[ [ Result Update Rating matrix Rating : Buy Target : 250 Target Period : 12-18 months Potential Upside : 20% What s changed? Target Changed from 210 to 250 EPS FY19E Changed from 0.9 to 3.1 EPS FY20E Introduced at 8.4 Rating Unchanged Quarterly performance (Standalone) Q2FY18 Q2FY17 YoY (%) Q1FY18 QoQ (%) Revenue 378.7 442.8-14.5 722.8-47.6 EBITDA 50.6 69.8 (27.5) 97.5 (48.1) EBITDA (%) 13.4 15.8-239 bps 13.5-13 bps PAT 32.7 45.3 (27.9) 62.0 (47.2) Key financials Crore FY17 FY18E FY19E FY20E Net Sales 2,979.4 3,351.2 3,912.7 4,504.6 EBITDA 912.4 967.7 1,085.5 1,302.4 Adjusted PAT (9.7) (47.4) 48.6 132.6 EPS Diluted ( ) (0.6) (3.0) 3.1 8.4 Valuation summary (x) FY17 FY18E FY19E FY20E P/E NA NA 67.9 24.9 Target P/E NA NA 81.3 29.8 EV / EBITDA 9.3 9.1 7.8 6.6 P/BV 2.0 2.0 2.0 1.8 RoNW (%) NA NA 2.9 7.3 RoCE (%) 8.2 8.0 9.4 11.7 Stock data Particular Amount Market Capitalization 3,874.0 Total Debt 4,754.4 Cash 102.3 EV 8,526.1 52 week H/L ( ) 243 / 137 Equity capital 93.6 Face value 5 Price performance Return % 1M 3M 6M 12M PNC Infratech (5.5) (12.1) 31.4 23.3 Sadbhav Engg (8.2) (21.5) (3.6) (3.4) Ashoka Buildcon (6.9) (16.8) (8.3) 13.7 IRB Infra (5.0) (20.3) (10.8) (0.3) Research Analyst Deepak Purswani, CFA deepak,purswani@icicisecurities.com Vaibhav Shah vaibhav.shah@icicisecurities.com Execution to pick up from here on November 14, 2017 Ashoka Buildcon (ASHBUI) 209 Ashoka Buildcon s (ABL) revenues de-grew 14.5% YoY to 378.7 crore (our expectation: 719.7 crore) due to muted execution owing to work stoppage at Eastern-Peripheral expressway for 50 days and slow moving power orderbook due to GST issues EBITDA margins contracted 240 bps YoY to 13.4% (our expectation: 13.0%) mainly due to higher employee expenses (6.5% of revenue in Q2FY18 vs. 4.7% of revenue in Q2FY17) PAT declined 27.9% YoY to 32.7 crore (our estimate: 59.0 crore) mainly on account of the dismal topline performance Strong order backlog of ~ 6110 crore ABL s current orderbook is strong at ~ 6110 crore, 2.6x its construction revenues (on a TTM basis), providing strong revenue visibility over the next couple of years. During the quarter, execution was impacted as construction at the Eastern Peripheral Expressway was halted for 50 days amid local agitation. Also, in several power orders, execution was impacted by re-negotiation of input costs with vendors post GST. However, these issues have been resolved. The company expects execution to pick up. With a strong bidding pipeline worth ~ 30000 crore, the company has given order inflow guidance of ~ 3000-4000 crore for FY18E. Consequently, we expect ABL s construction revenues to grow at 18.6% CAGR to 3415.6 crore in FY17-20E. Gross toll collections grew 16% YoY on like-to-like basis ABL s gross toll collection for Q2FY18 was at ~ 236.8 crore vs. ~ 234.4 crore in Q2FY17 while on a like-to-like basis, it grew 16% YoY largely driven by strong traffic growth across projects. On the project front, the company received a toll rate hike of 3.5% in Wainganga, Bhandara & Durg projects while it received a 7% toll rate hike in Jaora-Nayagaon project. ABL received arbitration award worth 124.3 crore for Ahmednagar- Karmala project for which toll collection was stopped in November, 2012. It also received an extension in concession period by a year to September 9, 2018 in the Ahmednagar-Ghodegaon project for which toll collection was at ~ 6.4 crore in Q2FY18. With strong traffic growth ahead, we expect toll collections at 1089.8 crore in FY20E. Total equity requirement at ~ 450 crore The company has total equity requirement of ~ 450 crore over the next three years including the airport project for which the agreement has not been signed. Furthermore, the SBI-Macquarie deal is expected to be completed by FY18E end. Ashoka Buildcon does not have any compulsion to conduct the stake sale. Furthermore, ABL achieved financial closure for its Anandpuram-Ranastalam HAM project in Andhra Pradesh at 9.1% with debt of 415 crore. Execution thrust to continue; traffic growth to pick up; maintain BUY Considering the strong track record, robust orderbook, well funded BOT project portfolio & huge opportunities ahead, we stay positive on Ashoka s long term prospects. Hence, we expect EPC revenues to grow robustly at 18.4% CAGR to 3535.6 crore. Even, there has been a strong revival in traffic growth across projects. We have rolled over our estimates to FY20E. We continue to maintain our BUY recommendation on the stock with a revised SoTP based target price of 250/share. We value ABL s BOT projects at 37.0/share, EPC business (net of debt) at 163.1/share (7.5x FY20E EV/EBITDA) and ACL at 52.0/share.
