RESULTS REVIEW 2QFY18 14 NOV 2017

Ashoka Buildcon
BUY
INDUSTRY INFRASTRUCTURE Bottoming out
CMP (as on 13 Nov 2017) Rs 207 ASBLs 2QFY18 net revenue declined ~14.5% YoY to Highlights of the Quarter
Rs 3.8bn, owing to (1) Land compensation-related Adjusted toll collection grew 16% YoY: Adjusted for
Target Price Rs 274
agitation on Eastern Peripheral project, and (2) GST the expiration of the Indore projects toll, 2QFY18
Nifty 10,225 negotiation with T&D segment supplier chain. This collection grew 16% YoY, on the back of 14.3% YoY
Sensex 33,034 resulted in Rs 2bn of execution miss. With these growth in ACL projects toll collection. The Bhandara
KEY STOCK DATA issues settling, execution has picked from Sep-2017. and Durg projects recorded muted YoY growth.
Bloomberg ASBL IN Adjusted for toll hikes - JN at 7.1%, Dhankuni, Belgaum
EBIDTA margins declined 242bps to 13.3%, largely and Sambalpur at 4%, traffic in these projects grew
No. of Shares (mn) 187
led by higher employee cost (+184bps YoY). APAT at 10.4%, 11.9%, 12.5% and 11.0% respectively YoY.
MCap (Rs bn) / ($ mn) 39/593
Rs 327mn declined ~28% YoY. Increased interest cost
6m avg traded value (Rs mn) 62 Pending equity requirement of Rs 4.5bn: is to be
of Rs 115mn (+43.7% YoY) was offset by lower taxes
STOCK PERFORMANCE (%) invested over two to three years (Roads at Rs 1.8bn,
on account of deferred tax adjustments of Rs 41mn. City gas at Rs 0.30bn and Realty Rs 2.4bn). SBI-
52 Week high / low Rs 244/137
3M 6M 12M Despite no new order wins during 1HFY18, ASBL Macquaries stake sale is in an advanced stage, and
maintained order inflow guidance of Rs 30-40bn. may take place by FY18E.
Absolute (%) 17.5 (1.4) 30.0
Relative (%) 11.7 (10.9) 6.8 NHAI awards, may pick up pace after the 1HFY18 lull. Standalone gross D/E at 0.06x: ABLs standalone/
SHAREHOLDING PATTERN (%)
We roll forward our valuation to Sep-19E and raise consolidated gross debt stood at Rs 1,398mn/Rs
Promoters 56.64
our P/E multiple to 18x (vs 15x earlier). We maintain 44.9bn. ABL highlighted that debtors have increased to
BUY on ASBL with an increased TP of Rs 274/sh. 7.2bn in Q2FY18 on captive billing.
FIs & Local MFs 26.71
FPIs 5.87
Public & Others 10.78
Financial Summary (Standalone)
Year Ending March (Rs mn) 2QFY18 2QFY17 YoY (%) 1QFY18 QoQ (%) FY17* FY18* FY19E* FY20E*
Source : BSE
Net Sales 3,787 4,428 (14.5) 7,228 (47.6) 29,753 34,277 37,723 42,783
Parikshit D Kandpal EBITDA 505 698 (27.6) 975 (48.2) 8,946 9,804 10,728 12,249
parikshitd.kandpal@hdfcsec.com APAT 327 454 (28.0) 619 (47.2) (100) 427 1,314 1,502
+91-22-6171-7317 Diluted EPS (Rs) 1.7 2.4 (28.0) 3.3 (47.2) (0.5) 2.3 7.0 8.0
P/E (x) (389) 90.8 29.5 25.8
Kunal Bhandari EV / EBITDA (x) 9.5 9.0 8.5 7.4
Kunal.bhandari@hdfcsec.com RoE (%) (0.6) 2.6 7.7 8.3
+91-22-6171-7319 Source: Company, HDFC sec Inst Research, * Consolidated

