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Buy This Effectively Debt-Free Stock For 20% Return, FY23 OI Guidance At Rs. 25-30bn: HDFC Securities
Reputed brokerage firm HDFC Securities recommends investors to buy the stocks of Ahluwalia Contracts. The company's incurred Capex in Q1 was Rs. 122mn, and the board has guided for Rs. 300mn Capex in FY23, mainly for machinery replacement.
Stock To Buy: Target Price & Financial Result
The Current Market Price (CMP) of Ahluwalia Contracts is Rs. 451. HDFC Securities has estimated a Target Price for the stock at Rs. 542. This stock has the potential to give a 20.17% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 2,986 crore.
| Stock Outlook | |
|---|---|
| Current Market Price (CMP) | Rs. 451 |
| Target Price | Rs. 542 |
| Potential 1 year return | 20.17% |
| 52 week high share price | Rs. 563.60 |
| 52 week low share price | Rs. 345.50 |
Ahluwalia Contracts reported weak revenue/EBITDA/APAT of 6/0.6/0.4bn, missing at all levels. AHLU continues to expect the top line to grow by 15% YoY in FY23, with EBITDA margin (incl. other income) in the range of 12%-13%.
Margin is expected to improve from H2FY23 with softening of commodity prices, narrower gap of indices with input prices (currently at 40% and expected to narrow down to 20%), and slightly lesser competitive intensity. FYTD23 OB stands at Rs. 82bn (~3x FY22 revenue), excluding L1 in two projects of Rs. 7.9bn (Tata Memorial Hospital and MMRDA depot additional work).
HDFC Securities: Advantages Of The Stock
According to HDFC Securities, "Ahluwalia Contracts is effectively debt-free, with a marginal gross debt of Rs. 119mn and total cash and cash equivalents of over Rs. 3.6bn, as of June, 2022 end. The average cost of borrowing inched up 25bps to 7.50% vs. 7.25% for Q4FY22."
"The order book (OB) is well diversified, with government/private orders comprising 81/19% of OB and East/North/West/South/international region contributing 37/35/18/5/5% to it. Segment-wise, institutional/hospital/ residential/commercial/infra/hotel contributed 34/33/14/9/8/2% to the OB. 15% of the OB of Rs. 82bn is fixed price contracts and is exposed to price volatility. The total order inflow in FYTD23 has been Rs. 28.6bn vs. FY23 OI guidance at Rs. 25-30bn. The company has a bid pipeline amounting to Rs. 50bn, of which 20% are from private clients. We maintain Buy on the stock, with an unchanged target price of Rs. 542," the brokerage firm added.
Company portfolio: Ahluwalia Contracts
With specialized experience in the Construction Industry for more than 40 years, Ahluwalia Contracts has carved a niche in the industry as one of the leading Civil Contractors of the country. Their turnover of over Rs. 1982.19 Crores for FY2020-21 was indicative of their high ranking in the industry. They have had the distinction of being associated with most of the leading Architects and Consultants of the country. They are amongst a select group of 3-4 Contractors who are pre-qualified to bid for most of the mega building projects in the Country.
Disclaimer
The above stock was picked from the brokerage report of HDFC Securities. 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.