Variance Analysis Particulars Q2FY18 Q2FY18E Q2FY17 YoY (%) Q1FY18 QoQ (%) Comments Income from Operations 378.7 719.7 442.8-14.5 722.8-47.6 Topline de-growth was on account of muted execution owing to work stoppage at Eastern-Peripheral expressway for 50 days and slow moving power order book due to GST issues Other Income 10.8 9.2 9.0 19.5 9.2 16.9 Operating Expenses 286.3 575.2 335.2-14.6 577.7-50.4 Employee Expenses 24.7 30.3 20.7 19.2 26.9-8.0 Other expenditure 17.1 20.7 17.1 0.0 20.8-17.9 EBITDA 50.6 93.6 69.8-27.5 97.5-48.1 EBITDA Margin(%) 13.4 13.0 15.8-239 bps 13.5-13 bps EBITDA margin contraction was on account of higher other expenses Depreciation 13.0 11.3 13.0 0.3 11.3 15.0 Interest 11.6 13.0 8.0 44.5 13.0-10.7 PBT 36.8 78.5 57.8-36.3 82.5-55.4 Taxes 4.1 19.5 12.5-67.1 20.5-80.0 PAT 32.7 59.0 45.3-27.9 62.0-47.2 PAT de-growth was on account of dismal topline show Change in estimates FY18E FY19E FY20E Comments ( Crore) Old New % Change Old New % Change Introduced Revenue 3,500.5 3,351.2-4.3 4,056.5 3,912.7-3.5 4,504.6 EBITDA 984.1 967.7-1.7 1,096.8 1,085.5-1.0 1,302.4 EBITDA Margin (%) 28.1 28.9 78 bps 27.0 27.7 74 bps 28.9 PAT -57.9-47.4-18.2 13.8 48.6 252.1 132.6 Significant savings in interest costs leads to earnings upgrade. We have factored in interest rate of 9.25% FY19E onwards inline with management commentary Diluted EPS ( ) -3.7-3.0-18.2 0.9 3.1 252.1 8.4 Assumptions Current Earlier Introduced Comments EPC FY14 FY15 FY16 FY17 FY18E FY19E FY18E FY19E FY20E Order Inflow 1,480 1,623 2,822 3,926 4,000 4,500 5,000 5,000 4,500 We tweak our assumptions in line with management Order Backlog 3,546 3,106 4,111 7,005 7,140 9,511 7,927 10,700 11,124 Page 2
Conference call highlights: Management guidance: With a strong bidding pipeline worth ~ 30000 crore, going ahead, the company aims to win ~ 3000-4000 crore worth of orders in H2FY18E. Consequently, the management expects EPC revenues to grow 20-25% YoY in FY18E. On the margin front, ABL expects to maintain 13-15% margins on a standalone basis in FY18E Projects update: The Islampur bypass project and Jharkhand Chaas project are stuck. The management expects to receive its first semiannual annuity payment worth 39.5 crore for the Mudhol-Nipani project soon (achieved CoD in December, 2016). It expects to start construction of Anandpuram-Ranastalam HAM project in Q3FY18E Traffic growth: The company received a toll rate hike of 3.5% in Wainganga, Bhandara & Durg projects while it received 7% toll rate hike in Jaora-Nayagaon project. Overall, gross toll collections grew 16% YoY to 236.8 crore on a like-to-like basis. ABL also witnessed strong traffic growth for the Dankuni Kharagpur and Belgaum Dharwad project during the quarter and expects growth to sustain Equity commitment: The company has total equity requirement of ~ 450 crore over the next three years including the airport project for which the agreement has not been signed. Equity requirement is at 205 crore for FY18E, 197 crore for FY19E and 50 crore for FY20E. These are inclusive of the airport project MIAL project: The company has still not signed the agreement. Due diligence of documents is going on. Hence, starting the project in October (earlier stated) seems difficult Capex: It is looking to do capex of 20 crore in H2FY18E and 50 crore in FY19E CGD project: The company has remaining equity requirement to the tune of ~ 30 crore ( 15 crore in H2FY18E & 15 crore in FY19E). ABL expects to starts commercial sales of gas in February, 2018 SBI-Macquarie stake sale: The company does not have any compulsion to conduct the stake sale. The company expects the sale to be completed by FY18E end Page 3
