Key beneficiary of NHAI’s expected awarding • Ashoka Buildcon :: ICICI Securities, report

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Key beneficiary of NHAI’s expected awarding • Ashoka Buildcon’s (ABL) topline grew 8.9% YoY to | 455.6 crore (vs. our estimate of | 549.5 crore) led by muted 0.8% YoY growth in the construction division to | 321.2 crore and 46.7% YoY growth in the BOT division to | 102.8 crore • The EBITDA margin expanded 42 bps YoY to 23.1% (vs. our estimate of 22.3%). However, the net profit declined to | 1.3 crore, lower than our estimate of | 36.8 crore mainly on account of higher depreciation and interest cost of new projects such as Sambalpur (| 26 crore) • The Sambalpur project started partial toll collection from October 1, 2014 on account of the receipt of provisional completion certificate and toll collection at | 10/lakh per day is below management expectations. With full completion & post lifting the mining ban, the management expects toll revenues to ramp up to | 20 lakh/day EPC revenues to grow at 15.0% CAGR during FY14-17E... In Q3FY15, ABL’s EPC revenue grew 0.8% YoY to | 318.3 crore with the EBIT margin at 13.4% (expansion of 60 bps YoY). ABL’s order book currently stands at | 3,381 crore, 2.1x order book to construction bill ratio on a TTM basis. Going ahead, we anticipate ABL’s EPC revenues and PAT will grow at a CAGR of 15.0% and 10.9%, respectively, during FY14-17E on the back of a strong order book, aggressive road awarding opportunities in Q4FY15E and opportunities from the T&D segment. Robust growth in toll collection to continue… ABL has 21 projects (including Ahmednagar-Karmala, Pune-Shirur where tolling has stopped since Q3FY13, Q2FY15, respectively) in its road portfolio. Out of its portfolio of 21 projects; 17 are fully operational, four BOT are under construction/development of which two are also tolling on the current stretch. In Q3FY15, gross toll collection grew 22.9% YoY to | 225.2 crore backed by 19.3% YoY growth in Ashoka Buildcon’s road portfolio and 24.3% YoY growth in Ashoka Concession’s road portfolio. Post the completion of all BOT projects, we expect the daily toll collection for ABL to inch up 1.5x to | 3.1 crore in FY17E vs. | 2.0 crore in FY14. Transforming into big league player with SBI Macquarie deal… In August 2012, SBI Macquarie (SBM) committed | 700 crore (with an additional | 100 crore contingency reserve) for a 34-39% stake in Ashoka Concession (ACL), which has seven of its big ticket project. The deal, at implied P/BV of 1.3x (assuming 34% dilution), ensures equity funding towards ACL’s project portfolio. As per the management, NHAI has recently come out with re-bidding of road projects worth | 15,000 crore. Also, NHAI is looking to roll out new road projects worth | 35,000 crore in Q4FY15E. With strong internal accruals, securitisation of matured projects (if required) and SBM deal, we believe ABL is well poised to grab the opportunity worth | 5,000 crore. ABL to be key beneficiary of new opportunities; maintain BUY… Considering the strong track record, well funded BOT road project portfolio and healthy order book, we remain positive on its long term prospects. With SBI Macquarie’s equity commitment, we believe ABL is likely to be a key beneficiary of the road awarding opportunities in next 12-18 months. Hence, we recommend BUY with SoTP target price of | 161/share. We value ABL’s BOT projects at | 41.2/share, EPC business (net of debt) at | 60/share (5x FY16 EV/EBITDA) and ACL at | 59.8/share.

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