The Q1 ~28% y-o-y revenue growth, and with three of its hybrid annuities seemingly set to be appointed in the year, the FY20 growth guidance of ~25-30% seems in sight.
Ashoka Buildcon made a heartening start to the year with Q1 revenue growth in line with the FY20 guided-to range and margins at the upper end of the guided-to range. More heartening was the q-o-q fall in standalone debt and restrained growth in SPV-level debt. All combined suggest healthy operations, with the stage set for an inspiring FY20. Though growth in EPC revenues was handsome, the BOT-toll segment continues to be a victim of constrained economic activity, and of a project-specific issue. Besides, additional orders are required at the earliest to keep growth beyond FY20. We are sanguine and, on the sturdy balance sheet and benign valuations, retain our Buy rating.
The Q1 ~28% y-o-y revenue growth, and with three of its hybrid annuities seemingly set to be appointed in the year, the FY20 growth guidance of ~25-30% seems in sight. With a ~12.5% margin in Q1, the guidance of ~11-12.5%, too, seems attainable. Margins would benefit from the greater share of higher-margin hybrid annuity projects.
Including the ~Rs 900 crore L1, the ~Rs 9,000 crore OB (~2.4x BtB) seems good to deliver in FY20, but growth beyond would require more at the earliest. We are optimistic owing to recent diversification into railways, and on expecting the NHAI awarding to get going by Q3. A ~Rs 140 crore q-o-q lower standalone gross debt more than sufficed to cover the net incremental draw-downs by project SPVs; consequently, consolidated gross debt was down ~Rs 50 crore q-o-q. Recoveries and lower WC needs are the reasons for the q-o-q lower standalone gross debt.