Exhibit 1: Portfolio of road projects of Ashoka Buildcon Ashoka Buildcon Limited Length Project Name Stake (%) (km) Company Analysis Focused play on road segment strong portfolio of projects ABL has 20 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 20 projects, 16 are fully operational. Furthermore, it has four BOT projects under construction/development of which two are also tolling on the current stretch. 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 has 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. Lane (km) TPC Debt Equity ABL Eq share 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 Construction completed Ashoka Concession Limited Project Name Stake (%) Length (km) Lane (km) TPC Debt Equity ACL Eq share 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 48.0 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 Operational Dankuni Kharagpur 100.0 112.0 840.5 2205.2 1516.2 689.0 689.0 Operational Chennai ORR 50.0 50.0 183.0 1450.0 1080.0 173.0 86.5 Construction completed Page 4
Order book break-up: T&D EPC 31% Road 69% Captive 32% Non-captive 68% EPC orderbook to grow at 15.9% CAGR during FY17-20E... ABL s order book at the end of Q2FY18 was at ~ 6101 crore implying book to bill of 2.6x TTM construction revenues. Roads constitute 69% of the overall order book while T&D EPC orders account for the balance 31%. ABL witnessed strong order inflows of ~ 3926 crore in FY17 and expects strong order inflows of ~ 3000-4000 crore in FY18E. Consequently, we expect its EPC order book to grow at 15.9% CAGR to 11124 crore in FY17-20E. Exhibit 2: Quarterly order book trend Exhibit 3: Annual order book trend 8000 7000 6000 5000 4000 3000 2000 1000 0 1891 751 1681 1782 1729 4724 4540 5114 4651 4381 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Roads Power T&D 12000 10500 9000 7500 6000 4500 3000 1500 11124 9511 7005 7140 4111 Consequently, the EPC segment is expected to report revenue CAGR of 18.6% to 3415.6 crore in FY17-20E. We expect the margin to remain in the range of 12.5-13.0% in FY18E-20E. Exhibit 4: Annual EPC revenue and EBITDA margin trend 4200 3500 2800 2100 1400 700 0 15.4 13.6 13.0 12.5 12.5 1923.9 2045.1 2456.4 2933.1 3415.6 17 15 (%) 13 11 9 Revenues EBITDA Margin(RHS) Page 5
Toll collection growth largely traffic driven ABL s gross toll collection for Q2FY18 was at ~ 236.8 crore against ~ 234.4 crore in Q2FY17 while on a like-to-like basis, it grew 16% YoY. On the project front, the company received a toll rate hike of 3.5% in Wainganga, Bhandara & Durg projects while it received 7% toll rate hike in Jaora-Nayagaon project. ABL received an arbitration award worth 124.3 crore for Ahmednagar-Karmala project for which toll collection was stopped in November, 2012. With strong traffic growth ahead, we expect toll collections to reach 1089.1 crore in FY20E. Exhibit 5: Quarterly gross toll collection trend Q2FY18 Q1FY18 Q4FY17 Q3FY17 Q2FY17 YoY (%) QoQ (%) ABL Owned Projects Ahmednagar - Aurangabad 6.4 6.4 9.8 3.69 7.37-12.8% -0.2% Nagar - Karmala - - Indore -Edalabad 0.0 0.0 16.4 21.95 30.3-100.0% - Wainganga Bridge 7.1 7.5 7.8 5.39 6.85 2.9% -6.4% Dewas Bypass - - - - - Katni Bypass 4.4 5.6 5.1 3.55 4.21 3.6% -21.5% Pune Shirur^ - - - - - Others# 24.4 22.0 26.5 12.64 15.53 57.3% 11.1% Sub-total 42.3 41.5 65.6 47.2 64.2-34.2% 1.8% Sub-total (like-to-like basis) 42.3 41.5 65.6 47.2 64.2-34.2% 1.8% ACL