RESULTS REVIEW 2QFY17

06 DEC 2016

Ashoka Buildcon
BUY
INDUSTRY

INFRASTRUCTURE

CMP (as on 5 Dec 2016)

Rs 144

Target Price

Rs 210

Nifty

8,129

Sensex

26,349

KEY STOCK DATA

Bloomberg

ASBL IN

No. of Shares (mn)

187

MCap (Rs bn) / ($ mn)

27/398

6m avg traded value (Rs mn)

36

STOCK PERFORMANCE (%)

52 Week high / low

Rs 212/111
3M

6M

12M

Absolute (%)

(9.1)

9.4

(25.5)

Relative (%)

(1.5)

11.2

(28.3)

SHAREHOLDING PATTERN (%)

Promoters

56.69

FIs & Local MFs

23.81

FIIs
Public & Others

8.44
11.06

Source : BSE

Parikshit D Kandpal
parikshitd.kandpal@hdfcsec.com
+91-22-6171-7317
Prabhat Anantharaman
prabhat.anantharaman@hdfcsec.com
+91-22-6171-7319

Worth a wait
ABL 2QFY17 standalone financial performance was
above expectations as EBITDA (+7.0% YoY) came
25.4% ahead of our estimates, mainly on account of
Rs 160mn saving achieved on six month early
completion of Bihar T&D project. EBITDA margins
expanded ~187bps YoY to 15.8% (~337bps ahead of
our estimates) led by ~382bps YoY contraction raw
material costs (Bihar project).
ABLs YTDFY17 order inflow stood at Rs 19.4bn (~55%
of our FY17E assumption). ABL has guided for FY17E
12-12.5% EPC EBITDA margins vs. our forecast of
~12.1%. We expect revenues to pick-up as execution
at JNPT/eastern peripheral projects improve and
new projects achieve financial closure.
Delays in Jharkhand/Islampur project (Rs 11.5bn)
have led to ABL cutting FY17E EPC revenue growth to
5-8% (vs. 10-15% earlier). We roll forward our
valuation to Sep-18E. Maintain BUY with SOTP-based
TP of Rs 210/sh (vs. Rs 202/sh earlier).
Financial Summary (Standalone)
Year Ending March (Rs mn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

2QFY17
4,410
698
453
2.4

2QFY16
4,674
652
315
1.7

YoY (%)
(5.7)
7.0
43.9
43.9

Highlights of the Quarter

BOTs stable toll growth, minimal pending equity:

ABL has Rs 2.6bn of pending equity requirement (incl.
Ludhiana HAM) over the next 3 years. 2QFY17 BOT
collections grew ~9.7% YoY to Rs 2.3bn. The Dhankuni
BOT largest project in ABLs portfolio continues to
clock double digit growth as 2QFY17 growth was1
15.8% YoY.

Balance sheet stable: ABL standalone gross debt

reduced Rs 348 QoQ to Rs 2.2bn, while consolidated
gross debt stood at Rs 37.3bn. With WPI turning
positive and toll growth picking pace, ABL should be
able to improve cash flows & BS. Standalone net D/E is
0.12x.

Near-term outlook: (1) Economic recovery has started

reflecting on toll collections, (2) FY17E started on a
positive note with new order win (Rs 19.5bn) ~1-6%
higher than NHAI cost, and (3) Balance sheet has been
improving. SBI Macquarie stake sale remains key
overhang.

1QFY17
4,660
596
308
1.6

QoQ (%)
(5.4)
17.1
47.1
47.1

FY16*
26,145
7,435
1,155
6.2
23.3
9.2
7.2

FY17E*
27,030
7,799
1,233
6.6
21.9
8.7
6.5

FY18E*
30,561
8,279
1,405
7.5
19.2
8.5
7.0

FY19E*
34,291
8,907
1,664
8.9
16.2
8.2
7.9

Source: Company, HDFC sec Inst Research, * Consolidated

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

ABLs 2QFY17 YoY execution

disappointed as net
revenues de-grew ~5.7/5.4%
YoY/QoQ. Jharkhand/
Islampur project (totaling Rs
11.5bn) are slow moving.
ABL has started Jharkhand
projects now whilst Islampur
(Rs 2.8bn) may remain slow.
ABL has lowered its EPC
revenue guidance to 5-8% vs
10-15% earlier owing to
slow moving orders
EBITDA margins expanded
~187bps YoY to 15.8%. Rs
160mn savings (time and
raw material price) on six
month early completion of
Bihar (Munger)T&D project
ABLs YTDFY17 order intake
was Rs 19.4bn takings its
Sept-end order backlog to Rs
55.2bn

