Ashoka did not report consolidated numbers in Q1FY17 highlighting lack of clarity on reporting of asset business under IndAS accounting norms. Standalone revenues were flat as expected with rampup expected in 2HFY17/FY18. However margins declined 160bps y-o-y due to some projects not reaching margin recognition threshold. Factoring in annuity project delays, we have reduced our FY17 EPS estimates by 6%. Maintain buy.
8.4% y-o-y toll collection growth, 5% y-o-y traffic growth: Ashoka reported weaker-than-expected toll collection in Q1FY17, in line with that reported by IRB (IRB IN, R233, Hold) and Sadbhav (SADE IN, R295, Buy). Dhankuni Kharagpur (most valuable project) has seen an encouraging 11% y-o-y traffic growth. The company has not reported consolidated results, so Ebitda levels in BOT business is unclear and awaited.
Construction revenues: Ashoka had earlier guided for a weak 1HFY17 and hence flat Q1FY17 construction revenues is not a surprise. However, margins have surprised (160 bps y-o-y decline) due to some projects not reaching margin recognition threshold. Working capital loans have fallen by R1272m q-o-q.
Order book-to-bill ratio ~3x: Ashoka has put to rest most of the worries surrounding order book with its first HAM project win worth R16 bn in Punjab and another R5 bn EPC order win in Jharkhand. Including these, order book-to-bill ratio is a comfortable 3x on a trailing 12M basis, providing
15-20% construction revenue growth visibility. Management
expects to garner R15-20 bn more orders in roads segment and R5 bn orders in power T&D.
We have reduced our FY17 estimates by 6% factoring annuity project delays. Maintain buy with SOTP based TP of R195. Risks: Unfavourable investigation outcome.