November 10, 2015 Rating matrix Ashoka Buildcon (ASHBUI) · PDF fileNovember 10, 2015 Result Update ICICI Securities Ltd | Retail Equity Research New order wins improve visibility

November 10, 2015

Result Update

ICICI Securities Ltd | Retail Equity Research

New order wins improve visibility… • Ashoka Buildcon’s (ABL) topline grew 51% YoY to | 651.2 crore

ahead of our estimate of | 601.9 crore mainly aided by 67.7% YoY growth to | 160.4 crore (our expectation: |171.4 crore) in the BOT division. The construction division revenues grew at a healthy pace of 46.2% YoY to | 490.8 crore and was ahead of our expectation of | 430.6 crore

• The EBITDA margin expanded 1012 bps YoY to 31.8% and was ahead of our estimate of 29.1% mainly on account of a sharp improvement in the BOT division margin. The BOT division margin expanded 1327 bps YoY to 28.8%

• Net profit zoomed 587.2% YoY to | 40.1 crore due to a lower base and was ahead of our estimate of | 9.6 crore. In Q2FY16, Ashoka sold land and TDR worth | 50 crore resulting in a post tax gain of | 35.3. Adjusting for this, net profit came in at | 4.8 crore

Significant new order takes order book to | 4444 crore… ABL secured significant orders worth | 2248 crore in Q2FY16. Key order inflow wins are :- i) Eastern Peripheral Expressway (project cost: | 789 crore) in UP ii) Mumbai JNPT Port (project cost: | 414 crore) iii) first international order win of | 124 crore in Maldives and iv) two annuity based BOT projects in Karnataka worth | 527 crore. With these order wins, ABL’s order book improved significantly at | 4444.4 crore implying 2.3x order book to construction bill ratio on a TTM basis providing strong revenue visibility over next couple of years. Moreover, the company is also lowest bidder in projects worth ~| 450 crore. Going ahead, we expect ABL’s construction revenues to grow at a CAGR of 12.3% at | 2379.8 crore during FY15-17E. Toll collection grows 14.6% YoY to | 240.3 crore … In Q2FY16, ABL’s gross toll collection grew 14.6% YoY to | 240.3 crore on the back of project commissioning such as Sambalpur and recovery of traffic growth (broadly it witnessed traffic growth of 6-8% across the portfolio except few projects). Going ahead, we expect toll collection for ABL to inch up at a CAGR of 37.7% at | 820 crore during FY15-17. Revival of road awarding to provide huge opportunities Given policy related issues like a delay in land acquisition & approval process, road awarding had been lacklustre. However, with the government’s renewed focus on the road vertical, there has been a revival in awarding in the road sector. NHAI is looking to award 5000-6000 km in FY16 vs. ~3000 km in FY15. Additionally, the Ministry of Road Transport and Highways (MoRTH) is looking to award 12,900 km (including NHAI target) in FY16E and 36,000 km over the next three years. This will ensure there are enough opportunities with better terms in the EPC and BOT space for quality player like ABL. ABL to be key recipient of new opportunities; maintain BUY… Considering the strong track record, well funded BOT road project portfolio and huge opportunity, going forward, we remain positive on its long term prospects. Hence, we recommend BUY with an SoTP target price of | 193/share. We value ABL’s BOT projects at | 37.7/share, EPC business (net of debt) at | 76.3/share (5x FY17 EV/EBITDA) and ACL at | 66.0/share. We have incorporated equity dilution arising from QIP into our valuation.

Ashoka Buildcon (ASHBUI) | 164 Rating matrix Rating : BuyTarget : | 193Target Period : 12 monthsPotential Upside : 22%

What’s changed?

Target Changed from | 193 to | 193EPS FY16E Changed from | 3.8 to | 3.1EPS FY17E Changed from | 6.4 to | 6.0Rating Unchanged

Quarterly performance

Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%)Revenue 651.2 431.4 51.0 630.2 3.3EBITDA 207.0 93.5 121.4 183.6 12.8 EBITDA (%) 31.8 21.7 1012 bps 29.1 266 bpsPAT 40.1 5.8 587.2 12.4 223.8

[ Key financials

| Crore FY14 FY15 FY16E FY17ENet Sales 1,794.9 2,319.7 2,718.5 3,200.4 EBITDA 397.2 474.0 767.9 908.0 Adjusted PAT 81.8 81.5 49.7 95.5 EPS Diluted (|) 6.2 5.2 3.1 6.0

Valuation summary

(x) FY14 FY15 FY16E FY17EP/E 26.6 31.8 52.1 27.1 Target P/E 31.3 37.4 61.3 31.9 EV / EBITDA 15.3 14.4 9.9 8.3 P/BV 2.1 1.9 1.9 1.8 RoNW (%) 6.5 6.0 3.6 6.5 RoCE (%) 2.2 2.6 3.9 4.7

[ Stock data Particular Amount (| crore)Market Capitalization 3,069.1Total Debt 3,784.3Cash 41.0EV 6,812.452 week H/L (|) 205 / 124Equity capital 93.5Face value | 5

Price performance

Return % 1M 3M 6M 12M

Ashoka Buildcon (0.1) (9.0) 4.8 25.3

IRB Infra (4.8) (5.7) 7.2 (6.3) Research Analyst

Deepak Purswani, CFA deepak,[email protected]

