This Small Cap Infra Stock Gets Buy Call For Robust 82% Gains, Gave Robust Q1 Performance

Stock Outlook & Returns

The current market price of the stock is 77.15 apiece. On Friday, it gained around 1.38%. Currently trading Rs 8.15 above the 52-week low and Rs 47.85 below the 52-week high, respectively. The 52 week low of the stock is Rs 69 apiece, recorded on 25 May 2022. Whereas, its 52 week high is Rs 125 apiece, recorded on 13 October 2021.

Over the week, the shares of the company gained roughly 3.91%. Whereas, in the past 1 month, the stocks moved up roughly 2.05%. In the past 1 year, the stocks have fallen 23.39%. In the past 3 and 5 years, the stocks have fallen 35.6% and 34.4%, respectively. Ashoka Buildcon Limited is a small cap infrastructure sector stock engaged in construction work. It has a market cap of Rs 2,105.42 crore.

Financial highlights

Revenue: Rs 14.8bn (+46%/-5% YoY/QoQ, a 26% beat). EBITDA: Rs 1.5bn (+21% YoY, -7% QoQ, a 19% beat). EBITDA margin: 9.8 % (-208/-25bps YoY/QoQ, vs. our estimate of 10.4%). Depreciation: Rs 168mn (+5%/-18% YoY/QoQ). Interest cost: Rs 198mn (+21%/-16% YoY/QoQ). Other income of Rs 312mn (-34%/-51% YoY/QoQ). APAT: Rs 1bn (+3% YoY, -44 QoQ, 15% beat). During Q1, Ashoka Buildcon recorded gross toll collection at Rs 2.9bn (+38.3%/+7% YoY/QoQ). For FY23, Ashoka Buildcon has revised its revenue growth guidance downward to 15-20% YoY vs. 20-25% earlier with EBITDA margin guidance now at 9-10% vs. 11-12% earlier.

Robust order inflow, attempt at diversification

The OB as on Jun'22 stood at Rs 147.8bn (~3.2x FY22 revenue). The OB is well-diversified with roads/T&D/railways/buildings/others contributing 60.4/15.9/7.7/15.6/.3% of the order backlog. Including three orders worth INR 5.6bn won after Jun'22, the OB stood at Rs 153.6bn (~3.3x FY22 revenue). Ashoka Buildcon has received orders worth ~Rs 25bn FYTD23 vs. earlier FY23 order inflow guidance of more than INR 100bn. Ashoka Buildcon has guided for OI of Rs 60-80bn in balance eight months of FY23. While Ashoka Buildcon has its clear focus on national and state highways, it is diversifying its portfolio into power T&D, railways, and buildings as well.

Asset-light balance sheet by FY23 end

Chennai ORR asset sale to NIIF (for Rs 6.9bn) is expected to complete by early Q3FY23. Ashoka Buildcon at parent level will receive Rs 4.5bn from this transaction. The Rs 13.4bn sale of 5 BOT asset is expected to conclude by Sep-22. The Jaora BOT asset sale is expected in FY23. The proceeds from these transactions will be mainly used for giving exit to SBI Macquarie from ACL and funding working capital. The standalone gross/net debt doubled to Rs 8.6/6.4bn as at Jun'22 vs. Rs 4.9/3.2bn as at Mar'22. The balance equity requirement for HAM assets as on Jun'22 stands at Rs 2.5bn, of which Rs 1.6bn would be funded in remaining year FY23 and the rest in FY24.

Robust performance, Buy for target price of Rs 140

Ashoka Buildcon reported revenue/EBITDA/APAT of INR 14.8/1.5/1bn, beating our estimates on all fronts. EBITDA margin is expected to remain in 9- 10% range in FY23, impacted by the project mix. Some support to the margins is expected from softening raw material prices and high proportion of variable priced orders (~90% of the OB). The Chennai ORR sale deal with NIIF is expected to fetch Rs 4.5bn for Ashoka Buildcon and it is targeted to complete by early Q3FY23. The five ACL BOT sales worth Rs 13.4bn are expected to conclude by Sep-22 and the Jaora BOT asset sale is expected in FY23. Ashoka Buildcon has received orders worth ~Rs 25bn FYTD23 vs. earlier FY23 order inflow guidance of more than Rs 100bn, taking the FYTD23 OB to Rs 153.6bn (~3.3x FY22 revenue). The company has revised its FY23 revenue growth guidance to 15-20% YoY. We maintain BUY, with a Target Price of Rs 140/sh (9x Mar-24E EPS).

About - Ashoka Buildcon Limited

Ashoka Buildcon Limited is one of the leading highway developers in India. The company is an integrated EPC, BOT & HAM player. It has a portfolio of 41 PPP projects, which is the largest in number by any private player in India. Besides the construction of highways and bridges, the company is also engaged in the Construction of Buildings (EPC), Power, Railways & City Gas Distribution. Ashoka has worked in over 22 states across the country and has completed prestigious projects for Central as well as State Governments. Overseas, it has completed projects in the Republic of Maldives. The company is one of the first Indian infrastructure companies to be certified for Integrated Management Systems, encompassing ISO certification for Quality, Occupational Health & Safety and Environment. Ashoka Buildcon is strengthened with a strong talent pool of technical and support staff. Its strong financials give it the ability to execute mega-scale projects.