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

Revenue, EBIDTA and PAT Standalone Quarterly Financial

estimates were 27.2 /23.3 Particulars (Rs mn) 2QFY18 2QFY17 YoY (%) 1QFY18 QoQ (%) 1HFY18 1HFY17 YoY (%)
/14.1% below our estimates, Net Sales 3,787 4,428 (14.5) 7,228 (47.6) 11,015 9,111 20.9
mainly on account of a Material Expenses 2,864 3,352 (14.6) 5,777 (50.4) 8,641 7,115 21.4
decline in EPC revenue Employee Expenses 247 207 19.2 269 (8.0) 516 406 27.0
Other Operating Expenses 171 171 0.2 208 (17.7) 379 249 52.1
EPC revenue declined 17.1% EBITDA 505 698 (27.6) 975 (48.2) 1,480 1,341 10.4
YoY to Rs 3,382mn. While Depreciation 130 130 0.0 113 14.7 243 253 (3.8)
sales from goods grew to Rs EBIT 375 568 (33.9) 862 (56.5) 1,237 1,088 13.7
328mn (19.3% YoY), Other Income 108 90 19.6 92 17.3 200 172 16.3
revenues from BOT declined Interest Cost 115 80 43.7 129 (11.2) 244 204 19.8
~8.3% YoY to Rs 77mn PBT 368 578 (36.3) 824 (55.4) 1,192 1,056 12.9
Tax 41 124 (66.9) 205 (80.0) 246 293 (16.0)
ASBL lost about Rs 2bn of RPAT 327 454 (28.0) 619 (47.2) 946 763 24.0
Source: Company, HDFC sec Inst Research
revenue on account of (1)
Agitation in the Eastern
Margin Analysis
peripheral project, and (2)
MARGIN ANALYSIS 2QFY18 2QFY17 YoY (%) 1QFY18 QoQ (%) 1HFY18 1HFY17 YoY (%)
GST negotiation with T&D
Material Expenses % Net Sales 75.6 75.7 (8) 79.9 (429) 78.4 78.1 35
vendors impacted power
Employee Expenses % Net Sales 6.5 4.7 184 3.7 281 4.7 4.5 22
segment revenue
Other Operating Expenses % Net Sales 4.5 3.9 66 2.9 164 3.4 2.7 71
EBITDA Margin (%) 13.3 15.8 (242) 13.5 (15) 13.4 14.7 (128)
The issues have been
Tax Rate (%) 11.1 21.5 (1,031) 24.9 (1,373) 20.6 27.7 (711)
resolved and work has re-
APAT Margin (%) 8.6 10.3 (162) 8.6 7 8.6 8.4 22
started from Sep-17
Source: Company, HDFC sec Inst Research

APAT at Rs 327mn declined

~28% YoY

EBIDTA margins declined

242bps to 13.3%, largely led
by higher employee cost
(+184bps YoY)

Page | 2
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

ABLs 2QFY18 order book Order Book Assumptions

Rs mn FY16 FY17 FY18E FY19E FY20E
stands at Rs 61.1bn, with no
new order wins during the Opening Order Book 32,126 41,106 70,047 88,682 1,08,674
quarter. ABL has guided for Add: New Order Wins 28,219 39,255 43,966 48,362 50,780
Rs 30-40bn order inflows in Less: Orders Executed 19,239 21,087 25,330 28,370 32,342
FY18E, with bidding Closing Order Book 41,106 70,047 88,682 1,08,674 1,27,113
expected to pick up from Order Book/Sales (x) 2.1 3.3 3.5 3.8 3.9
Source: Company, HDFC sec Inst Research
3QFY18E

We have assumed Rs
44/48bn of new order Order Book Skewed Towards Roads EPC and HAM Within Roads - HAM Captive Increasing
inflows during FY18/19E Roads - BOT Roads - EPC Roads - HAM Power T&D Roads - BOT Roads - EPC Roads - HAM
100% 100%
Roads segments (EBIDTA
80% 80%
margins of 12-12.5%) order
book has declined 60% 60%
sequentially vs. the T&D
order book which has 40% 40%
remained constant (EBIDTA
20% 20%
margins of 9-10%)
0% 0%
HAM captive order book

2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
with better margins is
increasing vs EPC order book
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
ABL claims to have 100bps
higher margins in captive
HAM projects, and with
increasing share of HAM,
EBIDTA margins may remain
in the 12-13% band, though
ASBL in the 2QFY18 call has
guided for 13.5-15.5%
EBIDTA margins

