AnandRathi

Ahluwalia Contracts (Buy)

CMP: ₹328

Target: ₹392

Key takeaways:

a) Strong FY19 inflows of about ₹4,700 crore (the best in any given year) far exceed the management’s revised FY19 inflow guidance of about ₹3,900-4,000 crore. With L1 status for about ₹200 crore, about ₹700 crore of bids not-yet-opened and a healthy about ₹4,300 crore bid pipeline, the opportunity landscape is bright to say the least. Management expects to acquire orders of about ₹2,000 crore in FY20.

b) Management has given a about 15 per cent revenue growth guidance for FY20, slightly lower from the earlier 15-20 per cent, but also states that the guidance has potential. The about 13.5 per cent margin guidance continues for the core construction business. The company expects to incur a about ₹40 lakh capex in FY20.

c) Management said strong year-to-date inflows have yielded an augmented OB of about ₹6,000 crore, providing ample assurance of about 3.5x FY19 revenues. While the backlog consists of a couple of slow-moving orders (about ₹850 crore), barring these the backlog is more than capable of delivering the company’s targeted growth.

Valuation: Factoring in the delays in timelines for the Charbagh railway re-development and the Kolkata-seater-extension projects, we lower our estimates. We also factor in the real-estate-inventory liquidation at below book value.

Risk: Any slower-than-expected project execution.

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