ASHOKA BUILDCON - COMPANY ANALYSIS

CMP as on 23^rd April’24- 176 Rs.

Introduction:

Ashoka Buildcon Ltd is engaged in the business of construction and infrastructure facilities on EPC and BOT basis. It is also involved in the sale of RMC (ready mix concrete).

ABL has an equity stake in 21 direct and 16 indirect subsidiaries, mostly SPVs set up for BOT and HAM projects.

ABL has an established track record of almost three decades in executing EPC

contracts. The company has constructed more than 14,000 lane kilometres of road since its inception. The group also has total 11 HAM projects of which nine are in the operational stage and remaining two are in the construction stage. ABL handles EPC contracts for all projects and are responsible for the Operations and Maintenance (O&M) of road projects in ABL and ACL.

The company is engaged in modernizing and setting up of power distribution lines for Maharashtra State Electricity Distribution Company, North Bihar Power Distribution Company Limited, Tamil Nadu Electricity Board and CPDCL. The company is also engaged in electrification of railway project with contract from Rail Vikas Nigam Limited, Northeast Frontier Railway, IRCON and Gujrat Rail Infrastructure Development Corp Limited.

Business Segment:

• Road EPC& BOT/ Annuity/ HAM toll segment
• Buildings Segment
• Railways Segment
• City Gas Distribution Segment

Current Update: ABL currently has a healthy order book position of Rs.14,025 Cr. as on February 2024 as against Rs. 15,805 Cr as on March 31, 2023, and Rs. 13,731 Cr as on March 31, 2022. The order book majorly comprises of road EPC and HAM projects which is 43%, power which is 42% and balance from Building EPC, Railways and CGD business.

Further, the company is expecting a good inflow of Rs 10,000 crore in order book in FY 2024 as Ministry of Surface transport is planning around 18,000 kilometers of roads in NHAI, MRTH, NHIDCL and state NH together and also the company is expecting good opportunities from Railways, metros and semi high-speed railways.

Sale of Equity in subsidiary Unison Enviro Private Limited to Mahanagar Gas Ltd. in Feb’24 – Company received Rs. 286 crore, company currently has  cash of around Rs. 486 crores

Company mgmt. update

• Company is optimistic with the future prospect of the industry due to 2.7% hike in the budgetary allocation.
• Company has received a letter of acceptance from CIDCO for design and construction of Still Bridge for eastern connectivity for Navi Mumbai International Airport in joint venture for a total consideration of INR662.55 Crore. Ashoka Buildcon has 51% share in this joint venture that is INR337.9 Crore
• Company has received letter of award for the project of 6 laning of Aurangabad, Bihar, Jharkhand border section of NH-2 in the State of Bihar under Bharatmala EPC mode for a total consideration of INR520 Crore.
• The company and its subsidiary, Ashoka Concessions Limited, are making progress towards the divestment of their entirestake in specific subsidiaries that are awarded by NHAI for the construction or operation ofroad projects on HAM and BOT basis.  Considering the high likelihood that the sale will be finalized within the following 12 months, these completed project assets and liabilities continue to be classified as held for sale.
• The road order book projects, HAM projects are to the tune of INR1,188 Crore and EPC road projects are worth INR4,475 Crore. Railway is around INR1,153 Crore.
• Company focuses on maintaining the growth rate of 15 to 20%
• Order Inflow guidance from Q2 onwards, and Co expect at least INR6,000 Crore to INR8,000 Crore of order book adding next year.

Industry Update: The government estimates that infrastructure expenditure has a multiplier effect of 2.45x on the GDP in the year of capital expenditure and 3.14x in the next year. The outlay of INR11.11 lakh Crore for infrastructure in FY '25, the availability of long-term interest-free capital expenditure loans and the implementation of 3 new railway economic corridor programs, as announced in the budget, will hold the sector in good stead. The ministry has constructed 6,216 kilometers of national highway up to December 2023 in ongoing fiscal as compared to 5,774 kilometers constructed in the year ago. The Ministry of Road Transport and Highways is aiming to create a national record by constructing 13,813 kilometers of highway in the current fiscal year.

The Road Transport and Highway Ministry will construct 14 new expressways and high-speed corridors under PPP model, totaling to 2,279 kilometers with an investment of INR1.3 lakh Crore. Efforts by Ministry are in progress, for implementing agencies to expedite pre-construction activities like land acquisition, regulatory clearances and environment, forest, wildlife and no objection certificates from different authorities through frequent and proactive coordination with the state government and other concerned authorities so as to improve the progress in awarding of the contracts.

Reveune update:

Y-o-Y

Q-o-Q

Technical view

• Weekly Chart  view: multiyear breakout
• Strong Pivot range :120-140
• Resistance  range: 180-200
• Upside range: 220/270/350

Kunnj Lalka

info@smartinvestment.in

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