Incremental order wins and monetisation in Ashoka Concessions (ACL) will be key stock catalysts, in our view.

Ashoka Buildcon (ABL) reported 4% y-o-y contraction in Q4FY20 revenue as COVID-19 adversely impacted execution. Ebitda margin surged 440bps y-o-y to 18.2% aided by one-offs; consequently, adjusted profit rose 56% y-o-y. Toll revenue remained weak with traffic declining y-o-y across all projects. Order book fell to ~ Rs 90 bn (book-to-bill of 2.4x). Incremental order wins and monetisation in Ashoka Concessions (ACL) will be key stock catalysts, in our view.

We revise up FY21/22e earnings 124%/209% due to higher-than-expected margin & other income and debt reduction in Q4FY20. However, the looming slowdown in the economy and weak revenue visibility compel us to slash earnings multiple to 4x from 6x. Maintain Buy with revised SOTP-based TP of Rs 84 ( Rs 67 earlier).

Margins up; BOT traffic continues to be weak: Ebitda margin surged 440bps y-o-y aided by ~Rs1-bn one-offs. Disappointment in the toll division continued; stoppage of toll collection due to COVID-19 played its part in weak toll performance.

Order book declines sequentially: The company’s order book declined from about Rs 95 bn in Q3FY20 to ~Rs 90 bn at end-FY20. It is targeting the ~Rs 700-bn road tender pipeline and hopes to win orders worth Rs 50-60 bn in FY21.

Outlook: Order wins key —Declining revenue visibility, weak traffic in BOT projects and delays in asset monetisation in ACL are main concerns for the stock; while the latter two will take time to get resolved, order accretion in the near term is critical to boost EPC revenue growth. We maintain Buy with revised SOTP-based TP of Rs 84—Rs 35/share from the EPC business (4x EPS) and the balance from BOT projects.