs 200mn (down 58%/114% YoY/QoQ, 81% beat). While labour availability has improved to ~80% from ~60% as on end-2QFY21, execution efficiency lags due to continuing COVID-related and other headwinds like supply chain disruptions, disruption of Punjab trains, NCR pollution-related disruptions (DG set and fly-ash ban) and social distancing norms. These issues will persist in 3QFY21, and AHLU is expected to be back on track in 4QFY21. FY22 will see a return to 15-20% revenue CAGR at normalised EBITDA margins of 12.5-13%. Collections are seeing a gradual improvement in MoM. Gardanibagh payments have now begun as well.

Order book remains robust at Rs ~82bn: AHLU has won Rs 12.4bn of new orders FYTD21. It is bidding conservatively as OB remains strong, and has bid for only 2 IIM projects of the 4-5 tenders due to aggressive bidding. 52% of the order book is from the hospital segment, and 24% from institutional. It is looking at Rs ~10-15bn additional inflows in 2HFY21. Of the Rs 250-300mn Capex to be incurred in FY21E, Rs 87mn has been incurred in 1HFY21. The focus remains on Northern and Eastern India with likely ramp-up in Western India over the next few quarters.

Shares of AHLUWALIA CONTRACTS (INDIA) LTD. was last trading in BSE at Rs.236.8 as compared to the previous close of Rs. 234.1. The total number of shares traded during the day was 286 in over 56 trades.

The stock hit an intraday high of Rs. 236.8 and intraday low of 233.85. The net turnover during the day was Rs. 67399.

Source : Equity Bulls

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