Markets

Broker's call: Ahluwalia Contracts

| Updated on January 13, 2020 Published on January 14, 2020

Anand Rathi

Ahluwalia Contracts (Buy)

CMP: ₹296.5

Target: ₹361

Key takeaways: a) For management, cash flows rank above revenue growth. It does not intend to deliver revenue growth at the risk of levering its balance sheet. It, however, sees a about 15 per cent long-term revenue CAGR as possible (non-linearity not ruled out), with no significant rise in leverage.

b) Its order book jumps to about ₹8,550 crore with strong FY20 inflows (year-to-date at about ₹2,000 crore) and recent L1 status on a about ₹1,270 crore hospital project in Jammu. With even the raised inflow guidance ( about ₹3,000 crore) already in sight, it now plans to sharpen its focus on execution. Consequently, all but one order (of about ₹540 crore) from the end-Q2 OB ( about ₹6,230 crore) have already been grounded.

Valuation: Adjusting for the 40-day construction ban in the NCR, we push execution forward only slightly for some of the projects affected. Consequently, our FY20e and FY21e revenues are down about 2 per cent and 3 per cent, respectively. Also, we introduce our FY22e and roll forward our valuation.

Risk: Slower-than-expected execution.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on January 14, 2020
This article is closed for comments.
Please Email the Editor