700% return in 5 years, but down lately, this multibagger is set to look up again




The management has raised its revenue growth guidance for FY18 by 15-20 per cent from 12-15 per cent earlier. NSEBSEAhluwalia ContractsLoading data…

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      ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIES NEW DELHI: Debt level of this construction company more than halved between FY13 and FY17, raising prospects for the business to look up. But a series of subdued inflow guidance, increased competitive intensity, margin pressure and a CBI case against the promoter have taken a toll on it, sending the stock down 10 per cent in last one year.

      The stock delivered a staggering 700 per cent return over the past five years. Is the stock past its prime?

      We are talking about Ahluwalia Contracts.

      The stock lost one-fifth of its value in last one quarter to hit a 52-week low of Rs 236 on August 11. It traded at Rs 278 on Friday, which was around 15.5 times its FY19 earnings.

      The management has raised its revenue growth guidance for FY18 by 15-20 per cent from 12-15 per cent earlier and pledged to make it a zero-debt company in two years.

      Analysts said despite lingering uncertainty, the current pace of execution and nearly Rs 3,000 crore order book – which provides revenue assurance for a little less than two years – may help the company meet revenue targets. They see 15-25 per cent potential upside in the stock.

      Brokerage Centrum Broking, which had in June recommended profit booking on the counter due to lingering concerns, is now advising investors to accumulate the stock post the Q1 numbers.

      “Given the management’s cautious approach towards bidding for new orders, revenue growth in FY19 could remain lower than FY18. However, on-track project execution aided by early certification work by clients, due to lack of clarity on GST, would help maintain the near-term momentum. Given the good growth guidance for FY18 and the recent correction in the price, we recommend investors to start accumulating the stock,” the brokerage said.

      Centrum values the stock at 18 times its FY19E EPS and has a target price of Rs 339.

      The company’s bid pipeline stands at Rs 2,000 crore, which includes bids for upcoming IITs in Bhubaneshwar, Kanpur and Roorkee – the project size is roughly Rs 500 crore each. The company is also seeking participation in redevelopment projects in excess of Rs 350-400 crore. Besides, it is bidding for an auditorium project of NBCC worth Rs 400 crore and hospital projects worth in excess of Rs 350 crore.

      “Notwithstanding the expected restrained inflows in the short term, though long-term prospects seem bright and with its proven execution capabilities and low-geared balance sheet, the company seems set to emerge as one of the key beneficiaries of the expected healthy capex in the buildings sub-segment. Together with the robust fundamentals, the 20 per cent contraction in the stock price in the last three months render valuations appealing. Hence, we raise our recommendation to a Buy,” said Anand Rathi Financial Services in another note.

      CBI in July alleged that Bikramjeet Singh Ahluwalia, promoter of Ahluwalia Contracts, was involved in a land deal, where he bought shares of a shell company Delight Marketing. Sarla Gupta, wife of Lalu Prasad Yadav’s close aide PC Gupta, is the director of Delight Marketing.

      The CBI issue is likely to dampen investor sentiments till clarity emerges on the issue.

      “This may take some time and, hence, we lower our target multiple to 16 times (from 21 times) FY19E EPS. We believe the price correction since the CBI probe news broke largely factors in the near-term negatives. Consequently, we alter our recommendation from ‘under review’ to ‘buy’ with a target price of Rs 346,” the brokerage said.




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