Page | 3
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

We expect ABLs order book EPC-Order Book To Multiply 1.4x Over FY18-20E % BOT EBIDTA To Increase To 67% By FY20E
Order Book (Rs bn) EPC Revenues (Rs bn) EPC EBITDA (Rs bn) BOT EBITDA (Rs bn)
to multiply 1.4x over FY18-
Order book/sales (x) - RHS % BOT EBITDA Contribution
20E
135 6.0 14.0 80.0
120 12.0 70.0
105 5.0 60.0
% BOT EBIDTA to increase to 90
10.0
50.0
67% by FY20E 75
4.0 8.0
40.0
60 6.0
3.0 30.0
Order book growth to mirror 45
4.0 20.0
ordering in roads and T&D 30 2.0
15 2.0 10.0
segments
- 1.0 - -

FY12

FY13

FY14

FY15

FY16

FY17

FY18E

FY19E

FY20E

FY20E
FY12

FY13

FY14

FY15

FY16

FY17

FY18E

FY19E
BOT revenue may de-grow
during FY18-19E, as ABLs Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
toll projects are expiring in
FY18E. This may result in toll Consolidated Net D/E Ratio To Remain Around 2.8x ABL To Generate FCFF Of ~Rs 8bn In FY20E
Net Debt (Rs bn) Net D/E Ratio (x) - RHS Cons.EBITDA (Rs bn)
revenue contraction largely
Cons. Cash flow from operations (Rs bn)
contributed by Indore, 60 3.5
Cons. FCF (Rs bn) - RHS
Wainganga and 50 3.0 14.0 10.0
Aurangabad projects 2.5 12.0 8.0
40 6.0
10.0
2.0
30 4.0
8.0
Strong FCFF to result in 1.5 2.0
20 6.0
stable gross consolidated 1.0 -
4.0 (2.0)
debt. Incremental borrowing 10 0.5 2.0 (4.0)
only for BOT projects
- - - (6.0)
funding
FY12

FY13

FY14

FY15

FY16

FY17

FY15

FY16

FY17
FY18E

FY19E

FY20E

FY18E

FY19E

FY20E
Consolidated Net D/E to
reduce to ~2.8x by FY20E Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Page | 4
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

