Ahluwalia Contracts share price gains for second session on robust Q4 performance

Ahluwalia Contracts India Ltd’s share price rose nearly 3 percent in early trade on May 30 for the second session, following the company’s announcement of strong numbers for the quarter ended March 2023. Yesterday, on May 29, the share price surged 17 percent intraday, reaching a record high of Rs 617.65, the highest in 13 years since February 2010.

The financials

The company reported a 62-percent increase in net profit, amounting to Rs 72.2 crore, compared to Rs 44.5 crore in the previous year. Additionally, it achieved an 18-percent growth in revenue, at Rs 863 crore, compared to Rs 731 crore a year ago.

At the operating level, EBITDA jumped by 73 percent to Rs 110.2 crore in the fourth quarter of this fiscal year, compared to Rs 63.80 crore in the corresponding period of the previous year. The EBITDA margin for the reporting quarter stood at 12.7 percent, in contrast to 8.7 percent in the corresponding period of the previous fiscal year. EBITDA represents earnings before interest, tax, depreciation, and amortisation.

For the fiscal year 2023, Ahluwalia Contracts‘ order inflow stood at Rs 5,057 crore, including both public and private projects. In fiscal year 2024, the company has secured projects worth Rs 3,751 crore to date, resulting in a total order book position of Rs 12,000 crore as of the current date.

The current bidding pipeline stands at Rs 3,000-5,000 crore and includes projects from both government and private parties. Notable projects in the pipeline are the Rs 2,500-crore NBCC redevelopment project in Delhi, a Rs 700-crore private educational institution project, and a Rs 800-1,000 crore private real estate development in Bangalore, Hyderabad, and Delhi.

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What analysts have to say

Management expects to win additional orders worth Rs 2,500 crore in the remaining fiscal year 2024. Analysts anticipate that the government’s increased focus on developing institutions, healthcare infrastructure, and other emerging opportunities in both public and private sectors will contribute to the company’s robust order inflow moving forward.

At 11:52 am, the company’s stock was quoted at Rs 595.45, representing a 2.62 percent increase on NSE.

Brokerage firm Axis Securities maintained a “buy” rating on Ahluwalia Contracts India with a target price of Rs 650 per share. The stock is currently trading at 15 times and 13 times FY24E/FY25E earnings per share (EPS). Axis Securities values the company at 14 times FY25E EPS to arrive at the target price of Rs 650 per share, indicating a potential upside of 12% from the current market price.

“Considering favorable attributes such as a strong and diversified order book position, healthy financials, a strong bidding pipeline, improved order inflows, an asset-light model, and emerging opportunities in the construction space, we anticipate the company to generate healthy free cash flows and achieve revenue/EBITDA/PAT growth of 17 percent/23 percent/26 percent CAGR over FY22-FY25E,” stated Axis Securities.

Key downside risks to the projections and target price include delays in execution impacting revenue growth and higher commodity prices affecting margin numbers.

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