8 February 2021
3QFY21 Results Update | Sector: Infrastructure
Ashoka Buildcon
Buy
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
CMP: INR104
TP: INR145 (+38%)
Execution in line; healthy order book visibility augurs well
Labor availability and execution back to pre-COVID levels
ASBL IN
281
29.3 / 0.4
117 / 37
5/45/-33
120
Financials & Valuations (INR b)
Y/E Mar
2020 2021E 2022E
Sales
39.4
37.8
43.4
EBITDA
5.9
4.9
5.2
PAT
3.9
3.7
3.1
EBITDA (%)
14.9
13.1
12.0
EPS (INR)
13.8
13.2
11.2
EPS Gr. (%)
20.2
(4.6) (15.0)
BV/Sh. (INR)
92.6 104.4 114.5
Ratios
Net D/E
0.1
0.2
0.2
RoE (%)
16.1
13.4
10.2
Adverse revenue mix affects operating profit
RoCE (%)
14.0
12.4
9.9
3QFY21 revenue was flat YoY at INR9.8b, in line with our estimate. EBITDA
Payout (%)
0.0
10.0
10.0
came in at INR1.1b, down 15% YoY (12% below our expectation). EBITDA
Valuations
margin stood at 10.8% (-180bp YoY) due to an adverse mix of projects
P/E (x)
7.6
7.9
9.3
executed. PBT was flat YoY at INR1.1b, owing to lower depreciation and
P/BV (x)
1.1
1.0
0.9
EV/EBITDA (x)
5.6
7.3
6.6
interest cost and higher other income. Adjusted PAT stood at INR856m, flat
Div Yield (%)
-
1.3
1.1
YoY (19% above our estimate).
FCF Yield (%)
23.3
5.6
6.7
ASBL’s 3QFY21 revenue came in flat YoY, in line with our estimate. Revenue
would have been higher as execution of three projects was delayed and
shifted to 4QFY21. EBITDA stood 15% below our estimate as an adverse
revenue mix led to 180bp YoY decline in EBITDA margin (120bp below our
expectation). As a result of lower depreciation and interest cost, coupled
with higher other income, adjusted PAT stood flat YoY at INR856m and was
19% above our estimate.
ASBL received a large EPC order worth INR5b in the solar segment. Execution
will be completed in 3-4 years, with EBITDA margin expected to be in 10-
11% range. Order book stood strong at INR91.5b, up 13% YoY, with an OB-
to-revenue ratio at 2.6x.
Strong execution over the past two years is commendable. However, the
pending PE exit in the asset portfolio is an overhang on the stock. We have
increased our FY21E EPS by 7% on higher other income. Strong order book
and continuous improvement in the Balance Sheet augurs well for ASBL.
Maintain
Buy
with a revised TP of INR145/share (v/s INR125/share earlier).
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Highlights from the management commentary
Dec-20 Sep-20 Dec-19
54.5
54.5
54.3
27.6
27.4
32.8
3.2
3.2
3.7
14.6
15.0
9.2
FII Includes depository receipts
EBITDA margin is expected to be ~11-11.5% based on the current order book
and the relevant inflation rate factored in.
On asset monetization, the management said substantial diligence is over
and ASBL has received binding offers from potential investors. It expects
negotiations to close in a couple of weeks and closure of documents by
Mar’21 end. A large part of the monetization proceeds will be utilized to
grow the EPC business.
ASBL is targeting INR50-60b worth of order inflows in FY22.
ASBL’s strong execution over the past two years has been a surprise.
However, the pending exit of the private equity investor in asset portfolio is
an overhang on the stock. We have increased our FY21E EPS by 7% on
account of higher other income.
Strong order book and continuous improvement in the Balance Sheet augurs
well for ASBL. Our TP of INR145/share (v/s INR125/share earlier) is based on
the SoTP methodology. We value the: a) EPC business at 6x Mar’23E EPS,
and b) BOT business on a NPV basis. At the CMP, adjusted for the valuation
of the BOT business, the stock is trading at FY22E/FY23E P/E of 4.4x/3.6x.
Maintain
Buy.
Valuation and view
Nilesh Bhaiya – Research Analyst
(Nilesh.Bhaiya@MotilalOswal.com)
Pratik Singh – Research Analyst
(Pratik.Singh@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.