Projects Belgaum Dharwad 20.8 21.4 19.2 14.12 17.79 17.0% -2.9% Dhankuni Kharagpur@ 75.7 78.6 77.0 47.82 65.09 16.3% -3.6% Bhandara 15.0 15.6 15.8 11.11 14.57 3.0% -4.1% Durg 18.5 19.0 19.3 13.81 17.92 3.3% -2.8% Jaora Nayagaon 50.3 47.4 46.7 33.91 42.52 18.2% 6.1% Pimpalgaon Nashik Gonde - - - - - - - Sambalpur 14.2 14.5 14.1 9.66 12.28 15.5% -2.3% Sub-total 194.5 196.6 192.1 130.4 170.2 14.3% -1.1% Sub-total (like-to-like basis) 194.5 196.6 192.1 130.4 170.2 14.3% -1.1% Grand Total 236.8 238.1 257.6 177.7 234.4 1.0% -0.6% (Grand total) like-to-like basis 236.8 238.1 257.6 177.7 234.4 1.0% -0.6% Katni project- Toll collection under High Court order for extension of period on account of claims, not recognized as Revenue # - Others include Anawali Kasegaon, Kognoli Toll Plaza, Dhule Bye pass, Nashirabad, Sherinala & six foot over bridges in Mumbai Ahmednagar Aurangabad : Passenger Vehicles are exempted from Toll; In Q3 received claim for toll loss since June 2015, of 2.7 crore Dewas project: Toll stopped from 24th Aug 2015; Earlier toll collected but not recognized as Revenue since Feb 2015 Exhibit 6: Gross toll collections trend 300.0 250.0 200.0 150.0 100.0 171.4 170.2 130.4 192.1 196.6 194.5 50.0 0.0 70.3 64.2 47.2 65.6 41.5 42.3 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 ABL Owned projects ACL Projects Page 6
Toll revenues to remain flat Going forward, toll collections are expected to grow at 6% CAGR to 1089.1 crore over FY17-20E. However, going ahead, we expect ACL s cash profit to grow to 705.0 crore in FY20E from 431.3 crore in FY17. Exhibit 7: BOT toll revenue trend 1000 Exhibit 8: Cash profit to rise to 566.0 crore in FY19E 750.0 800 600.0 600 400 450.0 300.0 154.2 205.5 198.8 285.9 410.2 200 0 690.6 914.1 916.5 990.4 1089.1 150.0 0.0 210.2 225.8 277.8 303.2 294.8 Construction BOT projects Consolidated revenue to grow at 15.6% CAGR during FY17-20E We expect ABL s consolidated net sales to grow at 15.8% CAGR in FY17-20E. Construction revenue growth for ABL in FY15 and FY16 was largely driven by under construction projects of ACL viz. NH-6-Sambalpur and NH-6-Dankuni Kharagpur along with newly won projects such as Chennai ORR and Karnataka State Highway. In addition to this, the T&D division also contributed significantly to EPC revenues. Going ahead, the EPC segment is expected to report revenue CAGR of 20.0% in FY17-20E with a strong set of opportunities lined up. However, toll revenues are expected to grow moderately. Hence, we expect revenues to grow at a CAGR of 15.6% in FY17-20E to 4504.6 crore. Exhibit 9: Consolidated revenue growth trend 5000.0 4500.0 4000.0 15.6% CAGR 3500.0 We expect revenues to grow at a CAGR of 15.6% over FY17-20E to 4504.6 crore 3000.0 2500.0 2000.0 1500.0 1000.0 2825.3 2979.4 3351.2 3912.7 4504.6 Page 7
Exhibit 10: EPC revenue to grow at 18.6% CAGR during FY17-20E 4000 Exhibit 11: BOT revenue to grow moderately 1250 3500 3000 18.6% CAGR 1000 2500 2000 750 1500 1000 1923.9 2045.1 2456.4 2933.1 3415.6 500 250 690.6 914.1 916.5 990.4 1089.1 EBITDA to grow at 12.6% CAGR during FY17-20E Consolidated EBITDA is expected to grow at a CAGR of 13.0% in FY17-20E given the sharp growth in BOT revenues. EBITDA margins are expected to moderate to 28.9% in FY20E on the back of increasing share of EPC revenues, which typically have lower margins compared to the high margin BOT division. Exhibit 12: Consolidated EBITDA margin trend EBITDA margins are expected to moderate to 28.9% in FY20E on the back of an increasing share of EPC revenues 1400.0 40.0 1200.0 1000.0 800.0 600.0 34.0 30.6 28.9 27.7 28.9 35.0 30.0 25.0 20.0 (%) 400.0 200.0 959.6 912.4 967.7 1085.5 1302.4 15.0 10.0 EBITDA EBITDA Margin (RHS) Page 8
