Buy Ashoka Buildcon, target Rs 328: Edelweiss

Edelweiss has a buy call on Ashoka Buildcon Ltd. with a target price of Rs 328.0 . The current market price of Ashoka Buildcon Ltd. is Rs 157.4 Time period given by the brokerage is a year when Ashoka Buildcon Ltd. price can reach defined target. Ashoka Buildcon Ltd., incorporated in the year 1993, is a midcap company with a market cap of Rs 4710.54 crore.

Investment rationale by Edelweiss

We recently interacted with Ashoka Buildcon’s (ABL) management to gain insights into the company’s future plans. Management is targeting order intake of ~INR50-60bn in FY19 and has guided for 40% top line growth each in FY19 and FY20, backed by a robust order book of ~INR119bn (>5x FY18 EPC revenues). It stated that ABL is in advanced stage of tying up funds for five HAM projects and expects to achieve financial closure (FC) for them over the next quarter. In our view, a lean balance sheet (debt:equity at 0.1x) will enable ABL to benefit from likely moderation in competition for HAM projects. Likely pick up in execution and robust traffic growth reinforce our bullish stance on ABL. Maintain ‘BUY’ with SOTP‐based target price of INR328.