Standalone Quarterly Financial

Particulars (Rs mn)
Net Sales
Material Expenses
Employee Expenses
Other Operating Expenses
Operating Profits
Other Operating Income
EBITDA
Depreciation
EBIT
Other Income
Interest Cost
PBT
Tax
RPAT
APAT

2QFY17
4,410
3,352
207
171
680
17
698
130
568
90
80
578
125
453
453

2QFY16
4,674
3,731
180
112
651
1
652
165
487
93
127
453
138
315
315

YoY (%)
(5.7)
(10.2)
15.1
51.8
4.6
1,100.8
7.0
(21.4)
16.7
(3.1)
(37.1)
27.7
(9.5)
43.9
43.9

1QFY17
76.0
4.7
3.9
15.4
0.4
15.8
21.6
10.3

1QFY16
79.8
3.9
2.4
13.9
0.0
13.9
30.4
6.7

YoY (bps)
(382)
85
146
151
37
187
(885)
354

1QFY17
4,660
3,763
198
126
572
24
596
123
472
82
76
478
170
308
308

QoQ (%)
(5.4)
(10.9)
4.4
35.6
18.9
(26.5)
17.1
5.3
20.2
10.4
4.8
21.0
(26.5)
47.1
47.1

1HFY17
9,070
7,116
406
297
1,252
41
1,293
253
1,040
172
156
1,056
294
762
762

1HFY16
9,423
7,548
346
203
1,326
4
1,330
304
1,026
324
271
1,080
307
773
773

YoY (%)
(3.7)
(5.7)
17.4
46.4
(5.6)
913.4
(2.8)
(16.6)
1.3
(47.0)
(42.2)
(2.3)
(4.3)
(1.5)
(1.5)

Source: Company, HDFC sec Inst Research

Margin Analysis
Material Expenses % Net Sales
Employee Expenses % Net Sales
Other Op Expenses % Net Sales
Operating Margins (%)
Other Op Income % Net Sales
EBITDA Margin (%)
Tax Rate (%)
APAT Margin (%)

4QFY16 QoQ (bps)

80.8
(476)
4.3
44
2.7
117
12.3
315
0.5
(11)
12.8
303
35.5
(1,393)
6.6
367

1HFY17
78.5
4.5
3.3
13.8
0.5
14.3
27.9
8.4

1HFY16
80.1
3.7
2.2
14.1
0.0
14.1
28.4
8.2

YoY (bps)
(166)
80
112
(27)
41
14
(58)
19

Source: Company, HDFC sec Inst Research

Standalone/Cons. gross debt

in 2QFY17 was Rs
2.2/37.3bn. Net D/E at 0.12x
Page | 2

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

Order Book Assumptions

ABLs YTDFY17 order book
stands at Rs 55.2bn with
new order wins of Rs 19.4bn.
ABL has guided for Rs60bn
order inflows in FY17E

Rs mn
Opening Order Book
Add: New Order Wins
Less: Orders Executed
Closing Order Book
Order Book/Sales (x)

We have assumed Rs
40/46/50bn of new order
inflow during FY17/18/19E

Source: Company, HDFC sec Inst Research

Roads - BOT
100%

Roads - EPC

Roads - HAM

YTDFY17
41,106
19,390
9,070
55,204
2.9

FY17E
41,106
40,918
20,033
61,991
3.1

FY18E
61,991
45,828
23,663
84,156
3.6

FY19E
84,156
50,410
27,242
107,324
3.9

Captive BOT reducing , EPC and HAM increasing

Power T&D

Roads - BOT

Roads - EPC

Roads - HAM

Source: Company, HDFC sec Inst Research

YTDFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

1QFY14

YTDFY17

4QFY16

3QFY16

0%

2QFY16

0%

1QFY16

20%

4QFY15

20%

3QFY15

40%

2QFY15

40%

1QFY15

60%

4QFY14

60%

3QFY14

80%

2QFY14

100%

80%

2QFY14

Captive road BOT order book

has been reducing while
third-party NHAI EPC and
HAM contracts (assuming
securitization post
completion) are increasing
in order share.