Page 2ICICI Securities Ltd | Retail Equity Research

Variance analysis

Particulars Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) CommentsIncome from Operations 651.2 601.9 431.4 51.0 630.2 3.3 Topline grew 51% YoY to | 651.2 crore ahead of our estimate of | 601.9

crore mainly aided by 67.7% YoY growth to | 160.4 crore (our expectation: |171.4 crore) in the BOT division

Other Income 11.6 9.1 5.6 109.0 9.1 27.4

Operating Expenses 406.3 394.1 303.0 34.1 412.6 -1.5Employee Expenses 23.2 20.1 20.7 12.0 21.1 9.8Other expenditure 14.7 12.3 14.2 3.8 12.9 14.1

EBITDA 207.0 175.3 93.5 121.4 183.6 12.8EBITDA Margin(%) 31.8 29.1 21.7 1012 bps 29.1 266 bps The EBITDA margin expanded 1012 bps YoY to 31.8% ahead of our

estimate of 29.1% mainly on account of a sharp improvement in BOT division margin, which expanded 1327 bps YoY to 28.8%

Depreciation 60.7 57.5 36.9 64.7 57.5 5.7Interest 110.7 114.1 51.6 114.4 114.1 -3.0

PBT 47.3 12.9 10.6 345.3 21.1 123.8Taxes 29.0 21.9 14.5 99.6 25.3 14.7PAT 18.3 -9.0 -3.9 -569.5 -4.1 -542.8Minority Interest -27.0 -26.8 -17.9 50.6 -24.7 9.3Share of Profit from Associates -5.2 -8.2 -8.2 -36.9 -8.2 -36.7Net Profit after MI 40.1 9.6 5.8 587.2 12.4 223.8 Net profit zoomed 587.2% YoY to | 40.1 crore due to a lower base and

ahead of our estimate of | 9.6 crore mainly on account of a better operational performance

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) Old New % Change Old New % ChangeRevenue 2,825.8 2,718.5 -3.8 3,225.7 3,200.4 -0.8EBITDA 781.4 767.9 -1.7 923.6 908.0 -1.7EBITDA Margin (%) 27.7 28.2 55 bps 28.6 28.4 -23 bpsPAT 71.6 49.7 -30.5 119.2 95.5 -19.9 We have aligned our estimates to reflect H1FY16 estimatesDiluted EPS (|) 3.8 3.1 -17.1 6.4 6.0 -5.5

FY16E FY17E


Assumptions

EPC FY13 FY14 FY15 FY16E FY17E FY16E FY17EOrder Inflow 186.0 1,480.0 1,622.5 4,052.8 4,000.0 4,638.5 4,200.0 We have tweaked our order inflow assumption in line with management guidance

Order Backlog 3,570.0 3,546.0 3,105.6 5,117.8 6,899.4 5,666.6 7,469.0

Current Earlier



Company Analysis Focused play on road segment…strong portfolio of 21 projects…

ABL has 21 projects (including Ahmednagar – Karmala and Pune - Shirur where tolling has stopped since Q3FY13 and Q2FY15, respectively) in its road portfolio encompassing ~5,000 lane km and spread across Maharashtra, Madhya Pradesh, Chhattisgarh, Karnataka, West Bengal and Odisha. Out of its portfolio of 21 projects, 17 are fully operational. Furthermore, it has four BOT projects under construction/development of which two are also tolling on the current stretch. It excludes the recently bagged two projects, namely, State Highway Bagewadi (NH-4)-Bailhongal – Saundatti and State Highway Hungund - Muddebihal – Talikot annuity projects. In one of its projects, Ahmednagar-Karmala, tolling has been stopped by MSRDC for which the company has taken the matter to arbitration. On its Pune-Shirur project, tolling has stopped from August 8, 2014 in accordance with the interim order of the Bombay High Court. In this project, the company has two awards in its favour approximately for three years. These are being contested at the district court.

ABL houses its road projects under two broad holding companies i.e., Ashoka Buildcon (ABL) and Ashoka Concession (ACL). The latter was carved out with eight projects in its portfolio to enable a strategic stake sale to SBI Macquarie, which holds 34% (expandable up to 39% on the performance of one road project) in ACL. It also carries out engineering & construction (E&C) work for road and power transmission and distribution (T&D) and sells ready mix concrete (RMC) for road construction.