Toll revenue growth picking pace Value BOTs at Rs 76/sh

Adjusted for toll hikes JN-
7.1%, Dhankuni, Belgaum ABLs consolidated 2QFY18 BOT toll collections grew PNG: PNG has terminated the project and handed over
and Sambalpur- 4%. Traffic ~1% YoY to Rs 2,368mn. Whilst ACL projects grew toll collection to NHAI on 13-Apr-2016. ABL has
in these projects grew ~14.3% YoY, ABL projects toll de-grew ~34.2% YoY. written off Rs 1.4bn on account of equity investment.
10.4%, 11.9%, 12.5% and ABLs de-growth was on account of expiry of Indore The consortium has claimed compensation from NHAI
11.0%respectively project collection rights on 18-Feb-2017. Adjusted for amounting to Rs 17.5bn, including debt (equity portion
the Indore project, ABLs standalone toll grew 24.5% will be Rs 5.5bn, ABL share Rs 1.4bn). Final NHAI award
YoY. is awaited.
Other ACL projects like
Bhandara and Durg are still Adjusted for toll hikes JN- 7.1%, Dhankuni, Belgaum Balance equity requirement: Rs 4.5bn is the
reporting muted growth and Sambalpur- 4%, traffic in these projects grew requirement over the next two to three years. Real
10.4%, 11.9%, 12.5% and 11.0% YoY respectively. estate Rs2.4bn, Roads Rs 1.8bn and Rs 0.3bn for its
Other ACL projects like Bhandara and Durg are still Ratnagiri city gas project. The investment will be
Total pending equity
reporting muted growth. ASBL attributed the traffic spread over FY18E Rs 1.9bn, FY19E - Rs 1.95bn and
requirement is Rs 4.5bn to growth to a pick up in the economy. FY20E Rs 0.5bn.
be invested over 2-3 years.
Roads Rs 1.8bn, City gas Rs Sambalpur project: The toll collection post full COD
HAM project: The Anandpuram - Ranastalam projects
has improved to Rs 1.54mn/day. Mining recovery will
0.30bn and Realty Rs 2.4bn financial closure was achieved at 9.1%, and for Rs
add another Rs 0.4mn/day, and plugging of leakages
4.2bn loan amount.
will add Rs 0.15mn/day incrementally. Despite this, Rs
We have valued ABLs 61% 1.9mn/day toll would be 25% lower vs. est.
stake in ACL projects at Rs
40.5/sh and the direct BOTs Project Value for ABL Per share value
BOT Project Valuation Stake (%) WACC (%)
at Rs 35.4/sh. The total Value (Rs mn) (Rs mn) (Rs/sh)
asset portfolio is valued at NH-4-Belgaum Dharwad 100 14 2,075 2,075 6.8
Rs 75.9/sh NH-6-Sambalpur Baragarh 100 14 (987) (987) (3.2)
NH-6-Dhankuni Kharagpur 100 14 4,176 4,176 13.6
NH-6-Durg (Chattisgarh - Maharashtra) 51 14 1,313 670 2.2
Mudhol Nipanis first semi- NH-6-Bhandara (Maharashtra Chattisgarh) 51 14 592 302 1.0
annual annuity payment is SH-31-Jaora Nayagaon 38 14 13,985 5,278 17.2
expected during Oct-17E (Rs Chennai ORR 50 14 1,810 905 2.9
395mn). ABL has applied for Total Ashoka Concessions @ 61% stake 14 22,964 12,418 40.5
Chennai ORR COD and ABL-Ahmednagar-Aurangabad 100 14 242 242 1.3
expects to receive the ABL-Nashirabad 100 14 120 120 0.6
completion certificate VHPL-Indore Edalabad 100 14 851 851 4.5
during 2HFY18E JAIPL-Wainganga 50 14 707 353 1.9
SH-31-Jaora Nayagaon 36 14 13,985 5,063 27.1
Total ABL Projects 15,906 6,630 35.4
TOTAL BOT Value 38,870 14,205 75.9
Source: Company, HDFC sec Inst Research

Page | 5
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

Key Assumptions And Estimates - Standalone

We expect ABLs order book Key Assumptions Growth%
FY18E FY19E FY20E Comments
to multiply 1.4x over FY18- (Rs mn) FY18E FY19E FY20E
20E Order-book (INR mn)
Opening Order Book 70,047 88,682 108,674
FY18-20E order inflow CAGR ABL has guided for Rs 30-40bn of
of 7.5% will largely be driven Add: New Order Wins 43,966 48,362 50,780 12.0 10.0 5.0
new orders in FY18E
by Hybrid Annuity and third- Less: Orders Executed 25,330 28,370 32,342
party NHAI road EPC
Closing Order Book 88,682 108,674 127,113 26.6 22.5 17.0 19.7% FY18-20E CAGR
projects
Trailing Order Book/Sales (x) 3.5 3.8 3.9
FY18-20E EPC revenue CAGR Revenue 25,330 28,370 32,342 20.1 12.0 14.0 13% FY18-20E EPC revenue CAGR
of 13% EBIDTA EPC 3,116 3,518 4,043 (10.7) (11.4) (13.0) 13.9% FY18-20E EPC EBIDTA CAGR
EBIDTA margins to remain in 12-
EBIDTA margins EPC 12.3 12.4 12.5 (88.8) 10.0 10.0
12.5% range
EPC EBIDTA margins to Depreciation 481 539 604 12.1 12.1 12.1
remain in 12-12.5% band 17.3% finance cost CAGR as WC
Financial Charges 501 643 689 (24.3) 28.4 7.2 demand picks up with execution
ramp up in roads projects
Financial charges jump Other income 398 319 341 (45.0) (20.0) 7.2
sharply over FY18-20E, as 10.5% FY18-20E PBT CAGR on
PBT 2,532 2,654 3,090 4.9 4.8 16.4
ABLs working capital account of higher interest cost
demands increases with an PBT margin (%) 10.0 9.4 9.6 (12.7) (6.4) 2.1
execution ramp-up Tax 633 823 958
Tax rate (%) 25.0 31.0 31.0 76.6 600.0 - From FY19-20E MAT benefit expires
PAT 1,899 1,831 2,132 3.8 (3.6) 16.4 6% FY18-20E Profit CAGR
6% FY17-19E APAT CAGR as
PAT margin (%) 7.5 6.5 6.6 (117.7) (104.2) 13.8
ABL moves to full tax rate,
Source: HDFC sec Inst Research
and high interest costs
impact profitability

