scorecardresearchHDFC Securities sees over 70% upside in Ashoka Buildcon; says asset value

HDFC Securities sees over 70% upside in Ashoka Buildcon; says asset value is greater than mcap

Updated: 28 Sep 2023, 03:02 PM IST

Ashoka Buildcon's order book has multiplied 2x over FY19-23, but its shares have underperformed. HDFC Securities maintains a 'buy' rating, with a revised target price of 189, citing a strong order book and anticipated cash inflows from asset monetisation.

HDFC Securities has revised its target price to  <span class='webrupee'>₹</span>189 apiece, maintaining a 'buy' rating on the stock.

HDFC Securities has revised its target price to 189 apiece, maintaining a 'buy' rating on the stock.

Shares of Ashoka Buildcon, one of the leading highway developers in India, have underperformed the broader infra space over the last 1, 2, and 5 years, despite its order book multiplying 2x over FY19–23, said brokerage firm HDFC Securities.

The company ended FY23 with an outstanding order book (OB) of 158.1 billion (2.5x FY23 standalone revenue). Business-wise it said, the OB is well-diversified with EPC (39.7%), HAM (17.9%), T&D (17.2%), buildings (15.9%), railways (8.9%), and other sectors (0.5%). 

Geographically, the southern region makes the largest contribution at 28%, followed by central (19.8%), overseas (18.6%), west (15.2%), south (6.7%), north (5.9%), and northeast (5.8%), according to the brokerage. 

The brokerage noted that Ashoka Buildcon has a strong financial position at the standalone level, with a gross debt of 10 billion and a net debt of 8.1 billion as of March 2023, with a gross debt-to-equity ratio of 0.3x, indicating a healthy financial position.

Ashoka Buildcon has entered into a definitive agreement to monetise three assets: Chennai ORR, Jaora Nayagaon, and CGD assets, for a total cash consideration of 11 billion. Besides this, the brokerage expects 18 billion of realisation from HAM assets and 15 billion from BOT assets.

Adjusting for the 13 billion payout to SBI Macquarie, the total inflow for the company is expected to be 31 billion, which is higher than the current market cap of 29 billion. This implies that standalone EPC business value is not reflected in the current stock price, it said. 

Given these factors, including a strong order book, improving visibility on asset monetisation, and likely cash inflow from asset monetisation ( 31 billion) exceeding market cap ( 29 billion), HDFC Securities has revised its target price to 189 apiece, maintaining a 'buy' rating on the stock. This new target price reflects an upside of 72% for the stock from its previous closing price of 110. 


Stock price chart of Ashoka Buildcon.

Meanwhile, the company achieved a provisional commercial operation date (PCOD) for two NHAI-HAM assets in FY23. Further, it entered into a SPA with Mahanagar Gas Ltd. to sell its entire 51% equity stake valued at 5.3 billion in its subsidiary, Unison Enviro Private Ltd.

Also, it achieved financial closure for one of its HAM projects. Furthermore, one of its step-down subsidiaries received 974 million, inclusive of interest towards a full and final settlement in respect of all claims from NHAI, as per the brokerage.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.


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First Published: 28 Sep 2023, 03:02 PM IST