Order book skewed towards roads EPC and HAM

1QFY14

Roads segments (EBIDTA

margins of 12-12.5%) order
book has been increasing vs.
the T&D order book (EBIDTA
margins of 9-10%)

FY16
32,126
28,219
19,239
41,106
2.1

Source: Company, HDFC sec Inst Research

High share of EPC will help

reduce margin volatility as
ABL may get commodities
price variations whilst BOT
project are generally fixed
price and margin dilutive
during commodity upcycle

Page | 3

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

EPC-Order Book To Multiply 1.7x Over FY17-19E

Order Book (Rs bn)
Order book/sales (x) - RHS

8.0

4.0

6.0

3.0

4.0

2.0

2.0

1.0

40.0
30.0
20.0
10.0

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

Consolidated Net D/E Ratio To Remain At 2x

ABL to generate FCF of ~Rs 2bn in FY19E

Net Debt (Rs bn)

FY19E

FY18E

FY11

FY19E

FY18E

FY17E

FY16

FY15

FY14

FY13

FY12

FY11

50.0

FY17E

30

60.0

FY16

45

70.0

FY15

60

Cons.EBITDA (Rs bn)

Cons. Cash flow from operations (Rs bn)
Cons. FCF (Rs bn) - RHS

Net D/E Ratio (x) - RHS

8.0

30

1.5

6.0

20

1.0

4.0

(2.0)

10

0.5

2.0

Source: Company, HDFC sec Inst Research

6.0
4.0
2.0

(4.0)
(6.0)

FY19E

FY18E

FY17E

(8.0)

FY16

FY15

FY19E

2.0

FY18E

40

FY17E

10.0

FY16

2.5

FY15

50

FY14

3.0

FY13

60

FY12

Strong FCFE to result in

stable gross consolidated
debt. Incremental borrowing
only for BOT projects
funding

5.0

80.0

FY14

75

10.0

FY13

90

6.0

FY12

120

FY11

BOT revenue may de-grow

during FY18-19E as ABLs toll
projects are expiring in
FY18E. This may result in toll
revenue contraction by Rs
1.8bn, largely contributed by
Indore, Wainganga and
Aurangabad projects

BOT EBITDA (Rs bn)

% BOT EBITDA Contribution

15

Order book growth to mirror

ordering in roads and T&D
segments

EPC EBITDA (Rs bn)

EPC Revenues (Rs bn)

105

FY17-19E order inflow CAGR

of 10.1% will largely be
driven by third-party NHAI
road EPC projects

% BOT EBIDTA To Reduce by ~237bps By FY19E

FY14

We expect ABL order book

to multiply 1.7x over FY1719E

Source: Company, HDFC sec Inst Research

Consolidated Net D/E to

remain in ~2-2.3x band
Page | 4

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

ABLs 2QFY17 BOT toll

collections grew ~9.7% YoY
to Rs 2.3bn
Dhankuni, Durg, Bhandara,
Belgaum and Sambalpur toll
collection grew ~6-27% YoY
Total pending equity
requirement is Rs 2.6bn for
the two new annuity
projects and one HAM
project to be invested over
2-3 years. City gas equity
requirement Rs 450mn

Toll revenue growth picking pace Value BOTs at Rs 76/sh

ABLs 2QFY17 BOT toll collections grew ~9.7% YoY to Rs

2.3bn on the back of healthy traction in ACL projects
(grew ~10.5% YoY). ABL projects toll collection grew
~7.5% YoY.

Dhankuni, Durg, Bhandara, Sambalpur and Belgaum

toll collection grew ~6-27% YoY. Improvement in Port
side traffic and pickup in localized economic activity in
Orissa and West Bengal resulted in strong YoY growth
in Dhankuni and Sambalpur projects.

Sambalpur project: The toll collection post full COD

has improved to Rs 1.36mn/day (Rs 1.3mn/day in
1QFY17). Mining recovery will add another Rs
0.4mn/day and plugging of leakages will add Rs
0.15mn/day incrementally. Despite this Rs 1.9mn/day
toll, would be 25% lower vs. est.

