Ashoka Buildcon - Religare

On a steady wicket despite sluggish order awards
As per our recent interaction with ASBL’s management, order progress in
the roads sectorremains sluggish and is likely to be back-ended this year.
In our view, the recent decision by government to allow exit mechanisms for
road developers (by introduction of substitute developers) from projects will
alleviate the bleak scenario in road sector. We remain positive on ASBL
given healthy revenue visibility across key projects in the next 12-24
months and a well-capitalised balance sheet. Reiterate BUY

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 Strong order book visibility: ASBL’s current order book stands at Rs 26bn (or 1.7x
FY13 sales), excluding the Rs 10bn Cuttack–Angul project. The Chennai ORR and
Karnataka State Highways Improvement projects are expected to add another
Rs 0.8bn to the order book, and management expects to win a further Rs 1.5bn in
orders overthe next two quarters.
 Equity requirements for project execution secured: Management indicated that
the equity requirements of Rs 5bn for FY14 are wellsecured: Macquarie will
contribute Rs 3.5bn while Rs 1.5bn will come from internal accruals. The
Dhankuni–Kharagpur/Belgaum–Dharwad/Sambalpur–Baragarh projects where
execution is 30%/73%/50% complete will require an added Rs 3.5bn/Rs 0.5bn/Rs
1bn of equity funding.
 Toll hikes ahead: With completion of EPC work on the PNG project, ASBL expects to
hike tolls from July’13. Hikes are also scheduled for Wainganga Bridge in July and
Durg Chattisgarh in September, implying healthy revenue visibility ahead.
 Valuation:We like ASBL for its (1) well-capitalised balance sheet supplemented by
funds from SBI Macquarie, (2) revenue visibility across key projects in the next
12-24 months, and (3) timely project execution. Reiterate BUY with a March’14
SOTP value of Rs 300 based on project NPV.