Low interest rate boosts bottomline in FY19E & FY20E ABL reported a negative bottomline in FY16 and FY17 due to Ind-As adjustments wherein the company has to book notional interest costs on the NHAI premium payable, resulting in higher interest costs. Going ahead, we expect ABL to post losses in FY18E to the tune of 57.9 crore. However, in FY19E, the company is expected to book profit of 48.6 crore as we have factored in interest rate of 9.25% inline with management guidance leading to significant interest costs savings. This is expected to further grow to 132.6 crore in FY20E. Further, we expect cash profit to remain healthy at 483.1 crore in FY20E. Exhibit 13: PAT trend Exhibit 14: Cash profit to remain healthy 150 100 50 0-50 -100-74.0-9.7-47.4 48.6 132.6 PAT PAT Margin (RHS) 4 3 2 1 0-1 -2-3 (%) 600 500 400 300 200 100 0 483.1 367.2 263.4 254.7 194.8 Return ratios to improve from here on Considering the large number of projects under construction, the return ratios of ABL are subdued. Even going forward, they are expected to remain subdued given the Ind-As adjustments, which have impacted the bottomline significantly. Hence, we expect RoEs and RoCEs at 11.7% and 7.3% levels in FY20E, respectively. Exhibit 15: Return ratios to improve We expect return ratios of ABL to improve here on 14.0 12.0 10.0 8.0 (%) 6.0 4.0 2.0 - (2.0) (4.0) (6.0) 11.7 9.4 8.1 8.2 8.0 7.3 2.9 FY16 FY17 (0.6) FY18E FY19E FY20E (2.9) (4.3) RoCE (%) RoE (%) Page 9
& We have a BUY recommendation with an SoTP based target price of 250/share Outlook and valuation Considering the strong track record, robust orderbook, well funded BOT project portfolio & huge opportunities ahead, we stay positive on Ashoka s long term prospects. Hence, we expect EPC revenues to grow robustly at 18.4% CAGR to 3535.6 crore. Even, there has been a strong revival in traffic growth across projects. We have rolled over our estimates to FY20E. We continue to maintain our BUY recommendation on the stock with a revised SoTP based target price of 250/share. We value ABL s BOT projects at 37.0/share, EPC business (net of debt) at 163.1/share (7.5x FY20E EV/EBITDA) and ACL at 52.0/share. ABL BOT: We value ABL s BOT portfolio at 37.8/share. To value ABL s BOT portfolio, we consider the traffic assumption of 6% till FY20 and 5% thereafter across projects with a toll hike in line with the concession agreement. We have considered cost of equity (CoE) of 12%. EPC: We value its EPC business at 170.6/share (7.5x FY20E EV/EBITDA). ACL BOT: To value ACL s BOT project portfolio, we consider the traffic assumption of 6% till FY20 and 5%, thereafter, across projects with a toll hike in line with the concession agreement. Also, in a couple of projects, we factor in higher growth of 7% for the next couple of years. We also consider CoE of 13% for toll projects & 12% for annuity projects. We would also like to highlight that we have incorporated higher dilution of ABL s stake in ACL due to lower-than-expected traffic assumption in Sambalpur project. Hence, we value ABL s 61% stake in ACL at 20% holding company discount at 973.0 crore or 52.0/share. Exhibit 16: ABL valuation Project Name Stake (%) Ashoka Buildcon Limited (ABL) - BOT Length (km) TPC ( crore) Debt ( crore) Equity ( crore) Eq share ( crore) CoE(%) ABL Equity Value/share ( Value ( cr) ) Aurangabad - Ahmednagar 100.0 