BOT Project Valuation

Jaora Nayagaon contributes

~58% to our BOT valuation
and the shift of traffic to
competing road on NH3
remains a key overhang

We have valued ABLs 61%

stake in ACL projects at Rs
40.5/sh and the direct BOTs
at Rs 35.4/sh. The total
asset portfolio is valued at
Rs 75.9/sh

NH-4-Belgaum Dharwad
NH-6-Sambalpur Baragarh
NH-6-Dhankuni Kharagpur
NH-6-Durg (Chattisgarh - Maharashtra)
NH-6-Bhandara (Maharashtra Chattisgarh)
SH-31-Jaora Nayagaon
Chennai ORR
Total Ashoka Concessions @ 61% stake
ABL-Ahmednagar-Aurangabad
ABL-Nashirabad
VHPL-Indore Edalabad
JAIPL-Wainganga
SH-31-Jaora Nayagaon
Total ABL Projects
TOTAL BOT Value

PNG: has terminated the project and handed over toll

collection to NHAI on 13th Apr 2016. ABL has written
off Rs 1.4bn on account of equity investment. The
consortium has claimed compensation from NHAI
amounting to Rs 17.5bn including debt (equity portion
will be Rs 5.5bn, ABL share Rs 1.4bn). Final NHAI award
awaited.

Balance Equity Requirement: Rs 1.1bn in two annuity

projects and Rs 1.5bn for the HAM project to be
invested over next 2-3 years. Additionally ABL will also
invest Rs 450mn for its city gas distribution project in
Ratnagiri.

HAM project Punjab HAM project execution to start

from 4QFY17E. ABL is looking to add about Rs 50bn in
HAM project over 4-5years.

Stake (%)

WACC (%)

100
100
100
51
51
38
50

14
14
14
14
14
14
14
14
14
14
14
14
14

100
100
100
50
36

Project
Value (Rs mn)
2,075
(987)
4,176
1,313
592
13,985
1,810
22,964
242
120
851
707
13,985
15,906
38,870

Value for ABL Per share value

(Rs mn)
(Rs/sh)
1,266
6.8
(602)
(3.2)
2,547
13.6
409
2.2
184
1.0
3,219
17.2
552
2.9
7,575
40.5
242
1.3
120
0.6
851
4.5
353
1.9
5,063
27.1
6,630
35.4
14,205
75.9

Source: Company, HDFC sec Inst Research

Page | 5

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

Key Assumptions And Estimates - Standalone

We expect ABL order book
to multiply 1.7x over FY1719E
FY17-19E order inflow CAGR
of 10.9% will largely be
driven by Hybrid Annuity &
third-party NHAI road EPC
projects
FY17-19E EPC revenue CAGR
of 16.6%
EPC EBIDTA margins to
contract as share of NHAI
EPC revenue increases in the
mix. These orders have 1112% margins vs. 12-13% for
the captive orders
We have stripped off the
dividend received from
subsidiary on account of the
real estate monetization.
Hence other income is lower
by ~Rs 350mn/annum vs
reported. We have adjusted
other income to recurring
level
8.7% FY17-19E APAT CAGR

Key Assumptions
(Rs mn)
Order-book (INR mn)
Opening Order Book

FY17E

FY18E

FY19E

41,106

61,991

84,156

FY19E

Comments

45.0

12.0

1HFY17 order inflow of Rs 19bn and

ABL has guided for fresh Rs 30bn in
10.0
roads and Rs 10bn in transmission in
rest of FY17E

50.8

35.8

27.5 31.6% FY17-19E CAGR

4.1
(5.6)

18.1
(7.6)

11.8

(12.2)

23.2

590
409

662
523

5.1
(21.9)

12.1
3.6

266

312

366

75.3

17.2

1,989
9.9
597
30.0
1,392
7.0

2,176
9.2
653
30.0
1,523
6.4

2,382
21.3
8.7
16.5
739
31.0 (260.7bps)
1,644
26.0
6.0
120.5bps

9.4
(7.4)

Add: New Order Wins

40,918

45,828

50,410

Less: Orders Executed

Closing Order Book
Trailing Order/Sales (x)
Revenue
EBIDTA EPC

20,033
61,991
3.1
20,033
2,644

23,663
84,156
3.6
23,663
2,863

27,242
107,324
3.9
27,242
3,201

EBIDTA margins EPC (%)

13.2

12.1

Depreciation
Financial Charges

527
395

Other income

PBT
PBT margin (%)
Tax
Tax rate (%)
PAT
PAT margin (%)

Growth%
FY17E
FY18E

(0.0bps)
9.4
(51.3bps)

