Buy Ahluwalia Contracts; target of Rs 388: HDFC Securities

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HDFC Securities' research report on Ahluwalia Contracts

Ahluwalia (AHLU) reported revenue at Rs 5.4bn (8%/23% YoY/QoQ), beating our estimate by 13%. However, EBITDA/APAT at Rs 317/147mn missed estimate by 25%/42% as higher employee cost, provisioning for expected credit loss (Rs 80mn) and higher commodity prices impacted margin (5.9% vs 8.9% est.). AHLU won new orders worth Rs 20.9bn 9MFY21, taking the order book to Rs 82bn at the end of 3QFY21. Gross debt decreased to Rs 320mn from Rs 440mn in 2QFY21. With cash balance at Rs 2bn, AHLU remains a net cash company. We have cut our FY21/FY22/FY23 estimates by 14/17/9% to accommodate potential impact on margins of higher commodity prices.

Outlook

We maintain BUY on AHLU with a reduced TP of Rs 388 (13x Mar-23E EPS), given its robust order book, strong balance sheet, and better RoE/RoCE than peers.

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