Page | 6
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

We expect ABL to deliver Key Assumptions And Estimates - Consolidated

Growth%
11.7% FY18-20E revenue Key Assumptions (Rs mn) Comments
FY18E FY19E FY20E FY18E FY19E FY20E
CAGR. This will largely be
driven by EPC revenue CAGR Toll revenue 8,947 9,352 10,441 3.2 4.5 11.6
EPC revenue 25,330 28,370 32,342 20.1 12.0 14.0 13% FY18-20E EPC revenue CAGR
of 13%
Total Revenue 34,277 37,723 42,783 15.2 10.1 13.4 11.7% FY18-20E revenue CAGR
10.8% FY18-20E EBIDTA CAGR as all toll
Jaora Nayagaon project is
EBIDTA Toll 6,688 7,210 8,207 8.5 7.8 13.8 projects start contributing to revenue and
now being consolidated EBIDTA margin expands
from FY17. ABL holds EBIDTA EPC 3,116 3,518 4,043 12.0 12.9 14.9 13.9% FY18-20E EPC EBIDTA CAGR
36.26%, ACL 37.74% and Total EBIDTA 9,804 10,728 12,249 9.6 9.4 14.2 11.8% FY18-20E EBIDTA CAGR
Macquarie 26%. ABLs Margins expansion in line with growth in high
EBIDTA margins toll 74.8 77.1 78.6 360.8 233.8 151.1
economic interest in the margin toll revenue
project is 59.3% EBIDTA margins EPC 12.3 12.4 12.5 (88.8) 10.0 10.0
EBIDTA Margins 28.6 28.4 28.6 (146.7) (16.2) 19.3
Depreciation 2,790 2,934 3,623 2.0 5.2 23.5
BOT margins to expand as Borrowing cost includes about Rs 2.7bn of non
toll growth picks up cash item on account of intangible now being
treated at NPV value vs absolute amount
earlier. This has resulted in Rs 55bn reduction
Financial Charges 7,497 7,384 7,582 (5.1) (1.5) 2.7
in NHAI premium deferral. Interest provisioning
will accrue to NPV through P&L and is non cash.
Earlier it was capitalized and reflected in
amortization
Other income 1,346 1,508 1,523 Will include annuity projects profitability
High tax rate as ABL pays PBT 863 1,918 2,567 (286.1) 122.1 33.9
tax on profit-making BOTs PBT margin (%) 2.5 5.1 6.0 407.8 256.5 91.7
at MAT and full tax on EPC Tax 912 1,058 1,261 15.5 16.1 19.1
Tax rate to remain high as MAT is incurred on
Tax rate (%) 105.6 55.2 49.1 27,580.7 (5,042.2) (608.1) profitable BOT projects, while losses offset
standalone profits

Page | 7
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

Growth%
Non-controlling interest Key Assumptions (Rs mn) FY18E FY19E FY20E Comments
FY18E FY19E FY20E
attribution to result in net
RPAT (48) 859 1,306
profit over FY18-20E Minority losses on account of initial years losses in BOT
Loss/(Profit) Minority (421) (455) (196)
projects
Profits from Wainganga. Loss making PNG project has
Share of Profit/loss Asso. 54 - - been terminated and hence profit from the associate
has improved
Net Profit 427 1,314 1,502 (528.1) 208.2 14.3
Gross Block Turnover 0.4 0.4 0.5 16.1 9.9 13.8
Debtor days 65 72 66 8.6 9.5 (8.0)
CFO - a 7,990 6,631 11,134
CFI - b (3,238) (1,843) (1,828) Includes equity investments in BOTs
Change in cash position FCF - a+b 4,752 4,787 9,306 Strong free cash flow generation as growth picks up
doesnt impact debt position CFF - c (4,935) (4,822) (9,020) Surplus cash flow utilised to repay debt service interest
materially Net change in cash doesnt impact debt position
Total change in cash - a+b+c (183) (34) 286
materially
Source: HDFC sec Inst Research