Exhibit 1: Portfolio of road projects of Ashoka Buildcon Ashoka Buildcon Limited

Project Name Stake (%) Length

(km) Lane(km)

TPC(| crore)

Debt(| crore)

Equity(| crore)

ABL Eq share(| crore) Status

Aurangabad - Ahmednagar 100.0 42.0 168.0 395.7 328.7 67.0 67.0 Operational

Nagar Karmala 100.0 80.6 160.0 50.4 38.1 12.4 12.4 Tolling stopped since Q3FY13

Anawali Kasegaon 5.0 11.0 22.0 7.4 NA NA 0.0 Operational

Katni Bypass 99.9 17.6 35.2 70.9 53.5 17.4 17.4 Operational

Nashirabad ROB 100.0 4.0 8.0 14.7 13.3 1.5 1.5 Operational

FOB Eastern Expressway 100.0 NA NA 3.7 1.8 2.0 2.0 Operational

Sheri Nallah Bridge 100.0 4.0 7.0 14.2 7.2 7.0 7.0 Operational

Dhule Bypass 99.9 6.0 11.8 5.8 5.2 0.6 0.6 Operational

Dewas Bypass 100.0 20.0 39.6 61.3 36.0 25.3 25.3 Operational

Indore Edalabad 99.7 203.0 406.6 165.0 101.5 63.5 63.3 Operational

Pune Shirur 100.0 54.0 216.0 159.9 113.5 46.4 46.4 Tolling stopped since Q2FY15

Wainganga Bridge 50.0 13.0 26.0 40.9 35.0 5.9 3.0 Operational

Karnataka State Highway 51.0 109.9 216.0 471.0 287.0 47.0 24.0 ~50% Construction completed

Ashoka Concession Limited

Project Name Stake (%) Length

(km) Lane(km)

TPC(| crore)

Debt(| crore)

Equity(| crore)

ACL Eq share(| crore) Status

Bhandara 51.0 82.6 376.8 528.0 354.5 173.5 60.0 Operational

Durg Chhattisgarh 51.0 71.1 368.2 630.5 410.0 220.5 100.2 Operational

Jaora Nayagaon 37.7 85.1 340.2 865.1 554.5 310.6 69.0 Operational

Belgaum Dharwad 100.0 82.0 772.0 694.1 479.0 185.0 185.0 Operational

Sambalpur Baragarh 100.0 88.0 407.6 1142.2 810.0 332.2 332.2 ~ 97% Construction completed, operational

Dankuni Kharagpur 100.0 112.0 840.5 2205.2 1516.2 689.0 689.0 ~ 91.0% Construction completed, partially tolling

Pimpalgaon Nasik Gonde 26.0 60.0 451.9 1691.0 1183.7 507.3 131.9 OperationalChennai ORR 50.0 50.0 183.0 1450.0 1080.0 173.0 86.5 ~80% Construction completed



EPC order book to grow at 49% CAGR during FY15-17E...

ABL’s order book at the end of Q2FY16 was at | 4444.4 crore implying book to bill of 2.3x TTM construction revenues. Roads (largely captive) constitute 69% of the overall order book while T&D EPC orders account for the balance 31%. Going ahead, the management is expecting road EPC to form a significant portion of the overall EPC order book on the back of anticipated awarding from NHAI. Construction revenue growth for ABL in FY16 will largely be driven by under construction projects of ACL and recently won projects such as Chennai ORR and Karnataka State Highway. In addition to this, the T&D order book of | 1361 crore would contribute significantly to EPC revenues. We expect the EPC order book to grow at 49% CAGR to | 6899 crore during FY15-17E.

Exhibit 2: Quarterly order book trend

1691 1492 1363 1258

3083

20051889 1743 1575

1361

0

1000

2000

3000

4000

5000

Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16

(| c

rore

)

Roads Power T&D


Exhibit 3: Annual order book trend

3570.0 35463106

5118

6899

0

1000

2000

3000

4000

5000

6000

7000

8000

FY13 FY14 FY15 FY16E FY17E

(| c

rore

)


Consequently, the EPC segment is expected to report revenue CAGR of 12.3% to | 2,397.8 crore during FY15-17E. However, we expect the margin to remain at 12% in FY17E against 13.1% in FY15.

Exhibit 4: Quarterly EPC revenue and EBITDA margin trend

335.

8

352.

8

677.

4

458.

8

490.

8

12.814.4

16.3

21.4

15.3

200.0

300.0

400.0

500.0

600.0

700.0


(| c

rore

)

5.07.09.011.013.015.017.019.021.023.0

(%)

Revenues EBITDA Margin


Exhibit 5: Annual EPC revenue and EBITDA margin trend

1584

.8

1502

.1

1886

.9

1976

.2

2379

.812.9

13.613.1 13.0

12.0

0

500

1000

1500

2000

2500


(| c

rore

)

9

10

11

12

13

14

(%)

Revenues EBITDA Margin(RHS)


Order book break-up:

T&D EPC31%

Captive32%

Non-captive68%Road

69%

With a majority of under construction projects (except Chennai

ORR and KSHIP II) expected to be completed in FY15, FY16E &

FY17E, EPC revenue growth would hinge on order inflows traction


Robust growth in toll collection to continue…

In Q2FY16, ABL’s gross toll collection grew 14.6% YoY to | 240.3 crore backed by 4.1% YoY growth in Ashoka Buildcon’s road portfolio and 18.9% YoY growth in Ashoka Concession’s road portfolio. Post the completion of all BOT projects, we anticipate toll revenue will grow at 42.1% CAGR to | 813.1 crore during FY15-17E.

