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Reliance Securities
Ahluwalia Contracts (Buy)
CMP: ₹320.45
Target: ₹410
Ahluwalia Contracts’ current order backlog stands at ₹6,000 crore (3.6x of trailing twelve month revenue), which continues to remain impressive. Despite soft revenue booking in 1Q, the management maintained FY20 revenue growth guidance at 15 per cent.
Having seen dismal order inflow of ₹4,700 crore in FY19, Ahluwalia Contracts witnessed order inflow of ₹400 crore during 1QFY20 and is in L1 position in projects worth ₹700 crore. However, as Ahluwalia is currently bidding for projects worth ₹2,000 crore, it has maintained order inflow guidance at ₹2,000 crore for FY20E.
We further believe that asset light business model; best in class return ratios and healthy balance sheet augur well for Ahluwalia.
We expect Ahluwalia Contracts to report revenue and earnings CAGR of 15 per cent and 22 per cent, respectively through FY19-21E.
At CMP, it trades at around 15.3x and 12.5x for FY20E and FY21E earnings, respectively, which is attractive. We have BUY recommendation on the stock with a target price of ₹410.
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