Change In Estimates - Consolidated

Rs mn FY18E Old FY18E New % Change FY19E Old FY19E New % Change
Revenues 33,513 34,277 2.3 38,371 37,723 (1.7)
EBIDTA 9,731 9,804 0.7 10,874 10,728 (1.3)
EBIDTA Margins (%) 29.0 28.6 (43.5) 28.3 28.4 10.0
APAT 306 427 39.4 1,331 1,314 (1.2)
Marginal changes in
Adj. EPS (INR) 1.6 2.3 39.4 7.1 7.0 (1.2)
consolidated and
Source: Company, HDFC sec Inst Research
standalone financials
Change In Estimates - Standalone
Rs mn FY18E Old FY18E New % Change FY19E Old FY19E New % Change
Revenues 24,566 25,330 3.1 29,019 28,370 (2.2)
EBIDTA 3,022 3,116 3.1 3,598 3,518 (2.2)
EBIDTA Margins (%) 12.3 12.3 - 12.4 12.4 0
APAT 1,761 1,899 7.9 1,886 1,831 (2.9)
Adj. EPS (INR) 9.4 10.1 7.9 10.1 9.8 (2.9)
Source: Company, HDFC sec Inst Research

Page | 8
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

We value ABLs BOT Outlook and valuation

portfolio at Rs 76/share
(1.1x invested equity)
We value standalone EPC
business at Rs 191/share
(18x one-year forward
Sep-19E EPS vs 15x one-year
forward Mar-19E EPS
earlier)
Real Estate land holding at
Rs 7/share (0.5x P/BV)
Target Price of Rs 274/sh implies 32.3% upside
We have valued ABL standalone on a P/E basis at 18x
one-year forward (vs 15x earlier). Multiple increase is
in-line with peer groups valuation. Our rationale
behind this is (1) Strong order book with ~1.4x increase
over the FY18-20E period to Rs 127bn, (2) Stable
balance sheet (FY20E standalone net D/E at 2.8x), and
(3) Limited equity support requirement from ACL (Rs
4.5bn). Further, with the reduction of the share of T&D
revenue in the mix, the working capital cycle may
improve, leaving scope for further balance sheet
improvement.
ABL has guided for higher EPC margins, now in the
13.5-15.5% range in-line with peers like KNR/PNC. We
have captured this partly in the higher EPC multiple of
18x (in-line with peers). Further, multiple expansion is
supported by ABLs (1) Diversified presence in Roads
and T&D segments, the biggest beneficiary of
government spending, (2) Strong execution capability,
and (3) Likely support from the captive order book in
lieu of any contraction in future roads EPC orders. The
government-led spends in the infrastructure sector will
continue to drive stock performance. ABL, with its
strong credentials, will likely benefit from the pick-up
in ordering activity. The company, over the past many
years, has built strong pre-qualification in potentially
large ordering segments such as roads and T&D.
We have valued the toll business separately under
Ashoka Concessions and ABLs direct projects. We have
used 14% discount rate for arriving at a NPV of the
projects. Our estimates for Sambalpur/
Dhankuni/Belgaum are lower vs. consensus. We value
the BOT business at Rs 76/sh (1.1x of ABL invested
equity).
We maintain BUY with a TP of Rs 274/share. We peg
(1) Standalone EPC business at Rs 191/share (18x Sep-
19E EPS), (2) ABL BOT projects at Rs 76/share, and (3)
land at 0.5x historical costs at Rs 7/share.

