This highway developer's Q1 nos beat estimates; analysts bullish on the stk

The management, however, took comfort from the current Order Book of Rs 8,616.8 crore, which it believes, provides revenue visibility
Shares of Ashoka Buildcon jumped 9.6 per cent to Rs 66.35 per share, in the intra-day trade, on the BSE on Thursday after the company managed to report rise in net profit for the June quarter of FY21, even as construction activity remained suspended for better part of the quarter due to on-going Covid-19 pandemic. 

The highway developer's standalone net profit rose 6.7 per cent to Rs 69 crore in the recently concluded quarter, as against profit of Rs 65 crore clocked in the year-ago period. It's revenue from operations, however, slipped 32 per cent YoY and 52 per cent sequentially to Rs 620.7 crore.

EBITDA, on the other hand, dipped 9.4 per cent on a yearly basis to Rs 130.2 crore from Rs 143.7 crore reported in Q1FY20. On a quarterly basis, the earnings' parameter skid 50.6 per cent from Rs 263.5 crore. It's EBITDA margin, however, improved from 15.8 per cent to 21 per cent YoY.

On a consolidated basis, the company posted a net loss of Rs 37.7 crore, compared to a net profit of Rs 146.7 crore in Q4FY20 and net loss of Rs 23.2 crore in Q1FY20. Consolidated revenue was Rs 761.3 crore and EBITDA was Rs 278.4 crore.

The management, however, took comfort from the current Order Book of Rs 8,616.8 crore, which it believes, provides revenue visibility.

"In Q1FY21, Business Operation was impacted due to disruption caused by Covid-19... However, as lockdown restrictions were eased, the Company commenced construction activity and ramped-up gradually. Presently, the company is operating at nearly 85 per cent of execution run-rate and is witnessing a significant resumption of work almost at all project sites," it said in a statement. 

Availability of labour, which was a key concern after a mass exodus of migrant workers, the company said that labour resumption was faster than expected. "In July, the company was operating at 90-95 per cent of required workforce," it added. 

"Revenue from operations was expectedly down, but a 35 per cent YoY dip in revenues against the backdrop of 30-35 per cent labour available for the operational days in Apr-May’20 (nearly 50-60 per cent for Jun’20) is comforting. The performance implies that blended execution efficiency was ahead of labour availability," said analysts at Anand Rathi Shares and Stock Brokers in its post-result report.

The brokerage maintains 'Buy' call on the stock on the back of "proven execution capabilities and a well-set balance sheet". They have at target price of Rs 127, derived using 8x FY22e core EPC PE, and the DCF/invested-basis valuation for asset ownership.

Those at JM Financial suggest earnings were partly supported 80 bps expansion in adjusted EBITDA margins, lower interest expenses (down 22 per cent YoY) and tax expenses (down 28 per cent YoY). "Adjusted EBITDA margins for the June quarter came in at 13.3 per cent led by fall in construction costs / other expenses respectively. However, guidance for FY21 EBITDA margin guidance is maintained at 12.5-13 per cent while ABL targets 1-1.x of FY20 revenues in FY21," they noted in their recent report. They maintain 'Buy' call on the stock with a target price of Rs 100.

Infra push

Analysts are also betting on the government's push towards infra-development, which they feel, may augur well for the company going ahead. "Given the Covid-19 related lockdown and labour migration, we were expecting a weak quarter for the company but the recovery in execution has been much swifter. As a result, revenue and EBITDA were 51.8 per cent and 155.4 per cent ahead of our estimates, respectively," said analysts at Nirmal Bang Institutional Equities in a report dated August 13. They too have 'Buy' rating on the stock with a target price of Rs 87.

HDFC Securities, meanwhile, believes that financial closure of TS-III, TS-IV and Kandi (still at ~60% 3H land) project, which is expected by September end, could start contributing to the company's topline from as early as Oct-20. The brokerage has target price of Rs 141 on the stock, translating into nearly 133 per cent upside from current market price of Rs 60.

NHAI has set a target of awarding 4,500 kms of national highway for FY21, out of which 1,400 kms have already been awarded whereas the bidding for another 1,800 kms is underway and will be announced by September 2020. 

"ABL has bid for projects for 300 km and expects an inflow of Rs 3000 crore from the road sector in FY2021. Improvement in order inflow from RVNL and CORE is expected to help the railways segment and ABL targets an inflow of Rs 1,000 crore for railways. The company expects to achieve financial closure of recently awarded HAM projects by 1HFY21. With gradual ramp-up of execution and inflows, we expect sharp uptick in revenues from 2HFY21," said Kotak Institutional Equities in a recent report. 

 
Besides Kotak, analysts at Antique Broking and Spark Capital, too, have 'Buy' and 'Add' calls on the stock with a target price of Rs 83 and Rs 70, respectively. 

At 12:50 pm, the stock was quoting at Rs 66, up 9 per cent, on the BSE. IN comparison, the S&P BSE Sensex was at 38,321 level, down 0.13 per cent. A combined 6.84 million shares had changed hands on the stock till the time of writing of this report. 


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