Ashoka Buildcon - Asset Value Exceeds Market Capitalisation: HDFC Securities

Well-diversified order book augurs well for mid-term revenue visibility.

<div class="paragraphs"><p>A bridge project carried out by Ahoka Buildcon Ltd. (Photo: Company website)</p></div>
A bridge project carried out by Ahoka Buildcon Ltd. (Photo: Company website)

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HDFC Securities Institutional Equities

Ashoka Buildcon Ltd. has underperformed the broader infra space over the last one year/two years/five years, despite its order book multiplying two times over FY19-23.

  1. Ashoka Buildcon has a well-diversified order book at ~2.5 times FY23 standalone revenue which provides revenue visibility over the medium term.

  2. At the standalone level, the company had gross/net debt of Rs 10/8.1 billion (gross debt/equity 0.3 times) as of March 2023 versus Rs 5.6/4.2 billion as of March 2022.

  3. Healthy asset monetisation pipeline, total proceeds over the next three years could cumulatively exceed the current market cap.

  4. Standalone engineering, procurement and construction business valuation is not priced in the current market cap.

Given the strong order book, improving visibility on asset monetisation, and likely cash inflow from asset monetisation (Rs 31 billion) exceeding market cap (Rs 29 billion), we increase our SOTP valuation to Rs 189/share (nine times September-25E earnings per share, asset value repriced higher). We maintain our 'Buy' rating.

Click on the attachment to read the full report:

HDFC Securities Institutional Equities Ashoka Buildcon - FY23 Annual Report Analysis.pdf
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