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Ashoka Buildcon 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Ashoka Buildcon (ABL) posted 3QFY2013 results below our estimates, primarily due to a slowdown in execution in the E&C segment, one time equity raising expense and higher tax rate. Order book as of 3QFY2013 stood at Rs.4,072cr (2.9x trailing E&C revenues), providing revenue visibility. We maintain our Buy rating on the stock.

Decent execution, profitability disappoints: On the top-line front, ABL reported consolidated revenues of Rs.431cr in 3QFY2013, an increase of 22.1% yoy against our estimate of Rs.522cr. During the quarter, the E&C segment’s revenue grew by 21.1% yoy to Rs.364cr (including other income) and was lower than our estimate of Rs.405cr. On the EBITDAM front, ABL’s margin came in at 18.9%, 400bp lower than our estimate of 23%, owing to one-time equity raising expense of Rs.11.8cr during the quarter and lower-than-expected revenue growth. At the earnings front, ABL’s PAT declined by 35.3% yoy to Rs.13cr against our estimate of Rs.54cr, owing to lower-than-expected performance at operating level and higher tax rate (69.4%) during the quarter.

Outlook and valuation: ABL has a robust order book of Rs.4,072cr (2.9x trailing E&C revenues), which lends revenue visibility. Although a slowdown in order awarding by NHAI in road sector has been witnessed in 9MFY2013, ABL expects ordering activity to improve going ahead. ABL‘s subsidiary Ashoka Concessions Ltd has received its first tranche of Rs.240cr from SBI-Macquarie in January 2013. ABL expects to get environment clearance by March end, post which it would commence construction activity for Cuttack Angul project. We have valued ABL on an SOTP basis to arrive at a target price of Rs.268, which implies an upside of 28% from the current levels.