This Small Cap Stock's Q1 Profit Plunged 50%, But Analyst Sees Over 60% Upside

Ashok Buildcon saw consolidated net profits plunge close to 50% in the June quarter to ₹67.7 crore compared to the ₹134.6 crore booked in the same quarter last year. Despite this analysts at HDFC Securities remain bullish on the stock.

The Ashok Buildcon Analyst: The analyst team at HDFC Securities led by Parikshit D Kandpal maintained their ‘buy’ rating for the stock, raising the price target to ₹148 from ₹135. The revised price target indicates an over 62% upside from the stock’s last closing price of ₹91.10.

The Ashok Buildcon Thesis: The firm noted that the company had an operationally weak quarter, as June quarter numbers missed the brokerage’s estimates on all counts. The construction major’s revenue missed HDFC securities by 5%, while adjusted profit after tax missed estimates by 77%.

See Also: Ashish Kacholia Picks Up Stake In This Micro Cap Stock That Has Gone Up Over 120% YTD

The firm highlighted that the company has secured a significant contract valued at ₹2,290 crore from Maharashtra State Electricity Distribution Company Limited (MSEDCL). This contract pertains to the development of distribution infrastructure across seven circles in Maharashtra.

The company previously anticipated receiving orders between ₹8000-₹10,000 crore for the remaining part of FY24, but it has now revised its guidance to ₹5000-₹7000 crore. As of June 2023, the company’s Order Book (OB) stands at ₹16,920 crore, which is approximately 2.7 times its FY23 revenue.

The analyst noted that in terms of business segments, the order book is well-diversified, with contributions from various sectors: roads (43%), power transmission and distribution (36%), buildings (13%), and railways (8%). The analysts said that the diversified OB augurs well for near-term revenue visibility.

Price Action: Shares of Ashok Buildcon were up 2.96% to trade at ₹93.80 in the early hours of trading on Wednesday.

Read Next: India Meets Pakistan In Singapore: A Tale Of Two Nations, Shared Visions, And A Tech Revolution!

Don't miss a beat on the share market. Get real-time updates on top stock movers and trading ideas on Benzinga India Telegram channel.

Posted In: Ashok BuildconHDFC Securities