15.1 16.6% FY17-19E EPC revenue CAGR

(10.6) 10.0% FY17-19E EPC EBIDTA CAGR
EBIDTA margins contract on account
of NHAI EPC projects having 11-12%
(110.0) margins vs 12-13% for captive order
book. FY17E has power transmission
cost savings of Rs 160mn in 2QFY17
12.1
27.7 Stable interest costs
We have removed the impact of
dividend stepped up from
monetization of real estate ~ Rs
~350mn average/annum. Quarterly
17.2 presentation carries the impact of real
estate monetization / investment
income in EPC revenue and profits.
We have arrived at adjusted recurring
other income.
9.5 9.4% FY17-19E PBT CAGR
(4.9)
100bps
7.9 8.7% FY17-19E Profit CAGR
(40.2bps)

Source: HDFC sec Inst Research

Page | 6

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

We expect ABL to deliver

12.6% FY17-19E revenue
CAGR. This will largely be
driven by EPC revenue CAGR
of 16.6%
EPC EBIDTA margins to
contract as share of NHAI
EPC revenue increases in the
mix. These orders have 1112% margins vs. 12-13% for
the captive orders
With ABLs high margins
(85%) BOT projects nearing
end of concession, FY18E
EBIDTA margins will
contract

Key Assumptions And Estimates - Consolidated

Key Assumptions (Rs mn)

Toll revenue
EPC revenue
Total Revenue

6,997

6,898

7,049

(0.0)

(1.4)

2.2

20,033 23,663 27,242

27,030 30,561 34,291

4.1
3.0

18.1
13.1

15.1
12.2

EBIDTA Toll

5,155

5,415

5,706

4.4

5.1

5.4

EBIDTA EPC
Total EBIDTA

2,644
7,799

2,863
8,279

3,201
8,907

6.0
4.9

8.3
6.1

11.8
7.6

EBIDTA margins toll (%)

73.7

78.5

81.0

310.0

483.3

244.5

EBIDTA margins EPC (%)

13.2

12.1

11.8

23.2 (110.0)

(35.0)

EBIDTA Margins (%)

28.9

27.1

26.0

51.9 (176.6) (111.3)

2,397

2,737

3,025

Depreciation
Financial Charges

High tax rate as ABL pays

tax on profit-making BOTs
at MAT and full tax on EPC

Growth%
FY17E FY18E FY19E FY17E FY18E FY19E

(3.8)

14.2

5,055

4,903

4,814

12.9

(3.0)

Other income
PBT

573
920

584
1,222

593
1,661

63.4

32.9

PBT margin (%)

3.4

4.0

4.8

58.6

17.5

Tax

988

932

974

1.5

(5.7)

107.4

76.2

58.6

Tax rate (%)

Comments
Muted growth in toll revenues during FY17-19E as
ABLs direct projects near end of concession period
viz. Indore, Ahmednagar, Wainganga etc. This will
result in Rs 1.8bn/yr reduction in toll revenue in/from
FY18E
16.6% FY17-19E EPC revenue CAGR
12.6% FY17-19E revenue CAGR
5.2% FY17-19E EBIDTA CAGR as all toll projects start
contributing to revenues.
10.0% FY17-19E EPC EBIDTA CAGR
6.8% FY17-18E EBIDTA CAGR
Margins expansion in line with growth in high margin
toll revenue
EPC margins contraction as share of captive BOTs
will reduce , third party increase
ABL margins will reduce during FY17-19E as ABL
direct toll project will end & EPC margins will
compress as NHAI EPC projects share increase in
revenue.

10.5
Borrowing cost reduction in FY18E as EPC projects
(1.8) won by ABL are interest-free , besides BOT projects
may get refinanced at lower interest rates
Dividend on cash and deposits
35.9 FY17-19E PBT CAGR of 34.4%
PBT margin expansion owing to benefit in financial
21.1 expenses. Refinancing is the key reason for the
margins gain
4.6
Tax rate to remain high as MAT is incurred on
profitable BOT projects, while losses offset standalone
profits

Page | 7

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

Losses from the BOT projects

nullify impact of standalone
profits. This results in muted
PAT

Key Assumptions (Rs mn)

Loss share of minority and

profits from associates
results in 16.2% FY17-19E
PAT CAGR

Share of Profit/loss Asso.

