Ashoka Buildcon’s (ASBL’s) Q3FY21 standalone EPC revenue was flat on y-o-y basis and up 12% q-o-q to Rs 9.8 bn. While ASBL’s order book of Rs 92 bn (2.2x FY20 EPC revenue) remains healthy, incremental order wins and monetisation of BOT road assets in Ashoka Concession Ltd (ACL) remain key triggers for the stock. ASBL is targeting Rs 20-30 bn of new order wins in Q4FY21 and Rs 50-60 bn in FY22e on the back of improved ordering outlook for road projects.
We maintain Buy with a revised TP of Rs 182 (earlier Rs 131) on SoTP basis as we roll forward to Mar-23 earnings and increase EPC earnings multiple to 10x from 8x earlier. Our TP includes Rs 112 for the standalone EPC business, Rs 65 for BOT/HAM projects and `5 for land at 0.5x P/B multiple.
EPC revenues flat y-o-y, to ramp up going ahead: Ebitda margins declined 188bps y-o-y to 10.8%. Mgmt highlighted labour availability has normalised and it expects flattish y-o-y EPC revenue in FY21E. Ebitda margin guidance over the next two-three years has been revised to 11-12% from 12-13% earlier. Standalone debt levels remain comfortable at Rs 3.5 bn (Rs 2.2 bn in Q2FY21). Execution is expected to ramp up from Q4FY21 with the Kandi project commencing execution along with two NHAI EPC projects in Bihar.
ACL asset monetisation a key trigger: As per mgmt, the asset monetisation plans for BOT/HAM projects in ACL/ASBL are at an advanced stage and the company expects a binding agreement by April 2021. While ASBL is looking to divest up to 100% stake in these projects, any positive outcome on the same is a key trigger going ahead.