42.0 102.7 35.7 67.0 67.0 12.0 0.0 0.0 Katni Bypass 99.9 17.6 70.9 53.5 17.4 17.4 12.0 9.9 0.5 Nashirabad ROB 100.0 4.0 14.7 13.3 1.5 1.5 12.0 4.0 0.2 Sheri Nallah Bridge 100.0 4.0 14.2 7.2 7.0 7.0 12.0 0.0 0.0 Dhule Bypass 99.9 6.0 5.8 5.2 0.6 0.6 12.0 8.4 0.4 Dewas Bypass 100.0 20.0 61.3 36.0 25.3 25.3 12.0 64.2 3.4 Indore Edalabad 99.7 203.0 165 101.5 63.5 63.3 12.0 450.2 24.1 Wainganga Bridge 50.0 13.0 40.9 35.0 5.9 3.0 12.0 94.1 5.0 FOB Eastern Expressway 100.0 NA 3.7 1.8 2.0 2.0 12.0 0.8 0.0 KSHIP 51.0 110.0 471.0 287.0 47.0 24.0 12.0 61.5 3.3 Total (ABL)-BOT (A) 419.6 950.2 576.1 237.1 210.9 693.0 37.0 EPC (B) 100.0 7.5x FY20 EV/EBITDA 3193.5 170.6 ACL stake valuation ( C) 61.0 20% Holding company Discount 973.0 52.0 MIAL Project 100.0 78.8 4.2 Less Standalone debt (D) 139.8 7.5 Total SoTP Valuation (A+B+C-D) 4719.7 252.2 Rounded off Target Price 250.0 Page 10
s [[ [ Exhibit 17: ACL valuation Project Name Stake (%) Length (km) Ashoka Concession Limited (ACL) TPC Debt Equity ACL share ( crore) CoE(%) ACL Equity Value Bhandara 51.0 82.6 528.0 354.5 173.5 60.0 13.0-32.0 Durg Chhattisgarh 51.0 71.1 630.5 410.0 220.5 100.2 13.0 89.0 Jaora Nayagaon 46.2 85.1 865.1 554.5 310.6 69.0 13.0 590.6 Belgaum Dharwad 100.0 82.0 694.1 479.0 185.0 185.0 13.0 238.3 Sambalpur Baragarh 100.0 88.0 1142.2 810.0 332.2 332.2 13.0-49.4 Dankuni Kharagpur 100.0 11.6 2205.2 1516.2 689.0 689.0 13.0 872.9 Chennai ORR 50.0 32.0 1450.0 1080.0 173.0 86.5 12.0 284.4 ACL Valuation 452.4 7515.0 5204.2 2083.8 1521.8 1993.8 ACL stake (%) ` 61.0 ACL stake value 1216.2 [ Exhibit 18: Valuation metrics Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY16 2,825.3 21.8 (4.7) NA (44.6) 8.7 (4.3) 8.1 FY17 2,979.4 5.5 (0.6) NA (340.7) 9.3 (0.6) 8.2 FY18E 3,351.2 12.5 (3.0) NA (69.6) 9.1 (2.9) 8.0 FY19E 3,912.7 16.8 3.1 LP 67.9 7.8 2.9 9.4 FY20E 4,504.6 15.1 8.4 1.7 24.9 6.6 7.3 11.7 Page 11
[ Recommendation History vs. Consensus 300 100.0 ( ) 200 100 80.0 60.0 40.0 20.0 (%) 0 Nov-15 Jan-16 Apr-16 Jun-16 Aug-16 Nov-16 Jan-17 Apr-17 Jun-17 Sep-17 Nov-17 0.0 Price Idirect target Consensus Target Mean % Consensus with BUY Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Mar-16 The company is looking to refinance its debt in some major projects including Durg Bypass, Sambalpur-Baragarh, Dankuni Kharagpur and Belgaum-Dharwad border roads worth ~ 3200 crore, expecting to complete this refinancing by Q1FY17 Mar-16 The consortium of Ashoka Buildcon & Bhartia Infra Projects has received an LoA for two laning with paved shoulders on NH - 52 from Pasighat to Bomjur road (22.2 km) in Arunachal Pradesh on EPC Mode from National Highways & Infrastructure Development (NHIDCL) worth 155.8 crore Mar-16 The company clarifies on having no contribution in any of the constructions of Bhujbal family and also for not sponsoring the trip of Shri. Sameer Bhujbal then MP to watch the FIFA World Cup in South Africa. Apr-16 Income tax authorities carry out search and seizure proceedings at the company and certain officials in connection with allegations that it financed certain construction by family of ex-deputy chief minister Chhagan Bhujbal May-16 Company is lowest bidder in project for 2/4 laning with paved shoulders of Govindpur-Chas section in Jharkhand on EPC mode worth 486 crore May-15 Ashoka Buildcon enters into a share purchase agreement with GVR Infraprojects by way of transfer of 23% stake and transfer of beneficial interest of 26% stake in Ashoka GVR Mudhol Nipani Roads (AGMNRL) Jul-16 Ashoka Concession, a subsidiary of