Ashoka Buildcon: Strong execution capabilities to lead growth

11 Jan 2024 , 12:09 PM

Recommendation: Buy; Target Price: Rs 208

 

Ashoka Buildcon has demonstrated strong execution at the Rs7.7bn 6.58km-long MOPA airport link road project, with the targeted completion four to five months ahead of schedule. Management interaction suggests that monetisation of asset portfolio would likely be completed in FY25 with highest confidence for portfolio of 11 HAM assets. In terms of growth outlook, the focus is BOT (Toll) where competition is limited, as well as other existing end segments in India and internationally. 

Strong execution of the tough MOPA airport link road project: 

Analysts of IIFL Capital Services visited the under-construction 6.6km MOPA Airport link road project in North Goa worth Rs7.7bn. The project is 82% complete with the company targeting completion by April’24 vs committed timeline of Aug’24 and should lead to bonus receipt, as per the contract terms. Key highlight for us was the strong execution capability for the 2.7km elevated structural section with peak height of ~40m in difficult hilly unexplored terrain, four RoBs and a four-leg interchange. Design and execution was done in-house in a short span of 24 months, including two disruptions due to monsoons. 

Monetisation of assets targeted in FY25: 

Analysts of IIFL Capital Services also interacted with Mr. Ashish Kataria, Promoter Director at Ashoka Buildcon. The company expects the proceeds from CGD business sale in Q4FY24. However, Chennai ORR and Jaora Naigaon project sale completion would be delayed, given the need for NOC from the respective state governments. For the HAM portfolio of 11 assets, the company has signed the term sheet for 9 asset and expects to sign the SPA soon. For the five older BOT assets, except for Bhandara & Durg (low balance life), while due diligence is on, sale is likely only in FY25. 

Confident on prospects for EPC business: 

The H1FY24-end order book of Rs148bn (2.2x trailing book to bill) provides reasonable growth visibility. Incrementally, the focus is on BOT (Toll) roads where the pipeline is expanding from MoRTH amidst lower competition, railways, water supply & treatment, buildings and T&D in India. It would target similar sectors internationally while covering funding risk.