Exhibit 6: Quarterly gross toll collection trend

(| crore) Q2FY16 YoY (%) QoQ (%) Q1FY16 Q4FY15 Q3FY15 Q2FY15 Q1FY15 Q4FY14 Q3FY14ABL Owned ProjectsAhmednagar - Aurangabad 3.7 -21.1% -24.2% 4.9 5.0 5.2 4.7 4.8 4.6 4.8Nagar - Karmala - - - - - - - - - - Indore -Edalabad 30.0 15.7% -7.7% 32.5 26.7 25.8 25.9 28.1 21.3 18.6Wainganga Bridge 6.5 13.5% -6.5% 6.9 7.0 6.6 5.7 6.2 6.4 5.9Dewas Bypass 3.3 -27.9% -49.2% 6.6 4.6 4.7 4.6 5.2 4.8 4.8Katni Bypass 4.4 -7.6% -12.6% 5.0 4.6 4.3 4.7 5.0 4.2 4.0Pune – Shirur^ - - - - - - 2.7 7.2 6.6 5.6Others# 15.2 24.3% -9.8% 16.8 14.1 13.1 12.2 14.4 10.6 6.3Sub-total 63.1 4.1% -13.2% 72.7 62.0 59.6 60.6 70.9 58.5 50.0ACL ProjectsBelgaum Dharwad 16.7 7.9% -6.5% 17.8 17.0 16.2 15.5 16.4 15.1 14.7Dhankuni – Kharagpur@ 56.2 8.1% -3.8% 58.5 56.9 53.2 52.0 53.3 52.3 49.0Bhandara 13.4 11.8% -5.6% 14.2 14.2 13.6 12.0 12.6 13.1 12.1Durg 16.9 10.9% -5.9% 17.9 18.0 17.0 15.2 16.0 16.4 15.2Jaora – Nayagaon 41.1 26.8% 8.0% 38.1 35.4 34.1 32.4 31.6 32.5 32.5Pimpalgaon – Nashik – Gonde 23.2 6.2% 15.1% 20.2 24.0 23.1 21.9 17.0 10.5 9.8Sambalpur 9.7 NA -4.7% 10.1 9.8 8.4 - - - - Sub-total 177.2 18.9% 0.2% 176.8 175.2 165.6 149.0 146.9 139.9 133.3

Grand Total 240.3 14.6% -3.7% 249.5 237.2 225.2 209.6 217.8 198.4 183.2

Source: Company, ICICIdirect.com Research ^ - Toll collection has stopped since Q2FY15 @ - Commenced Toll collection w.e.f. April 1, 2012. Toll adjusted in Capital WIP # - Others include Anawali Kasegaon, Kognoli Toll Plaza, Dhule Bye pass, Nashirabad, Sherinala & six foot over bridges in Mumbai Dewas and Katni project – Toll collection under High Court order, not recognized as Revenue

Exhibit 7: Gross toll collection break-up

96.5 103 125.8172 162.2

61.1 6974.2

77.5 7852.0 5337.2

0 0

209.6225 237.2 249.5 240.2

0

100

200

300

400

500

600


(| c

rore

)

Recognized as Revenue Income from AssociatesAdjusted against Capital WIP



Toll revenues to grow at 37.1% CAGR…

Toll revenues are expected to grow at 37.1% CAGR during FY15-17E mainly due to the commencement of operations of major projects under ACL by FY16 despite projects like Katni, Dhule, Nashirabad, etc. completing their concession period in FY15/16. Growth is expected to be led by ACL’s portfolio, which consists of large sized under construction projects vs. ABL’s portfolio where most projects are mature. Furthermore, we expect ACL’s cash profit to grow to | 374 crore in FY17E from | 231.8 crore in FY15 despite building up conservative estimates for the EPC division in FY17E.

Exhibit 8: BOT toll revenue trend

286.

5

292.

8

432.

8

742.

3

813.

1

0

200

400

600

800

1000


(| c

rore

)


Exhibit 9: Cash profit to rise to | 374 crore in FY17E

104.4142.8 146.8

192.1 200.2

112.193.6 85.0

95.5173.8

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

FY 13 FY 14 FY 15 FY 16 E FY 17 E

(| c

rore

)

Construction BOT projects


Consolidated revenue to grow at 17.5% CAGR during FY15-17E…

We expect consolidated net sales to grow at 17.5% CAGR during FY15-17E. Construction revenue growth for ABL in FY15 and FY16 will largely be driven by under construction projects of ACL viz. NH-6-Sambalpur and NH-6-Dankuni Kharagpur and newly won projects such as Chennai ORR and Karnataka State Highway. In addition to this, the T&D order book of | 1,361.2 crore would contribute significantly to EPC revenues. Consequently, the EPC segment is expected to report revenue CAGR of 12.7% during FY15-17E. However, it should be noted that with a majority of under construction projects expected to be completed by FY16E, EPC revenue growth would hinge on new order inflow traction, going ahead.

Despite projects like Katni, Dhule, Nashirabad, etc. completing their concession period in FY15/16, toll revenues are expected to grow at 37.1% CAGR during FY15-17E mainly due to the commencement of operation of major projects under ACL by FY16. We expect projects viz. NH-6 Sambalpur and NH-6 Dankuni to contribute more than 46% to consolidated toll revenues of FY16E and FY17E.


