Motilal Oswal is bullish on Ashoka Buildcon recommended buy rating on the stock with a target price of Rs 88 in its research report dated August 12, 2020.
Motilal Oswal 's research report on Ashoka Buildcon
Ashoka Buildcon's (ASBL) 1QFY21 results were robust. Top line decline was limited to INR5.7b (18% above est.). On account of one-off items as well as release of contingencies, EBITDA and PAT came in well above expectations. A key surprise was the reduction in gross debt to INR2.4b (v/s INR4b at end-FY20), indicating strong focus on cash flow management. Strong execution over the past two years is commendable. However, the pending PE exit in the asset portfolio is an overhang on the stock. We have increased our FY21E EPS by 16%, but FY22E EPS remains broadly unchanged. Strong order book and continuous improvement in the balance sheet augurs well for ASBL. Maintain Buy with revised TP of INR88.
Outlook
Strong order book and continuous improvement in the balance sheet augurs well for ASBL. Our TP of INR88 (Prior: INR98) is based on SOTP based methodology - we value the (a) EPC business at 7x Mar'22E EPS, and (b) BOT business on NPV basis. At CMP, adjusted for valuation of the BOT business, the stock is trading at FY21/FY22E PE of 5.2x/4.4x. Maintain Buy.
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