Ashoka Buildcon, emerges as lowest bidder for 4/6 laning of Kharar to Ludhiana section of NH-95. This project is under hybrid annuity mode and is worth 1600 crore Sep-16 Media reports indicate that SBI Macquarie is looking to sell its 39% stake in Ashoka Concessions, a subsidiry of Ashoka Buildcon. Oct-16 Receives letters of intent (LoIs) from Dakshinanchal Vidyut Vitran Nigam (DVVNL) for execution of work on rural electrification on turnkey basis worth 178.6 crore from UP government Nov-16 Ashoka Buildcon's subsidiary Ashoka Highway (Durg) completes refinancing of its debt with IDFC by issuing NCDs worth ~ 200 crore. The NCDs will carry coupon rate @ 9.40% per annum. The SPV repaid the rupee term loan of 200 crore carrying interest cost @ 9.90% per annum Dec-16 Receives letters of intent for projects from North and South Bihar Power Distribution Company worth ~ 949.9 crore Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Parakh (Shobha Satish) 30-Sep-17 13.6% 25.4 0.0 2 Katariya (Ashok Motilal) 30-Sep-17 10.3% 19.3 9.7 3 ICICI Prudential Asset Management Co. Ltd. 30-Sep-17 7.1% 13.3 (0.3) 4 Katariya (Asha Ashok) 30-Sep-17 7.1% 13.3 0.0 5 Katariya (Ashok Motilal) HUF 30-Jun-17 5.2% 9.7 0.0 6 Katariya (Ashish Ashok) 30-Sep-17 4.9% 9.1 0.0 7 Katariya (Ashish Ashok) HUF 4-Oct-17 4.4% 8.2 0.0 8 L&T Investment Management Limited 31-Oct-17 4.2% 7.8 0.0 9 Katariya (Astha Ashish) 30-Sep-17 3.6% 6.7 0.0 10 Reliance Nippon Life Asset Management Limited 31-Oct-17 3.5% 6.6 0.4 Shareholding Pattern (in %) Mar-17 Jun-17 Sep-17 Promoter 56.66 56.64 56.64 Public 43.34 43.36 43.36 Others 0.00 0.00 0.00 Total 100.00 100.00 100.00 Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Katariya (Ashok Motilal) 27.89M 9.70M Morgan Stanley Investment Management Inc. (US) -10.29M -3.37M Reliance Nippon Life Asset Management Limited 1.30M 0.40M Khatri (Snehal Manjeet) -3.36M -1.02M HDFC Asset Management Co., Ltd. 0.98M 0.30M Invesco Asset Management (India) Private Limited -2.76M -0.90M Katariya (Ashish Ashok) HUF 0.13M 0.04M Principal PNB Asset Management Company Ltd. -1.14M -0.37M BlackRock Institutional Trust Company, N.A. 0.0M 0.0M ICICI Prudential Asset Management Co. Ltd. -0.77M -0.27M Source: Reuters, ICICIdirect.com Research Page 12
Financial summary Profit and loss statement Crore Cash flow statement Crore ( Crore) FY17 FY18E FY19E FY20E Net Sales 2,979.4 3,351.2 3,912.7 4,504.6 Other income 121.9 86.8 85.2 85.9 Total Revenue 3,101.2 3,438.0 3,997.9 4,590.5 Raw Material Expense 82.3 150.2 230.1 220.2 Operating Expenditure 1,770.8 2,097.2 2,438.7 2,800.2 Cost of materials sold 95.8 - - - Employee benefit expenses 118.0 136.2 158.3 181.8 Total Operating Expenditure 2,066.9 2,383.5 2,827.1 3,202.2 EBITDA 912.4 967.7 1,085.5 1,302.4 Interest 788.3 813.7 734.4 752.4 Depreciation 273.1 302.1 318.6 350.6 Other income 121.9 86.8 85.2 85.9 PBT (27.0) (61.3) 117.7 285.3 Taxes 78.8 64.4 95.7 146.3 PAT before MI (105.8) (125.7) 22.0 139.1 Minority Interest (115.5) (86.6) (23.5) 14.9 Share of Profit from Associates (19.4) (8.3) 3.2 8.4 PAT (9.7) (47.4) 48.6 132.6 Adjusted EPS (Diluted) (0.6) (3.0) 3.1 8.4 ( Crore) FY17 FY18E FY19E FY20E Profit after Tax (9.7) (47.4) 48.6 132.6 Depreciation 273.1 302.1 318.6 350.6 Interest 788.3 813.7 734.4 752.4 Others (243.8) (173.5) (170.5) (171.8) Cash Flow before wc changes 1,008.5 1,046.0 1,112.2 1,295.9 Changes in WC (242.7) 80.1 258.4 (80.9) Taxes Paid (76.8) (64.4) (95.7) (146.3) Net CF from operating activities 689.1 1,061.7 1,274.8 1,068.8 (Purchase)/Sale