Analysts said a monetisation drive at the company, though delayed, was on path and the pending exit of the private equity investor, SBI Macquarie, from its asset portfolio would be a key monitorable event. Given the inexpensive valuations, they said the stock can go up by 100 per cent in 12 months.
This is
. The stock was trading at Rs 95.80 a piece on Monday.
Centrum Broking, which has a target of Rs 200 on the stock, said the much delayed monetisation of Ashoka Concessions (ACL) assets, complexity of the return structure with SBI Macquarie and a weak cash flow profile of some assets in the portfolio continued to cause significant uncertainty and overhang on the stock. “However, the underlying liquidity profile of the parent remains sound and is able to support any cash shortfalls in the assets. With the stock underperforming peers and valuations at 8.9 times FY23 and 7.7 times FY24 core EPC earnings, the stock does not seem to be pricing in any upside from the asset sale transaction,” Centrum said.
Monetisation of assets
The pending exit of the private equity investor was an overhang on the stock, said Motilal Oswal Securities, adding that faster closures held the key for a stock re-rating.
Macquarie had invested Rs 800 crore in Ashoka Concessions in 2012 through Macquarie-SBI Infrastructure Fund (MSIF). Ashoka Buildcon owns 61 per cent stake in Ashoka Concessions.
The company recently re-negotiated terms of the August 2012 shareholders’ agreement with SBI Macquarie regarding the exit options from the proceeds of the sale of assets. The commitment has been revised down to Rs 1,100 crore from Rs 1,526 crore, which IDBI Capital said was a positive.
The company’s consolidated debt stood at Rs 6,466 crore.
Order book
As on September 30, the company’s total order book stood at Rs 11,883 crore, which excludes orders worth Rs 139 crore received for Mangaldoi Electrical Circle in Assam. The book-to-bill ratio stood at 2.8 times, though slightly inferior to peers.
Of the total book, order contribution from roads HAM (hybrid annuity model) and roads EPC (engineering, procurement and construction) stood at Rs 2,813 crore and Rs 4,455 crore, respectively. Power transmission & distribution and others accounts for Rs 1,850 crore, railways Rs 794 crore, buildings EPC Rs 1,912 crore and CGD contributes the rest. The company has guided for a revenue growth of 20 per cent YoY for FY22 and margins of 12-12.5 per cent.
“The company expects to bag additional Rs 2,000-3,000 crore worth orders in H2FY22 (H1 FY22 orders at Rs 4,100 crore), though sustainable Ebitda margins are now expected at 11.5-12 per cent (vs 13.5 per cent in FY21 when many projects were in competition stage). ABL is hopeful of its BOT subsidiary sale (Ashoka Concessions) by March quarter, with signing of non-binding term sheets and ABL’s liability to its partner SBI Macquarie has been capped at Rs 1,100 crore,” said JM Financial.
Motilal Oswal Securities said a strong order book and continuous improvement in the balance sheet augured well for Ashoka Buildcon. It values the company’s EPC business at 5 times March 2023 EPS and BOT business on an NPV basis.
Price targets
Phillip Capital set the stock’s price target at Rs 200, Motilal Oswal at 175, Anand Rathi at Rs 147, Edelweiss Rs 145, IDBI Capital 135 and JM Financial at Rs 127.
Edelweiss said it was enthused by Ashoka’s improving order intake, and added that asset monetisation and simplification of corporate structure would drive the stock price.
Phillip Capital said it continued to like the stock and saw as Ashoka a perfect proxy to play the road segment, with proven execution capabilities and a healthy portfolio mix of EPC-BOT-HAM projects.
“Its strategy to diversify into the buildings segment also augurs well for the company, as it grows. The McQ deal however, remains the only hurdle in the rerating of the stock – which should also, hopefully, see culmination soon,” it added.
