Maintain ‘buy’ on Ashoka Buildcon: Jefferies

Ashoka reported 20% decline in Q4FY16 construction revenue led by slow execution on projects due to land possession issues. BOT segment saw 14% toll collection growth

Written by Jefferies

May 25, 2016 07:42 IST

The company has emerged as the lowest bidder for the Rs 1,600 crore 4/6 laning of Kharar to Ludhiana section of NH-95 project in Punjab. The project will be developed on the hybrid annuity model, Ashoka Buildcon said in a BSE filing. (Reuters)

Ashoka reported 20% decline in Q4FY16 construction revenue led by slow execution on projects due to land possession issues. BOT segment saw 14% toll collection growth, led by Dhankuni-Kharagpur (DKR) project. PNG termination is a positive and reduces cash burn going forward. Order flow is key for Ashoka, having won only Rs 28 billion of road orders in FY16, leading to 2.2x book-to-bill ratio. Maintain ‘buy’.

DKR, which is the most valuable project for Ashoka, saw 17% y-o-y and 12% q-o-q toll collection growth. Management did not attribute this to state elections and expects the pick-up to continue in FY17.

Sambhalpur-Baragarh also saw 16% q-o-q toll collection growth on the back of pickup in mining activity. We expect SBR to see at least 20%+ growth in FY17 on the back of full-commissioning (15%) and traffic growth (5-7%). On the other hand Jaora-Naygaon saw 8% q-o-q decline due to some diversion to NH-3.

PNG termination is a positive as it reduces cash burn of `300 million on an annualised basis. Profit from associates (instead of loss) was the key reason to profit beat on our estimates in Q4FY16.

Ashoka reported 20% y-o-y decline in construction revenues in Q4FY16 due to land acquisition issues in Easternperipheral and JNPT projects. These issues are now resolved and projects started execution from May 16.

This article was first uploaded on May twenty-five, twenty sixteen, at forty-two minutes past seven in the morning.