Afcons gains traction on Street with margin boost, order flows

Afcons Infrastructure, a recently listed company from the Shapoorji Pallonji group, has reported renewed traction on bourses after its September quarter result was declared over the past weekend. Though the company reported year-on-year fall in revenue due to seasonal weakness, margin improvement and traction in order book were key positives. The stock has gained around 7% over the IPO price of Rs 463 in a choppy market since its debut on November 4 after failing to earn listing gains.

The order book expanded to Rs 34,152 crore in the September 2024 quarter from Rs 31,747 crore at the end of the previous quarter. The urban infrastructure segment consisting of metro and bridge projects formed nearly 57% of the second quarter order book while hydro contributed 25.5%. Of the total order book, 83% was in the domestic market while the rest was overseas. The share of government projects was 80%.

The book-to-bill ratio increased to 2.7 from 2.5 by similar comparison. In addition, the company emerged as the lowest bidder (L1) in orders worth Rs 10,154 crore during the September quarter. These factors offer improved revenue visibility considering that the latest order book size combined with L1 orders is three times the FY24 revenue of Rs 13,267.5 crore.

Founded in 1959, Afcons became a part of Shapoorji Pallonji Group in 2000. Barring buildings and factories where its parent group is actively involved, and electrical substations which face immense competitive pressure, the company is present across all other segments of infrastructure.

The company’s revenue fell by 11% year-on-year to Rs 2,960 crore in the September quarter amid heavy rainfall and floods across various parts of the country affecting project execution. The operating margin before depreciation and amortisation (EBITDA margin) improved by 230 basis points to a record 13.8%, reflecting higher operating efficiency. Net profit grew by 30% to Rs 135 crore.

Afcons raised Rs 5,430 crore in October through an initial public offering. Of this, Rs 1,250 crore was a fresh issue. The company subsequently used Rs 600 crore from the fresh component of the IPO to reduce debt, which will be reflected in the balance sheet in subsequent quarters. As of September 2024, net debt was Rs 2,640 crore and net debt-equity ratio was 0.7.

At Wednesday’s closing stock price of Rs 495 on the BSE, the company’s enterprise value (EV) was 13 times the annualised EBITDA in the first half of FY25. The stock of the larger peer Larsen and Toubro was available at an EV/EBITDA of 24 calculated in a similar way.