Shares of Ashoka Buildcon have remained under pressure since the company posted its results for the December quarter results. However, analysts at HDFC Securities remain positive about the stock’s long-term prospects.

The Ashoka Buildcon Analyst: Parikshit D Kandpal for HDFC Securities maintained the “buy” rating raising the price target to ₹254 from ₹239. The revised target indicates an around 58% upside from the stock’s last closing price of ₹160.35.

The Ashoka Buildcon Thesis: The brokerage said that the company’s December quarter results beat its expectations. The company’s revenue, EBITDA, and APAT surpassed the brokerage’s estimates by 20/6.1/3%.

However, the EBITDA margin of 8.3% fell short of the estimated 9.4%, primarily due to weaker margins in legacy projects. The analysts pointed out that the company anticipates achieving EBITDA margins of 10% or more from Q1/Q2FY25, with further improvement to 11-11.5%.

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As of December 2023, the order book stands at ₹13,170 crore, equivalent to around 2.1 times FY23 revenue. The analysts highlighted that the order book is well-diversified across roads, power T&D, railways, and buildings, constituting 43/42/9/6% respectively. Geographically, the highest contribution comes from the west/south regions at 33/27%, followed by central/east/overseas at 13/9/10%. State/central governments are major clients, making up 43/29% of the OB, with overseas/HAM/private at 10/10/8%.

The brokerage also remarked that the company has a comfortable balance sheet, the standalone gross/net debt as of December 2023 is ₹1,100/830 crore, compared to ₹1,120/890 crore as of September 2023.

Price Action: Ashoka Buildcon’s share price was up 2.12% to trade at ₹163.75 in early trade on Tuesday.

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