Exhibit 10: Consolidated revenue growth trend

1852

.7

1794

.9

2319

.7

3200

.4

2718

.5

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

FY13 FY14 FY15 FY16E FY17E(|

cro

re)


Exhibit 11: EPC revenue to grow at 12.3% CAGR during FY15-17E

1561

.2

1500

.0

1886

.9

1976

.2

2379

.8

0

500

1000

1500

2000

2500

3000


(| c

rore

)


Exhibit 12: BOT revenue to grow at 37.1% CAGR during FY15-17E

286.

5

292.

8

432.

8

742.

3

813.

1

0

200

400

600

800

1000


(| c

rore

)Sambalpur and Dhankuni will become fully operational by FY16E which will contribute >46% to the consolidated toll revenue


EBITDA to grow at 38.4% CAGR during FY15-17E… The consolidated EBITDA of ABL is expected to grow at a CAGR of 38.4% during FY15-17E given the sharp growth in BOT revenues. EBITDA margins are expected to improve from 20.4% in FY15 to 28.4% in FY17E on the back of an increasing share of BOT revenues, which typically have 75-80% margins. We expect BOT revenue to contribute 25.4% to total revenues in FY17E against 18.7% share in FY14.

Exhibit 13: Consolidated EBITDA margin trend

397.

2

371.

9

474.

0

767.

9

908.

0

20.1

22.120.4

28.2 28.4

200

400

600

800

1000


(| c

rore

)

15

18

21

24

27

30

(%)

EBITDA EBITDA Margin (RHS)


We expect revenues to grow at a CAGR of 17.5% in FY15-

17E from | 2319.7 crore to | 3200.4 crore

EBITDA margins are expected to improve from 20.4% in

FY15 to 28.4% in FY17E on the back of an increasing share

of BOT revenues, which typically have 75-80% margins


Bottomline to remain flat in FY16E; cash profit to remain healthy…

We expect ABL’s bottomline to remain flat in FY16 as all projects become operational leading to higher depreciation and interest outflow. However, we expect PAT to bounce back in FY17E and cash profit to remain healthy at | 374 crore in FY17E.

Exhibit 14: PAT to remain flat

84.2

97.4

81.5

49.7

95.5

4.5

5.4

3.5

1.8

3.0

0

20

40

60

80

100

120


(| c

rore

)

0

1

2

3

4

5

6

(%)

PAT PAT Margin (RHS)


Exhibit 15: Cash profit to remain healthy

216.6239.0 234.2

287.6

374.0

0

100

200

300

400


(| c

rore

)


Return ratios to improve from here on…

Considering the large number of projects under construction, the return ratios of ABL are subdued. However, we anticipate return ratios of ABL to improve from here on as under construction projects become operational. Going ahead, we expect RoEs and RoCEs to bounce back to 6.5 and 4.7 in FY17E, respectively.

Exhibit 16: Return ratios to improve

2.2 2.22.6

3.94.7

6.5 6.56.0

3.6

6.5

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0


RoCE (%) RoE (%)


We expect return ratios of ABL to improve as under

construction projects become operational


Conference call highlights: • In Q2FY16, the company sold land and TDR worth ~| 50 crore, which

resulted in post tax gain of | 35 crore. Beside this, the company has ~270 acres land under its subsidiaries named Viva Highways amounting to ~| 275 crore

• The company won two BOT-annuity projects viz. State Highway

Bagewadi (NH-4)-Bailhongal – Saundatti and State Highway Hungund - Muddebihal – Talikot in September, 2015. Furthermore, both projects will be under ABL’s portfolio and the company expects to get annuity payment of ~| 70 crore each from both projects while equity commitment for the projects would be ~| 110-120 crore

• The company has emerged as lowest bidder in projects worth ~| 450

crore from NHAI and is awaiting the letter of award (LoA) • The average cost of debt for the current quarter stands at 11.4% due

to refinancing of Bhandara and Durg projects

• Dankuni Kharagpur Project received sanction under premium deferment scheme of NHAI

• There was a significant toll revenue decline in Ahmednagar-

Aurangabad project (21.3% decline) due to exemption of toll for cars and state buses & for Dewas Bypass project (28% decline) on account of stoppage of toll collection from August 24, 2015

• The management expects better EPC revenue growth in H2FY16 and

has given a revenue target of ~| 2000crore and order inflow target of | 1500-2000 crore for H2FY16E

• The company bagged its first international opportunities in Maldives

worth | 34 crore. It is also keen on finding opportunities in Africa and Mauritius. The projects in the international markets are expected to have better margins than those in domestic markets

• For the Maldives project, the company will mobilise equipment from

India while the project is set to be completed in 18 months. The company will get 15% as mobilisation advance from the Mauritius government while the rest will be funded by Exim bank