Change in cash position

doesnt impact debt position
materially

PAT
Profit/(Loss) Minority

Net Profit
Gross Block Turnover
Debtor days
CFO - a
CFI - b
FCF - a+b
CFF - c
Total change in cash - a+b+c

Growth%
FY16E FY17E FY18E
687
-

FY16 FY17E FY18E

(68)

291

(902)

(677)

(455)

399

438

522

1,233 1,405 1,664

0.2
0.2
0.3
49
47
47
7,754 5,487 5,141
(2,409) (2,500) (2,558)
5,345 2,987 2,583
(2,493) (2,341) (2,251)
2,852

647

6.8
3.1
(3.8)

14.0
14.2
(4.2)

Comments

Minority losses on account of initial years losses in BOT

projects
Profits from Wainganga and Jaora. Loss making PNG
project has been terminated and hence profits from
associate has improved
18.4 16.2% FY17-19E PAT CAGR
12.1
0.4

Strong free cash flow generation as growth picks up

Surplus cash flow utilised to repay debt service interest
Net change in cash doesnt impact debt position
materially

332

Source: HDFC sec Inst Research

Change in Estimates - Consolidated

We have increased our EPS

estimate on account of
higher EBIDTA margins and
lower financial expense. ABL
has repaid Rs1bn of NCD
during 2QFY17
This has resulted in 9-15%
increase in EPS estimate

Rs mn
Revenues
EBIDTA
EBIDTA Margins (%)
APAT
Adj. EPS (INR)

FY17E Old
28,544
7,566
26.5
948
5.1

FY17E New
27,030
7,799
28.9
1,233
6.6

% Change
(5.3)
3.1
235.0
30.0
30.0

FY18E Old
31,704
8,007
25.3
1,118
6.0

FY18E New
30,561
8,279
27.1
1,405
7.5

% Change
(3.6)
3.4
183.3
25.7
25.7

FY18E New
23,663
2,863
12.1
1,523
8.1

% Change
(4.6)
0.4
60
9.6
9.6

Source: Company, HDFC sec Inst Research

Change in Estimates - Standalone

Rs mn
Revenues
EBIDTA
EBIDTA Margins (%)
APAT
Adj. EPS (INR)

FY17E Old
21,548
2,607
12.1
1,213
6.5

FY17E New
20,033
2,644
13.2
1,392
7.4

% Change
(7.0)
1.4
110.0
14.8
14.8

FY18E Old
24,806
2,853
11.5
1,390
7.4

Source: Company, HDFC sec Inst Research

Page | 8

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

We value ABLs BOT

portfolio at Rs 76/share
(1.1x invested equity)

Outlook And Valuation

Target Price of Rs 210/sh implies ~45.8% upside

We value standalone EPC

business at Rs 127/share
(15x one-year forward
Sept-18E EPS)
Real Estate land holding at
Rs 7/share (0.5x P/BV)

Our target P/E multiple is in

line with peers, such as KNR
Construction, Sadbhav and J
Kumar Infra

We have valued ABL standalone on P/E basis, in-line

with peers, namely KNR/J Kumar/Sadbhav, at 15x oneyear forward. Our rationale behind this is (1) Strong
order book with ~1.7x increase over the FY17-19E
period to Rs 107.3bn, (2) Stable balance sheet (FY19E
standalone net D/E at <0.2x), and (3) Limited equity
support requirement from ACL. Further, with the
reduction in share of T&D revenue in the mix, the
working capital cycle may improve, leaving scope for
further standalone debt reduction.
Despite having lower margins vs KNR/J Kumar we have
valued ABL at 15x (in line with peers) on account of (1)
Diversified presence in roads and T&D segments, the
biggest beneficiary of government spending (2) Strong
execution capability, and (3) Likely support from
captive order book in lieu of any contraction in future
roads EPC orders. The government-led spends in the
infrastructure sector will continue to drive stock

SOTP Valuation
Segment

We roll forward our

valuation to Sep-18E and
revise our SOTP-based
target price to Rs 210/sh (vs.
Rs202/sh earlier on Mar-18E
EPS)

Ashoka Concessions Ltd

ABL direct Projects
TOTAL BOT Value
Standalone construction - EPC
Land
SOTP Value

Project
Value (Rs mn)
22,964
15,906
38,851

performance and ABL, with its strong credentials, will

likely benefit from the pick-up in ordering activity. The
company, over the past many years, has built strong
pre-qualification in potentially large ordering segments
such as roads and T&D

We have valued toll business separately under Ashoka

Concessions and ABLs direct projects. We have used
14% discount rate for arriving at NPV of the projects.
Our estimates for Sambalpur/ Dhankuni/Belgaum are
lower vs. consensus. We value the BOT business at Rs
76/sh (1.1x of ABL invested equity).