SOTP Valuation
Project Value for ABL (Rs mn) Per share value
Segment Comments
Value (Rs mn) @ 61% stake (Rs/sh) @ 61% stake
Ashoka Concessions Ltd 22,964 7,575 41 DCF using 14% WACC
Maintain BUY with ABL direct Projects 15,906 6,630 35 DCF using 14% WACC
increased SOTP-based target TOTAL BOT Value 38,870 14,205 76
price to Rs 274/sh vs Rs Standalone construction - EPC 35, 673 191 Standalone 18x Sep-19E EPS
249/sh earlier. Target price Land 1,391 7 0.5x P/BV
increase largely on account SOTP Value 51,270 274
of increase in EPC segments Source: HDFC sec Inst Research
attributable multiple to 18x
vs 15x earlier

Page | 9
 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

Income Statement (Consolidated) Balance Sheet (Consolidated)

Year ending March (Rs mn) FY16 FY17 FY18E FY19E FY20E Year ending March (Rs mn) FY16 FY17 FY18E FY19E FY20E
Net Revenues 28,249 29,753 34,277 37,723 42,783 SOURCES OF FUNDS
Growth (%) 21.8 5.3 15.2 10.1 13.4 Share Capital 936 936 936 936 936
Material Expenses 17,022 18,563 22,101 24,503 27,858 Reserves 16,210 15,782 15,770 16,647 17,711
Employee Expenses 959 1,182 1,300 1,398 1,537 Total Shareholders Funds 17,146 16,717 16,706 17,582 18,647
Other Operating Expenses 1,085 1,061 1,073 1,094 1,138 Minority Interest 5,625 4,490 4,069 3,614 3,418
EBIDTA 9,183 8,946 9,804 10,728 12,249 Long Term Debt 42,294 45,488 48,488 51,488 50,488
EBIDTA Margin (%) 32.5 30.1 28.6 28.4 28.6 Short Term Debt 4,625 2,056 2,056 2,056 2,056
EBIDTA Growth (%) 94.1 (7.5) (4.9) (0.6) 0.7 Total Debt 46,920 47,544 50,544 53,544 52,544
Depreciation 2,690 2,735 2,790 2,934 3,623 Net Deferred Taxes (221) (202) (202) (202) (202)
EBIT 6,492 6,211 7,014 7,794 8,627 Other Non Current Liabilities 27,307 28,485 28,836 29,190 29,550
Other Income (Incl EO items) 241 1,224 1,346 1,508 1,523 TOTAL SOURCES OF FUNDS 96,775 97,035 99,953 103,729 103,957
Interest 7,996 7,899 7,497 7,384 7,582 APPLICATION OF FUNDS
PBT (1,263) (464) 863 1,918 2,567 Net Block 85,148 83,695 83,905 83,971 83,348
Tax 974 790 912 1,058 1,261 CWIP/Intangible assets under
200 366 2,213 2,922 1,865
RPAT (1,383) (1,154) (421) (455) (196) development
Minority Interest/Share of Investments 2,276 1,863 1,600 1,800 2,000
(854) (100) 373 1,314 1,502
associates Total Non-current Assets 87,624 85,924 87,718 88,693 87,212
Share Profit/(loss) from associates - - 54 - - Inventories 10,731 12,036 13,157 13,315 14,337
EO Items 299 - - - Debtors 5,161 4,910 6,140 7,397 7,720
APAT (554) (100) 427 1,314 1,502 Cash & Equivalents 1,709 1,023 840 806 1,091
APAT Growth (%) (168.0) (82.0) (528.1) 208.2 14.3 Other Current Assets 4,325 7,355 8,034 8,917 9,824
Adjusted EPS (Rs/sh) (3.0) (0.5) 2.3 7.02 8.03 Total Current Assets 21,927 25,323 28,171 30,434 32,972
EPS Growth (%) (168.0) (82.0) (528.1) 208.2 14.3 Creditors 5,400 5,744 7,456 6,904 7,720
Source: Company, HDFC sec Inst Research Other Current Liabilities & Provns 7,375 8,467 8,480 8,494 8,508
Total Current Liabilities 12,775 14,211 15,936 15,398 16,228
Net Current Assets 9,152 11,112 12,235 15,036 16,744
TOTAL APPLICATION OF FUNDS 96,775 97,035 99,953 103,729 103,957
Source: Company, HDFC sec Inst Research

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 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

Cash Flow (Consolidated) Key Ratios (Consolidated)