of Fixed Assets (144.3) (434.5) (197.0) (229.9) Change in Others - Premium Payable 95.8 (154.4) (157.7) (340.8) Net CF from Investing activities 84.5 (502.1) (269.5) (484.8) Increase/Decrease in NW (33.2) (0.0) 0.0 - Increase/Decrease in Debt 62.6 300.0 (222.2) (77.6) Interest Paid (788.3) (813.7) (734.4) (752.4) Change in Minority Interest (113.4) (33.5) 29.6 68.0 Net CF from Financing activities (872.3) (547.2) (927.0) (762.1) Net Cash flow (98.8) 12.4 78.2 (178.1) Opening Cash 170.9 102.3 114.6 192.9 Closing Cash/ Cash Equivalent 102.3 114.6 192.9 14.7 Balance sheet Crore Key ratios ( Crore) FY17 FY18E FY19E FY20E Liabilities Equity Capital 93.6 93.6 93.6 93.6 Reserve and Surplus 1,578.1 1,530.7 1,579.3 1,711.9 Total Shareholders funds 1,671.7 1,624.3 1,672.9 1,805.5 Minority Interest 449.0 415.5 445.2 513.1 Total Debt 4,754.4 5,054.4 4,832.1 4,754.5 Deferred Tax Liability (20.2) (20.2) (20.2) (20.2) Other- NHAI Premium Payable 2,444.9 2,290.5 2,132.7 1,791.9 Total Liabilities 9,300 9,364 9,063 8,845 Assets Gross Block 9,259.8 9,896.3 9,926.3 9,956.3 Less Acc. Dep 874.0 1,734.7 1,980.5 2,248.9 Net Block 8,385.7 8,161.6 7,945.8 7,707.4 Capital WIP 20.3 376.8 471.0 588.8 Total Fixed Assets 8,406.0 8,538.4 8,416.8 8,296.2 Investments 186.3 186.3 186.3 186.3 Inventory 1,203.6 1,508.0 1,565.1 1,801.8 Sundry Debtors 491.0 502.7 391.3 450.5 Loans & Advances 58.3 8.2 9.6 11.0 Cash & Bank Balances 102.3 114.6 192.9 14.7 Other Current Assets 706.3 550.1 642.3 739.4 Total Current Assets 2,561.4 2,683.7 2,801.1 3,017.5 Other Current Liabilities 3,113.4 3,543.5 4,137.2 4,763.1 Provisions 536.2 536.2 536.2 536.2 Net Current Assets (1,088.3) (1,396.0) (1,872.3) (2,281.8) Total Assets 9,300 9,364 9,063 8,845 FY17 FY18E FY19E FY20E Per Share Data ( ) EPS - Diluted (0.6) (3.0) 3.1 8.4 Cash EPS 14.1 13.6 19.6 25.8 Book Value 105.8 102.8 105.9 114.3 Operating Ratios (%) EBITDA / Net Sales 30.6 28.9 27.7 28.9 PAT / Net Sales NA NA 1.2 2.9 Inventory Days 147.4 164.3 146.0 146.0 Debtor Days 60.1 54.8 36.5 36.5 Return Ratios (%) RoNW (0.6) (2.9) 2.9 7.3 RoCE 8.2 8.0 9.4 11.7 RoIC 7.0 7.5 9.2 11.6 Valuation Ratios (x) EV / EBITDA 9.3 9.1 7.8 6.6 P/E (Diluted) NA NA 67.9 24.9 EV / Net Sales 2.9 2.6 2.2 1.9 Market Cap / Sales 1.3 1.2 1.0 0.9 Price to Book Value (Diluted) 2.0 2.0 2.0 1.8 Solvency Ratios (x) Net Debt / Equity 2.8 3.0 2.7 2.6 Debt / EBITDA 5.2 5.2 4.5 3.7 Current Ratio 1.3 1.3 1.1 1.1 Quick Ratio 0.7 0.5 0.4 0.5 Page 13
ICICIDirect.com coverage universe (Infrastructure) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) P/B (x) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E NBCC (NBCC) 268 220 Hold 24,120 3.9 4.6 6.9 71.0 60.2 40.2 58.2 48.8 31.1 14.9 13.1 11.2 21.0 21.9 27.9 IRB Infra (IRBINF) 231 250 Hold 8,076 21.5 29.5 23.3 10.8 7.8 9.9 1.3 1.3 1.3 1.5 1.3 1.1 13.6 16.1 11.5 PNC Infratech (PNCINF) 190 155 Buy 4,765 8.2 6.9 10.3 23.3 27.5 18.4 21.2 17.5 11.8 3.1 2.9 2.5 9.8 10.4 13.6 Sadbhav Engg. (SADENG) 315 360 Buy 5,402 10.9 13.5 12.5 28.8 23.3 25.2 19.4 15.9 13.1 3.3 2.9 2.6 11.3 12.4 10.4 Ashoka Buildcon (ASHBUI) 209 250 Buy 3,908-0.6-3.0 3.1 NA NA 67.9 9.3 9.1 7.8 2.0 2.0 2.0 NM NM 2.9 Simplex Infra (SIMCON) 512 550 Buy 2,534 24.3 27.7 44.2 21.1 18.5 11.6 8.4 7.6 6.4 1.7 1.5 1.3 7.9 8.2 11.6 NCC (NAGCON) 102 110 Buy 5,684 4.1 4.7 5.9 25.2 21.7 17.2 10.4 9.6 8.4 1.7 1.5 1.4 6.6 6.9 8.1 Page 14
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 pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com Page 15
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