Indiabulls Ventures

Ashoka Buildcon (Buy)

CMP: ₹149.9

Target: ₹165

Ashoka Buildcon is one of the leading highway developers in India. The company is an integrated engineering procurement and construction (EPC) and build-operate-transfer (BOT) player. It has a portfolio of 36 public-private partnership (PPP) projects, which is the largest in number by any private player in India. Besides construction of highways and bridges the company is also engaged in power transmission and distribution on EPC basis.

Ashoka Buildcon reported stupendous set of 4QFY19 numbers whereby revenue grew by 86 per cent y-o-y to ₹1,307 crore as against ₹702 crore in 4QFY18 and EBITDA grew by 123 per cent y-o-y to ₹181 crore as against ₹81 crore in 4QFY18. PAT was flat on a yearly basis on account of higher finance cost and taxes.

The management guided for strong guidance for FY20 where they quoted ₹6,500–7,000 crore across segments and ₹4,000 crore expected from the roads, ₹1,500–2,000 crore expected from the railways and about ₹1,000 crore from power T&D segment. Management has stated that debt had increased due to equity infusion in HAM projects and has guided that debt would be hovering at the same level going forward.

Outlook & valuations: Ashoka Buildcon has constantly grown its order-book even in challenging times. ASHOKA has a track record of maintaining healthy profitability and sound returns ratio. We believe the company will be able to grow at a CAGR of 20 per cent on the bottom-line over a period of next two years, therefore would like to recommend a ‘buy’ on the stock.