We maintain BUY on ABL with TP of Rs 210/share (vs

Rs 202/sh earlier). We roll forward our valuation to
Sep-18E. We peg (1) Standalone EPC business at Rs
111/share (15x Sep-18E EPS) and (2) ABL BOT projects
at Rs 76/share (3) land at 0.5x historical costs at Rs
7/share.

Value for ABL (Rs

mn)
@ 61% stake
7,575
6,630
14,186
23,752
1,391
39,970

Per share value

(Rs/sh) @ 61%
stake
41
35
76
127
7
210

Comments
DCF using 14% WACC
DCF using 14% WACC
Standalone 15x Sept-18E EPS
0.5x P/BV

Source: HDFC sec Inst Research

Page | 9

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

Income Statement (Consolidated)

Year ending March (Rs mn)
Net Revenues
Growth (%)
Material Expenses
Employee Expenses
Other Operating Expenses
EBIDTA
EBIDTA Margin (%)
EBIDTA Growth (%)
Depreciation
EBIT
Other Income (Incl EO items)
Interest
PBT
Tax
RPAT
Minority Interest/Share of
associates
Share of (Loss) / Profit from
Asso.(Net Of Tax)
EO Items
APAT
APAT Growth (%)
Adjusted EPS (Rs/sh)
EPS Growth (%)
Source: Company, HDFC sec Inst Research

Balance Sheet (Consolidated)

FY15
23,197
29.2
16,712
754
1,001
4,730
20.4
23.8
1,517
3,213
290
2,721
782
796
(13)

FY16
26,145
12.7
16,850
924
936
7,435
28.4
57.2
2,491
4,943
98
4,478
563
973
(410)

FY17E
27,030
3.4
17,552
1,017
662
7,799
28.9
1.5
2,397
5,402
573
5,055
920
988
(68)

FY18E
30,561
13.1
20,494
1,119
669
8,279
27.1
(6.1)
2,737
5,541
584
4,903
1,222
932
291

FY19E
34,291
12.2
23,499
1,202
683
8,907
26.0
(4.1)
3,025
5,882
593
4,814
1,661
974
687

(828)

(995)

(902)

(677)

(455)

399

438

522

815
(28.0)
4.4
(28.0)

570
1,155
41.7
6.2
41.7

1,233
6.8
6.6
6.8

1,405
14.0
7.5
14.0

1,664
18.4
8.89
18.4

Year ending March (Rs mn)

SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholders Funds
Minority Interest
Long-term Debt
Short-term Debt
Total Debt
Net Deferred Taxes
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP/Intangible assets under
development
Investments
Total Non-current Assets
Inventories
Debtors
Cash & Equivalents
Other Current Assets
Total Current Assets
Creditors
Other Current Liabilities & Provns
Total Current Liabilities
Net Current Assets
TOTAL APPLICATION OF FUNDS

FY15

FY16

FY17E

FY18E

FY19E

793
12,776
13,569
5,047
35,837
2,889
38,726
(99)
57,244

936
17,752
18,688
4,995
39,885
2,892
42,777
(221)
66,238

936
18,547
19,483
4,094
42,885
2,892
45,777
(221)
69,132

936
19,514
20,450
3,417
45,885
2,892
48,777
(221)
72,422

936
20,740
21,676
2,962
48,885
2,892
51,777
(221)
76,193

125,712 129,286 126,434 126,697 126,671

1,505

3,437

3,521

3,606

2,345
3,377
3,377
3,377
3,377
129,562 132,663 133,248 133,594 133,654
7,286 10,890
9,105
9,861 11,105
3,644
3,660
3,642
3,945
4,442
410
1,679
4,531
5,177
6,031
5,607
4,791
6,886
7,699
8,796
16,947 21,020 24,165 26,683 30,374
6,332
4,054
7,284
7,889
8,884
82,934 83,390 80,996 79,965 78,951
89,265 87,445 88,280 87,855 87,835
(72,319) (66,425) (64,116) (61,172) (57,461)
57,244 66,238 69,132 72,422 76,193