• The company plans to incur capex of | 35-40 crore every year for its

EPC business • The management expects Chennai ORR and KSHIP project to be

completed by April, 2016 • After full commissioning of Sambalpur project, the management

expects a 20% increase in the toll revenues


Outlook and valuation At the CMP, the stock is trading at 1.8x FY17E P/BV. Considering the strong track record, well funded BOT road project portfolio and healthy order book, we remain positive on its long term prospects. Hence, we have a BUY recommendation with a SoTP target price of | 193/share. ABL-BOT: We have valued ABL’s BOT portfolio at | 37.7/share. To value ABL’s BOT portfolio, we have considered the traffic assumption of 4% for FY15 and 6% for FY16E with a toll hike in line with the concession agreement (discussed in detail in key assumptions & sensitivity section). We have valued the ABL portfolio using cost of equity (CoE) of 13%. EPC: We have valued ABL’s EPC business at | 76.3/ share (5x FY17E EV/EBITDA, which is at ~28% discount to other leading construction companies). ACL BOT: To value ACL’s BOT project portfolio, we have considered CoE of 13% for annuity based projects and 14% for toll based projects. We have also considered a traffic assumption of 5% for FY15 and 6% for FY16 and a toll hike in line with the concession agreement (discussed in detail in key assumptions and sensitivity section). Based on these assumptions, we have arrived at ACL’s valuation at | 2022.1 crore. We also highlight that we have incorporated higher dilution of ABL’s stake in ACL due to lesser than expected traffic assumption in Sambalpur project. Hence, we have valued ABL’s 61% stake in ACL at | 1233.5 crore or | 66.0/share. &

Exhibit 17: ABL valuation

Project Name Stake (%)Length

(km)TPC (| crore)

Debt (| crore)

Equity (| crore)

Eq share (| crore) CoE(%)

ABL Equity Value (| cr)

Value/share (| )

Ashoka Buildcon Limited (ABL) - BOT

Aurangabad - Ahmednagar 100.0 42.0 102.7 35.7 67.0 67.0 13.0 5.3 0.3

Katni Bypass 99.9 17.6 70.9 53.5 17.4 17.4 13.0 9.9 0.5

Nashirabad ROB 100.0 4.0 14.7 13.3 1.5 1.5 13.0 10.5 0.6

Sheri Nallah Bridge 100.0 4.0 14.2 7.2 7.0 7.0 13.0 0.0 0.0

Dhule Bypass 99.9 6.0 5.8 5.2 0.6 0.6 13.0 8.4 0.4

Dewas Bypass 100.0 20.0 61.3 36.0 25.3 25.3 13.0 64.2 3.4

Indore Edalabad 99.7 203.0 165 101.5 63.5 63.3 13.0 448.8 24.0

Wainganga Bridge 50.0 13.0 40.9 35.0 5.9 3.0 13.0 93.0 5.0

FOB Eastern Expressway 100.0 NA 3.7 1.8 2.0 2.0 13.0 1.7 0.1

KSHP 51.0 110.0 471.0 287.0 47.0 24.0 13.0 63.3 3.4

Total (ABL)-BOT (A) 419.6 950.2 576.1 237.1 210.9 705.1 37.7

EPC (B) 100.0 1427.9 76.3

ACL stake valuation ( C) 61.0 1233.5 66.0

Less Standalone debt (D) -239.7 -12.8

Total SoTP Valuation (A+B+C-D) 3606.1 193.4

5x FY17 EV/EBITDA


We have a BUY recommendation with an SoTP based

target price of | 193/share


Exhibit 18: ACL valuation

Project Name Stake (%) Length (km)TPC

(| crore) Debt

(| crore)Equity

(| crore)ACL share (|

crore) CoE(%) ACL Equity Value

Ashoka Concession Limited (ACL)

Bhandara 51.0 82.6 528.0 354.5 173.5 60.0 14.0 -22.7

Durg Chhattisgarh 51.0 71.1 630.5 410.0 220.5 100.2 14.0 80.8

Jaora Nayagaon 37.7 85.1 865.1 554.5 310.6 69.0 14.0 464.9

Belgaum Dharwad 100.0 82.0 694.1 479.0 185.0 185.0 14.0 278.5

Sambalpur Baragarh 100.0 88.0 1142.2 810.0 332.2 332.2 14.0 719.6

Dankuni Kharagpur 100.0 11.6 2205.2 1516.2 689.0 689.0 14.0 440.3

PNG 26.0 60.0 1691.0 1183.7 507.3 131.9 14.0 -170.3

Chennai ORR 50.0 32.0 1450.0 1080.0 173.0 86.5 13.0 231.0ACL Valuation 512.4 9206.0 6387.9 2591.1 1653.7 2022.1

ACL stake (%) ` 61.0

ACL stake value 1233.5

ACL stake value per share 66.0


[

Exhibit 19: Valuation metrics Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE(| cr) (%) (|) (%) (x) (x) (%) (%)

FY14 1,794.9 15.6 6.2 16.9 26.6 15.3 6.5 2.2 FY15 2,319.7 29.2 5.2 -16.4 31.8 14.4 6.0 2.6 FY16E 2,718.5 17.2 3.1 -38.9 52.1 9.9 3.6 3.9 FY17E 3,200.4 17.7 6.0 92.0 27.1 8.3 6.5 4.7


[[

Exhibit 20: One year forward P/BV chart

020406080

100120140160180200220

Apr-1

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5

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Pric

e (|

)

