[T.S.R:14472] Ahluwalia Contracts

 

Ahluwalia Contracts: Maintain buy

 

Sushil Finance

09 June 2010

Ahluwalia Contracts (India) Ltd. (ACIL) has delivered a strong performance for year ended 31st Mar. 2010. We attended the concall of ACIL. Some of the key points pertaining to results and discussed in the concall are summarized below:

Key Highlights of Q4FY10 & FY10 Results

- During Q4FY10, ACIL posted net sales of Rs.4893.8 mn, registering a growth of 56.9% YoY. Its EBITDA de-grew by 19.2% y-o-y to Rs330.6 mn and EBITDA margins decreased significantly by 636 bps YoY to 6.7%. This was mainly due to cost overrun, on back of certain orders that needed to meet the deadline and higher sub-contracting costs wherein some portion included overseas job, which had thinner margins.

- Its Interest cost remained flat at Rs. 46 mn and depreciation decreased by 46.2% YoY to 66.8 mn. Its PBT (including other income) decreased by 9% YoY to Rs. 236.1 mn. APAT stood at Rs. 147 mn registering a 16% YoY de-growth.

- During the FY10, ACIL’s net sales increased by 35.7% to Rs.16,175 mn, its EBITDA increased by 26.7% to Rs.1854.3 mn, whereas its EBITDA margins decreased by 82 bps to 11.5%, due to fall in margins in the last quarter. Its APAT increased by 59% y-o-y to Rs895.8 mn and its RPAT grew by 42.8% to Rs.817.8 mn, due to provision of extraordinary items related to annual gratuity provision, annual bonus provision and writing-off some doubtful debts and advances.

Common Wealth Games contributed to top line

- ACIL has executed most of the Common wealth games project and is left to complete only 10% which would get over by June.

BOT projects facing some delays

- ACIL has bagged a DBOT project from Rajasthan State Road Transport Corporation (RSRTC), to build a bus terminal along with commercial complex, at Kota, Rajasthan. The Company has faced some delays and has not yet crossed 20% completion on the project. It expects the project to get over by Dec 2010 and commission from Mar 2011.

Strong order book and order pipeline provides strong visibility

- ACIL's unexecuted order book stands at Rs.30 bn. Out of the total order book, 29% of orders are from government sector & the rest are from private sector. It has received order inflow of about Rs.15.6 bn during FY10 & expects order inflows in range of Rs22 bn to Rs24 bn.

- Out of the unexecuted order book, 2% of orders are from BOT projects, 15% is from commercial projects, 7% from hospital projects, 13.5% from hotel projects, 19% from infrastructure projects, 32% from residential projects, 4% from retail projects & 7.5% from institutional projects.

OUTLOOK & VALUATION

ACIL has a strong order book position and a decent order pipeline, which gives a good business visibility for the next two years. The revenues for FY10 were ahead of our full year estimates but PAT was lower than our estimates due to onetime items. We have slightly increased our revenue estimates for FY11 and decreased our EBITDA, interest and depreciation estimates for FY11 & FY12.Thus, maintaining our PAT estimates for FY11 & FY12. At the CMP of Rs.205, the stock is trading at 11.5x its FY11E & 9.8x its FY12E EPS of Rs.17.8 & Rs.20.9, respectively. We maintain Buy rating on the stock with a target price of Rs.250 (i.e. 12x its FY12E earnings).

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