Ashoka Buildcon: PAT growth of 269% & revenue growth of 21% for H1-25 at a PE of 7
Guidance of flattish revenue in FY25 with 10-15% growth in FY26. Margin expansion and asset monetization to drive strong bottom-line growth. Order book in place to support revenue outlook.
1. Why is ASHOKA interesting?
ashokabuildcon.com | NSE: ASHOKA
While revenue is expected to be flattish for FY25, the combination of margin expansion and the asset monetization plan will add to the upside and drive strong bottom-line growth. For the outlook given by ASHOKA management the valuations are attractive with a margin of safety2. Construction company : EPC + BOT + HAM
3. FY20-24: PAT CAGR of 34% & Revenue CAGR of 18%
4. Strong FY24: PAT up 40% & Revenue up 21% YoY
5. Strong Q2-25: PAT up 334% & Revenue up 16% YoY
PAT up 193% & Revenue up 1% QoQ
6. H1-25: PAT up 269% & Revenue up 21% YoY
7. Business metrics: Weakening return ratios
8. Outlook: Revenue supported by order book
i. FY25: Flat Revenue
So on the execution side, keeping in view the orders which have come in and their expected date of start of activities, we believe that the revenue top line may be flattish for this year, so what we have said or thought in the last quarter.
ii. FY26: Revenue growth of 10-15%
FY '26, based on this order book, and maybe next order book, we should definitely look at after getting new orders, to grow by 10% to 15%.
iii. FY25: Margin improvement in H2-25
Margin expansion in H2-25 suggests a marginal improvement, reaching around 8.5% by the end of FY25. Ashoka expects to start witnessing double-digit margins from Q1 and Q2 of FY26. This is based on the execution of new projects secured with better margins of 11-12%
As far as EBITDA concerned, we expect at least it should improve by 0.5% for the next 2 quarters.
And we now continue to bid at double-digit margins, 11% to 12%.
the double-digit numbers would be seen only in Q1, Q2 FY '26.
iv. Order book sufficient for FY25 revenue
Coming to the order book status. As on September 30, 2024, our balance order book stands at INR11,104 crores. This excludes additional orders received from projects post September '24 worth INR4,320 crores and also excludes L1 of INR265 crores. The total of current order book stands at INR15,424 crores.
9. PAT growth of 269% & Revenue growth of 21% in H1-25 at a PE of 7
10. Hold?
If I hold the stock then one may continue holding on to ASHOKA
The guidance of flattish growth in FY25 with 10-15% revenue growth is not exciting. However, the underlying business momentum is in place given the strong order book and guidance of margin expansion.
So we'll have a marginal growth in the revenue based on the existing order book, which is getting over a period of time. So overall, we will do the similar turnover, which we did in last year -- last half year, H2.
Order book is sufficient to support the remaining quarters of FY25. However, one needs to see order inflow in the remaining quarters of FY25 or else the FY26 revenue growth guidance will be under threat and could be reason to move out from ASHOKA
The sale of five BOT projects is expected to generate an equity value of Rs 2,539 cr. SBI Macquarie Infrastructure will receive Rs 1,526 cr from the total equity value of Rs 2,539 cr. The remaining Rs 1,013 crore (2,539 - 1,526) would go to other stakeholders in ACL which will directly add to the bottom-line of Ashoka.
So as far as ACL is concerned, after payment of INR1,526 crores, Ashoka Buildcon will become 100% owner of ACL. We expect this transaction the long stop date for this transaction is June '25, and we expect to get that done somewhere in the month of March -- April, May '25.
11. Buy?
If I am looking to enter ASHOKA then
ASHOKA has delivered PAT growth of 269% and revenue growth of 21% in H1-25 at a PE of 7 which makes the valuations attractive in the short term.
Flat revenue with margin expansion of 0.5% in H2-25 will ensure a a very strong PAT growth in FY25 at a PE of 7. It makes the valuations attractive from a FY25 perspective.
The revenue guidance of about 10-15% revenue growth in FY26 with margin expansion from Q1-26 /Q2-26 at a PE of & makes the valuations reasonable from the medium term.
The value unlocking by ASHOKA expected by Apr-March-25 through Asset Monetization will add to the upside in either FY25 or FY26 and makes the valuations at PE of 7 quite attractive.
The risk in the thesis around ASHOKA is if the asset monetization does not go as per plan and or the margin expansion being promised does not come through. However, at a PE of 7 their is a margin of safety in the valuations.
Previous coverage of Ashoka
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