Year ending March (Rs mn) FY16 FY17 FY18E FY19E FY20E FY15 FY16 FY17E FY18E FY19E
Reported PBT (1,263) (464) 863 1,918 2,567 PROFITABILITY (%)
Non-operating & EO items (566) (799) (1,292) (1,508) (1,523) GPM 39.7 37.6 35.5 35.0 34.9
Interest expenses 7,996 7,899 7,497 7,384 7,582 EBITDA Margin 32.5 30.1 28.6 28.4 28.6
Depreciation 2,690 2,735 2,790 2,934 3,623 EBIT Margin 23.0 20.9 20.5 20.7 20.2
Working Capital Change (6,524) (2,608) (956) (3,039) 146 APAT Margin (2.0) (0.3) 1.2 3.5 3.5
Tax Paid (1,095) (744) (912) (1,058) (1,261) RoE (3.6) (0.6) 2.6 7.7 8.3
Minority Interest 1,270 1,025 RoIC 15.6 18.0 (0.4) 3.5 4.3
OPERATING CASH FLOW ( a ) 2,508 7,044 7,990 6,631 11,134 RoCE 17.7 21.9 0.0 4.5 5.2
Capex (1,089) (1,419) (4,848) (3,151) (3,151) EFFICIENCY
Free cash flow (FCF) 1,419 5,625 3,142 3,480 7,983 Tax Rate (%) (77.1) (170.2) 105.6 55.2 49.1
Fixed Asset Turnover (x) 0.3 0.3 0.4 0.4 0.4
Investments (1,506) 1,124 1,609 1,308 1,323
Inventory (days) 139 148 140 129 122
INVESTING CASH FLOW ( b ) (2,595) (295) (3,238) (1,843) (1,828)
Debtors (days) 67 60 65 72 66
Share capital Issuance 4,916 (9) - - -
Other Current Assets (days) 56 90 86 86 84
Debt Issuance 3,826 653 3,000 3,000 (1,000)
Payables (days) 70 70 79 67 66
Interest expenses (7,996) (7,899) (7,497) (7,384) (7,582)
Other Current Liab & Provns
Dividend (495) (180) (438) (438) (438) 63 74 64 59 53
(days)
FINANCING CASH FLOW ( c ) 250 (7,435) (4,935) (4,822) (9,020) Cash Conversion Cycle (days) 128 154 147 161 154
NET CASH FLOW (a+b+c) 163 (686) (183) (34) 286 Debt/EBITDA (x) 5.1 5.3 5.2 5.0 4.3
Closing Cash & Equivalents 1,709 1,023 840 806 1,091 Net D/E 2.6 2.8 3.0 3.0 2.8
Source: Company, HDFC sec Inst Research Interest Coverage 0.8 0.8 0.9 1.1 1.1
PER SHARE DATA
EPS (Rs/sh) (3.0) (0.5) 2.3 7.0 8.0
CEPS (Rs/sh) 11.4 14.1 17.2 22.7 27.4
DPS (Rs/sh) 1.8 2.0 2.0 2.0 2.0
BV (Rs/sh) 91.6 89.3 89.3 93.9 99.6
VALUATION
P/E (69.9) (388.9) 90.8 29.5 25.8
P/BV 2.3 2.3 2.3 2.2 2.1
EV/EBITDA 9.1 9.5 9.0 8.5 7.4
EV/Revenues 3.0 2.9 2.6 2.4 2.1
OCF/EV (%) 0.0 0.1 0.1 0.1 0.1
FCF/EV (%) 1.7 6.6 3.6 3.8 8.9
FCFE/Market Cap (%) (7.1) (4.2) (3.5) (2.3) (1.5)
Dividend Yield (%) 0.8 1.0 1.0 1.0 1.0
Source: Company, HDFC sec Inst Research
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 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

RECOMMENDATION HISTORY
Ashoka Buildcon TP
Date CMP Reco Target
300 6-Dec-16 144 BUY 210
24-Jan-17 173 BUY 220
250 18-Apr-17 210 NEU 220
14-Jul-17 194 BUY 235
200
21-Aug-17 184 BUY 235
150
14-Nov-17 207 BUY 274
Rating Definitions
100
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Aug-17
Apr-17
Jan-17

Feb-17

Jul-17

Sep-17
Nov-16

Nov-17
Jun-17
May-17
Dec-16

Mar-17

Oct-17
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

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 ASHOKA BUILDCON: RESULTS REVIEW 2QFY18

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