Price 0.5x 0.75x 1x 1.25x 1.5x

Source: Bloomberg, ICICIdirect.com Research

[


Company snapshot

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Target Price | 193

Source: Bloomberg, Company, ICICIdirect.com Research Key events

Date EventJun-13 Board approves issue of bonus share in the ratio of 1:2 and stock split in the ratio 1:2Oct-13 Receives total of | 490 crore from SBI Macquarie till Oct 2013Apr-15 Receives fourth tranche of investment of | 133 crore from SBI MacquarieAug-14 On its Pune-Shirur project, tolling stops in accordance with interim order of The Bombay High CourtOct-14 Receives another tranche of equity investment of | 70 crore from SBI MacquarieJan-15 Receives LoA from NHAI for collection of user fee for Kognoli Toll Plaza of NH - 4 in Karnataka for one year with estimated value of | 38.14 croreFeb-15 ABL's Dewas Bypass BOT road project's original concession period as per the Concession Agreement gets completed from February 18, 2015Mar-15 Receives LoA from MoRTH for the Project viz. EPC of rehabilitation and upgrading to two lanes of Madhugiri-Chikkaballapura Mulbagal Section in Karnataka under Mar-15 Plans to buy 36% stake in Jaora Nayagaon Toll Project in MP from existing investors like Srei Infra and IFCI for | 900 croreMar-15 Plans to raise nearly | 500 crore via qualified institutional placement (QIP)May-15 Receives LoA from Karnataka government under Karnataka State Highways Improvement Project (KSHIP), for the project viz. upgradation of road from Badami Jun-15 Ashoka Buildcon's subsidiary Ashoka Highway (Durg) completes refinancing of its debt of | 363.4 crore with IDFCSep-15 Ashoka Buildcon receives LoA from Karnataka Road Development Corporation Ltd (KRDCL) for two projects worth | 440 crore on DBFOMT basis to build the Sep-15 Ashoka Buildcon receives LoA from Mumbai-JNPT Port Road Ltd for construction of NH- 4B from 21.20 km to 27.27 km (D to E Section) and from 0.0 km to 4.49 km

(D to G Section) of JNPT Phase - II (Package - IV) on EPC Basis. The accepted bid value for the project is | 414 crore [

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Katariya (Ashish Ashok) 30-Jun-15 12.5 23.4 (0.2)2 Parakh (Satish Dhondulal) 30-Jun-15 12.1 22.6 (0.0)3 Katariya (Ashok Motilal) 30-Jun-15 10.1 18.9 (0.3)4 Parakh (Shobha Satish) 30-Jun-15 5.6 10.5 (0.1)5 Katariya (Astha Ashish) 30-Jun-15 4.9 9.2 0.06 ICICI Prudential Asset Management Co. Ltd. 30-Jun-15 4.9 9.1 8.67 Katariya (Asha Ashok) 30-Jun-15 4.2 7.9 0.08 L&T Investment Management Limited 30-Jun-15 3.2 6.0 0.09 Parakh (Aditya Satish) 30-Jun-15 2.8 5.3 0.010 DSP BlackRock Investment Managers Pvt. Ltd. 30-Jun-15 2.1 3.9 0.8

(in %) Sep-14 Dec-14 Apr-15 Jun-15 Sep-15Promoter 67.61 67.54 57.24 57.24 57.23FII 3.63 3.69 1.37 10.43 10.62DII 12.63 12.35 27.04 18.42 19.06Others 16.13 16.42 14.35 13.91 13.09

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesICICI Prudential Asset Management Co. Ltd. 23.96m 8.61m ICICI Prudential Life Insurance Company Ltd. -4.33m -1.55m Morgan Stanley Investment Management Pvt. Ltd. 7.35m 2.64m UTI Asset Management Co. Ltd. -0.93m -0.35m Birla Sun Life Asset Management Company Ltd. 4.39m 1.58m Katariya (Ashok Motilal) -0.54m -0.33m Lazard Asset Management, L.L.C. 2.27m 0.82m GMO LLC -0.45m -0.19m DSP BlackRock Investment Managers Pvt. Ltd. 2.11m 0.81m Katariya (Ashish Ashok) -0.45m -0.16m

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore

(| Crore) FY14 FY15 FY16E FY17ENet Sales 1,794.9 2,319.7 2,718.5 3,200.4 Other income 17.3 29.0 26.4 30.3 Total Revenue 1,812.2 2,348.8 2,744.8 3,230.7 Raw Material Expense 40.6 99.2 126.5 234.2 Operating Expenditure 1,242.7 1,595.8 1,674.4 1,970.7 Cost of materials sold 56.1 75.4 75.4 - Employee benefit expenses 58.3 75.4 74.3 87.5 Total Operating Expenditure 1,397.7 1,845.8 1,950.6 2,292.4 EBITDA 397.2 474.0 767.9 908.0 Interest 133.5 272.1 499.4 551.6 Depreciation 141.5 152.7 237.9 278.5 Other income 17.3 29.0 26.4 30.3 PBT 123.7 78.2 57.0 108.2 Taxes 68.8 79.6 94.6 96.3 PAT before MI 54.9 (1.4) (37.6) 11.8 Minority Interest (42.5) (82.8) (107.3) (81.8) Share of Profit from Associates - - (19.9) 1.9 PAT 97.4 81.5 49.7 95.5 Adjusted EPS (Diluted) 6.2 5.2 3.1 6.0