Source: Company, HDFC sec Inst Research

Page | 10

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

Cash Flow (Consolidated)

Year ending March (Rs mn)
Reported PBT
Non-operating & EO items
Interest expenses
Depreciation
Working Capital Change
Tax Paid
OPERATING CASH FLOW ( a )
Capex
Free cash flow (FCF)
Investments
INVESTING CASH FLOW ( b )
Share capital Issuance
Debt Issuance
Interest expenses
Dividend
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
Closing Cash & Equivalents
Source: Company, HDFC sec Inst Research

Key Ratios (Consolidated)

FY15
782
1,069
2,721
1,517
(1,317)
(874)
3,898
(8,872)
(4,973)
749
(8,122)
(106)
6,811
(2,721)
(290)
3,694
(530)
415

FY16
563
806
4,478
2,491
(1,949)
(1,095)
5,295
(4,546)
749
(1,492)
(6,038)
4,916
1,276
(4,478)
(338)
1,375
632
1,679

FY17E
920
(174)
5,055
2,397
543
(988)
7,754
(2,982)
4,772
573
(2,409)
3,000
(5,055)
(438)
(2,493)
2,852
4,531

FY18E
1,222
(146)
4,903
2,737
(2,297)
(932)
5,487
(3,084)
2,403
584
(2,500)
3,000
(4,903)
(438)
(2,341)
647
5,177

FY19E
1,661
(71)
4,814
3,025
(2,792)
(974)
5,663
(3,151)
2,512
593
(2,558)
3,000
(4,814)
(438)
(2,251)
854
6,031

PROFITABILITY (%)
GPM
EBITDA Margin
EBIT Margin
APAT Margin
RoE
RoIC
RoCE
EFFICIENCY
Tax Rate (%)
Fixed Asset Turnover (x)
Inventory (days)
Debtors (days)
Other Current Assets (days)
Payables (days)
Other Curnt Liab/Provns
(days)
Cash Conversion Cycle (days)
Debt/EBITDA (x)
Net D/E
Interest Coverage
PER SHARE DATA
EPS (Rs/sh)
CEPS (Rs/sh)
DPS (Rs/sh)
BV (Rs/sh)
VALUATION
P/E
P/BV
EV/EBITDA
EV/Revenues
OCF/EV (%)
FCF/EV (%)
FCFE/Market Cap (%)
Dividend Yield (%)

FY15

FY16

FY17E

FY18E

FY19E

28.0
20.4
13.8
3.5
6.2
(0.1)
1.4

35.6
28.4
18.9
4.4
7.2
(6.2)
(3.4)

35.1
28.9
20.0
4.6
6.5
(0.6)
1.3

32.9
27.1
18.1
4.6
7.0
2.1
3.6

31.5
26.0
17.2
4.9
7.9
3.7
4.9

101.7
0.2
115
57
88
100

172.9
0.2
152
51
67
57

107.4
0.2
123
49
93
98

76.2
0.2
118
47
92
94

58.6
0.2
118
47
94
95

128

143

121

107

96

33
8.2
2.8
1.2

70
5.8
2.2
1.1

46
5.9
2.1
1.1

55
5.9
2.1
1.1

68
5.8
2.1
1.2

4.4
12.5
1.5
72.5

6.2
19.5
1.8
99.9

6.6
19.4
2.0
104.1

7.5
22.1
2.0
109.3

8.9
25.1
2.0
115.8

33.1
2.0
13.8
2.8
0.1
(7.6)
(3.3)
1.0

23.3
1.4
9.2
2.6
0.1
1.1
(9.1)
1.2

21.9
1.4
8.7
2.5
0.1
7.0
10.1
1.4

19.2
1.3
8.5
2.3
0.1
3.4
1.9
1.4

16.2
1.2
8.2
2.1
0.1
3.5
2.6
1.4

Source: Company, HDFC sec Inst Research

Page | 11

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

RECOMMENDATION HISTORY
Date
3-Feb-16
23-May-16
30-Aug-16
6-Dec-16

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

TP

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Dec-15

240
220
200
180
160
140
120
100

Jan-16

Ashoka Buildcon

CMP
184
136
156
144

Reco
BUY
BUY
BUY
BUY

Target
215
202
202
210

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 12

ASHOKA BUILDCON: RESULTS REVIEW 2QFY17

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Page | 13