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Ahluwalia Contracts India Ltd - 1QFY17 Result Update - BUY - Healthy Performance Continues - Reliance Securities

Posted On: 2016-08-18 20:03:31

Ahluwalia Contracts' (ACIL) reported a top-line growth of ~16% yoy at to Rs3.05bn marginally below our estimates in 1QFY17. Its operating profit surged by robust ~33% yoy to Rs424mn vis--vis our expectation of Rs413mn. EBITDA margin stood at strong 13.9% (+183 bps yoy & +15bps qoq) for 1QFY17 mainly due to execution of high-margin projects, while net profit grew by ~14% yoy to Rs215mn. We maintain our positive view on the stock, as we believe that ACIL is well-poised to witness a healthy traction on the backdrop of healthy order book, sound return ratios, improving balance-sheet amid positive indications on macroeconomic front. Its current order backlog stands at Rs42.3bn (3.3x TTM revenue), which provides healthy revenue visibility. Further, ACIL is expected to add orders worth Rs24bn (+50% yoy) in FY17E & Rs28bn (+17% yoy) in FY18E. We reiterate our BUY recommendation on the stock with a revised Target Price of Rs345.

Decent Performance with Strong Margins

ACIL's reported top-line stood at Rs3.05bn (+16% yoy) mainly owing to healthy order inflow over last 2 years (added aggregate orders worth >Rs35bn in FY15 & FY16) and improved macro scenario. Further, its operating profit grew strongly by 33% yoy to Rs424mn, while EBITDA margin stood robust at 13.9%. Net profit grew by ~14% yoy to Rs215mn marginally below our estimate of Rs238mn owing to lower other income.

Order Backlog Continues to Remain Robust

ACIL's current order backlog stands at Rs42.3bn (3.3x TTM revenue), which provides promising revenue visibility. Notably, it added projects worth Rs15.3bn in FY16 and further added ~Rs9.64bn in FY17E till date. It is presently bidding orders worth ~Rs20bn and was already declared L1 for projects worth Rs2.50bn. ACIL is confident to secure a decent size of orders predominantly from institutional and hospital segments.

Outlook and Valuation

ACIL continues to remain our preferred pick in construction space owing to (1) healthy order book and disciplined order-mix; (2) strong balance-sheet; (3) one of the best return ratios; (4) no equity commitment unlike several other construction companies; and (5) likely increase in commercial contribution from Kota Bus project. At CMP, the stock trades at 17.7x & 13.4x of FY17E & FY18E earnings, respectively. Upgrading our earnings estimates by ~4% for FY18E mainly to factor recent addition of high-margin projects, we reiterate our BUY recommendation on the stock with a revised Target Price of Rs345.

Shares of AHLUWALIA CONTRACTS (INDIA) LTD. was last trading in BSE at Rs.294.1 as compared to the previous close of Rs. 292.55. The total number of shares traded during the day was 7516 in over 56 trades.

The stock hit an intraday high of Rs. 296.5 and intraday low of 290. The net turnover during the day was Rs. 2217779.


Source: Equity Bulls

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