Q4FY23 Review: Ashoka Buildcon: Healthy visibility; asset monetisation key

26 May 2023 , 01:22 PM

Ashoka Buildcon’s EPC business is well on track to report healthy 20%+ revenue growth backed by Rs158bn order book (Rs22.85 further wins in Q1 so far). However margins will remain muted given that orders were won amid intense competition. Focus remains on roads, power, railways and buildings incrementally. ACL BOT project monetisation fell through on delayed approvals but mgmt. has restarted the process. Three other monetisation deals are expected to be closed in 2023 with proceeds likely to be used for Rs12.72bn exit payout to SBI-Macquarie.

Execution well on track; margins to remain subdued: 

FY23 was strong year with 37% revenue growth on a reasonable base. Despite this order book grew 15% YoY to Rs158bn as at end FY23. Off this, baring the Rs11bn Maldives building order balance is under construction. This should support 20-25% revenue growth as per management. However, Ebitda margin has weakened steadily from 12% in FY22 to 7.4% in H2FY23 and 8.4% for FY23. Margin should sustain at 2H levels in FY24 given that large part of FY24 revenues would be contributed by orders won amid intense competition.

Well diversified order book; targeting Rs110-150bn of fresh wins: 

Comfort on EPC business emanates from the well diversified order book of Rs158bn. This is well diversified with 51% contribution from roads (39% EPC, 12% HAM), 25% from power T&D, 14% from Buildings and 19% from railways. Beyond FY23, company has won Rs22.85bn order from MSEDCL (funded by PFC) for development of distribution infra in 7 circles. It is further targeting wins of Rs110-150bn from focus sectors of roads, railways, power and buildings.

ACL deal for 5 BOT falls through; monetisation to be keenly watched: 

The deal with KKR associate for sale of 5 BOT (Toll) assets fell through in May-23 due to delays in approvals on technical issues. Management has restarted the process and expects early signing given that process was already on. Three other monetisation transactions (Chennai ORR and Jaora-Nayagaon to NIIF, CGD business to MGL) are expected to close in this calendar year. Proceeds will go towards giving exit to SBI Macquarie with pay-out of Rs12.72bn.

Analysts of IIFL Capital Services maintain buy with target price of Rs 146.