Ashoka Buildcon - Angel Broking recommends Buy with a Target Price :Rs. 245 (12 months).
Ashoka Buildcon (ABL), traditionally a state player, has transformed into a national
player by winning 4 NHAI (National Highway Authority of India) projects totaling to a TPC of Rs. 5,156 Cr. However, this transition has come at a cost, as it entails premium commitments to NHAI
(Rs. 220 Cr per year, albeit covered by toll collections during the construction period)
and huge equity contributions from ABL’s side, which we believe would stretch its
leverage (consolidated net D/E is expected to rise from 1.4x in FY2011 to 3.0x by
FY 2012-13 E).
Angel Broking have valued ABL on an SOTP basis – by assigning 5.0x EV/EBITDA
to its standalone business (`87/share) and valued its BOT projects on NPV basis
(Rs. 158/share). We initiate coverage with a Buy rating on the stock and a SOTP
target price of Rs. 245 and key catalyst being raising equity from capital
markets.
Integrated Business Model..!
ABL boasts of an integrated business model in place with strong in-house execution capabilities, which helps it to have control over time and cost – the two key essentials of road development business. In the past, many
industry players have witnessed severe strain on the financials and profitability of
their projects because of their inability to control these important factors.
Even in current times, there are developers who do not have an integrated business model
and are dependent on contractors for construction activities, making them
vulnerable. ABL having an integrated business
model are better placed.
Road Sector; Opportunities Galore..!
NHAI has set itself an aggressive target of awarding Rs. 9,371 km of road projects in FY 2011-12 against 5,000 km in FY 2010-11.NHAI has done a commendable job by handing out 4,000km so far in FY 2011-12. Going ahead, NHAI, state and rural projects are expected to garner investments of Rs.
6.1 trillion over FY 2012-16 E, which augurs well for road developers.
Prefer IRB over ABL in the Road BOT space ..!
We initiate coverage on ABL with a Buy rating and a SOTP target price of Rs. 245. Our analysis indicates that ABL would need to infuse equity up to Rs. 990cr (FY 2012-14 E) in various SPVs; this would be
substantially funded by the PE route, as per management.
However, Angel Broking have not factored the same in our estimates, given the gloomy market conditions; instead, have penciled in the increase in debt levels.
In recent times, markets have been harsh on companies with loose financial discipline and, hence, Angel Broking are conservative in assigning trading multiples to ABL. Therefore, Angel Broking
prefer IRB over ABL, considering ABL’s comparatively smaller size, dependency on capital markets
for equity and projects at nascent stage.
Angel Broking6th Floor, Ackruti Star
Central Road,MIDC
Andheri (E) , Mumbai-93
91-22 - 3935 7600
Website : www.angelbroking.com
Ashoka Buildcon (ABL), traditionally a state player, has transformed into a national
player by winning 4 NHAI (National Highway Authority of India) projects totaling to a TPC of Rs. 5,156 Cr. However, this transition has come at a cost, as it entails premium commitments to NHAI
(Rs. 220 Cr per year, albeit covered by toll collections during the construction period)
and huge equity contributions from ABL’s side, which we believe would stretch its
leverage (consolidated net D/E is expected to rise from 1.4x in FY2011 to 3.0x by
FY 2012-13 E).
Angel Broking have valued ABL on an SOTP basis – by assigning 5.0x EV/EBITDA
to its standalone business (`87/share) and valued its BOT projects on NPV basis
(Rs. 158/share). We initiate coverage with a Buy rating on the stock and a SOTP
target price of Rs. 245 and key catalyst being raising equity from capital
markets.
Integrated Business Model..!
ABL boasts of an integrated business model in place with strong in-house execution capabilities, which helps it to have control over time and cost – the two key essentials of road development business. In the past, many
industry players have witnessed severe strain on the financials and profitability of
their projects because of their inability to control these important factors.
Even in current times, there are developers who do not have an integrated business model
and are dependent on contractors for construction activities, making them
vulnerable. ABL having an integrated business
model are better placed.
Road Sector; Opportunities Galore..!
NHAI has set itself an aggressive target of awarding Rs. 9,371 km of road projects in FY 2011-12 against 5,000 km in FY 2010-11.NHAI has done a commendable job by handing out 4,000km so far in FY 2011-12. Going ahead, NHAI, state and rural projects are expected to garner investments of Rs.
6.1 trillion over FY 2012-16 E, which augurs well for road developers.
Prefer IRB over ABL in the Road BOT space ..!
We initiate coverage on ABL with a Buy rating and a SOTP target price of Rs. 245. Our analysis indicates that ABL would need to infuse equity up to Rs. 990cr (FY 2012-14 E) in various SPVs; this would be
substantially funded by the PE route, as per management.
However, Angel Broking have not factored the same in our estimates, given the gloomy market conditions; instead, have penciled in the increase in debt levels.
In recent times, markets have been harsh on companies with loose financial discipline and, hence, Angel Broking are conservative in assigning trading multiples to ABL. Therefore, Angel Broking
prefer IRB over ABL, considering ABL’s comparatively smaller size, dependency on capital markets
for equity and projects at nascent stage.
Angel Broking6th Floor, Ackruti Star
Central Road,MIDC
Andheri (E) , Mumbai-93
91-22 - 3935 7600
Website : www.angelbroking.com
No comments:
Post a Comment