Cash flow statement | Crore

(| Crore) FY14 FY15 FY16E FY17EProfit after Tax 97.4 81.5 49.7 95.5 Depreciation 141.5 152.7 237.9 278.5 Interest 133.5 272.1 499.4 551.6 Others 52.4 58.0 - - Cash Flow before wc changes 511.0 672.9 855.3 991.7 Changes in WC (55.1) (195.6) 127.9 (86.6) Taxes Paid (70.2) (87.5) (94.6) (96.3) Net CF from operating activities 385.8 389.8 888.6 808.8 (Purchase)/Sale of Fixed Assets (1,018.7) (887.3) (700.9) (110.3) Change in Others - Premium Payable (70.5) 19.1 (389.3) (151.1) Net CF from Investing activities (922.3) (812.2) (1,023.8) (231.1) Increase/Decrease in NW 114.6 12.7 (23.2) - Increase/Decrease in Debt 649.7 681.1 1,156.8 175.4 Interest Paid (133.5) (272.1) (499.4) (551.6) Change in Minority Interest 185.8 40.2 (107.3) (81.8) Net CF from Financing activities 579.0 369.4 526.9 (457.9) Net Cash flow 42.5 (53.0) 391.7 119.8 Opening Cash 51.7 94.3 41.3 433.0 Closing Cash/ Cash Equivalent 94.3 41.3 433.0 552.7


Balance sheet | Crore

(| Crore) FY14 FY15 FY16E FY17ELiabilitiesEquity Capital 79.0 79.3 93.5 93.5 Reserve and Surplus 1,168.9 1,277.6 1,289.9 1,385.5 Total Shareholders funds 1,262.8 1,356.9 1,383.5 1,479.0 Minority Interest 464.5 504.8 397.5 315.7 Total Debt 3,103.2 3,784.3 4,941.1 5,116.6 Deferred Tax Liability (2.1) (10.0) (10.0) (10.0) Other- NHAI Premium Payable 7,760.6 7,779.7 7,390.4 7,239.3 Total Liabilities 12,589.0 13,416.0 14,103.0 14,141.0 AssetsGross Block 4,671.8 13,202.3 13,771.8 14,272.8 Less Acc. Dep 646.7 631.1 963.8 1,256.2 Net Block 4,025.0 12,571.2 12,808.0 13,016.6 Capital WIP 7,962.1 150.5 376.8 - Total Fixed Assets 11,987.1 12,721.8 13,184.8 13,016.6 Investments 284.7 234.5 179.8 179.8 Inventory 627.2 728.6 895.5 1,022.3 Sundry Debtors 130.5 364.4 197.7 232.7 Loans & Advances 308.7 459.4 380.6 448.1 Cash & Bank Balances 94.5 41.0 445.4 610.6 Other Current Assets 83.5 101.3 135.9 160.0 Total Current Assets 1,244.4 1,694.6 2,055.1 2,473.6

Other Current Liabilities 776.3 1,037.4 1,121.4 1,288.2 Provisions 150.8 197.8 197.8 197.8 Net Current Assets 317.3 459.4 735.9 987.7

Total Assets 12,589.0 13,416.0 14,100.0 14,184.0


Key ratios

FY14 FY15 FY16E FY17EPer Share Data (|)EPS - Diluted 6.2 5.2 3.1 6.0 Cash EPS 15.1 14.8 15.4 20.0 Book Value 79.9 85.9 87.6 93.6 Dividend per share 2.0 2.0 2.0 - Operating Ratios (%)EBITDA / Net Sales 22.1 20.4 28.2 28.4 PAT / Net Sales 4.6 3.5 1.8 3.0 Inventory Days 127.5 114.6 120.2 116.6 Debtor Days 26.5 57.3 26.5 26.5 Creditor Days - - - - Return Ratios (%)RoNW 6.5 6.0 3.6 6.5 RoCE 2.2 2.6 3.9 4.7 RoIC 5.6 2.4 4.0 4.6 Valuation Ratios (x)EV / EBITDA 15.3 14.4 9.9 8.3 P/E (Diluted) 26.6 31.8 52.1 27.1 EV / Net Sales 3.4 2.9 2.8 2.4 Market Cap / Sales 1.7 1.3 1.1 1.0 Price to Book Value (Diluted) 2.1 1.9 1.9 1.8

Solvency Ratios (x)Net Debt / Equity - - - - Debt / EBITDA 7.8 8.0 6.4 5.6 Current Ratio 1.2 1.3 1.2 1.3

Quick Ratio 0.6 0.7 0.5 0.6



ICICIDirect.com coverage universe (Infrastructure)

CMP M Cap(|) TP(|) Rating (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

IRB Infra (IRBINF) 254 260 Hold 8,927 16.3 17.7 17.0 15.6 14.4 14.9 8.3 6.6 6.9 1.9 1.8 1.6 12.4 12.3 10.9Ashoka Buildcon (ASHBUI) 164 193 Buy 3,059 5.2 3.1 6.0 31.8 52.1 27.1 14.4 9.9 8.3 1.9 2.2 2.1 6.0 3.6 6.5

Sector / CompanyRoE (%)EPS (|) P/E (x) EV/EBITDA (x) P/B (x)


RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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Documents

November 10, 2015 Rating matrix Ashoka Buildcon (ASHBUI) · PDF fileNovember 10, 2015 Result Update ICICI Securities Ltd | Retail Equity Research New order wins improve visibility