Ahluwalia Contracts - Robust Industry Outlook, Supported By Momentum In Order Inflows: HDFC Securities

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..HDFC Securities Retail Research.Ahluwalia Contracts India Ltd. continues to see robust order flow prospects in healthcare, data centres, industrial structures apart from government buildings. Competitive intensity remains elevated but Ahluwalia Contracts remains very selective in bidding for projects. Despite near term headwinds of high input costs, margin is expected to improve from FY24E with softening of commodity prices, a narrower gap of indices with input prices, slightly lesser competitive intensity and new projects bid at elevated input price assumption. The promoter family remains closely involved in the business with well-defined responsibilities and clear understanding of future roles. Ahluwalia Contracts’ robust and diversified order book, strong bidding pipeline, timely execution could help to bring more orders going forward.Investors can buy the stock in the Rs 690-704 band and add more on dips to Rs 615-629 (12.5 times FY25E earnings per share). We feel the base case fair value of the stock is Rs 771 (15.5 times FY25E EPS) and the bull case fair value is Rs 821 (16.5 times FY25E EPS) over the next two to three quarters..Key triggersHealthy and diversified order book position to provide medium to long term revenue visibility.Expectation to regain its margins to 11-12% going forward.Robust industry outlook, supported by momentum in order tendering and awarding.Sound fundamentals led by comfortable capital structure and strong debt coverage indicators..What could go wrong? Economic slowdown and changes in regulatory environment may impact the construction industry and/or real estate market. This could adversely affect the company’s operations and execution time periods. Contractual obligations for quality, timeliness, protection of confidential information and other specific terms and conditions are crucial for engineering, procurement and construction orders. Ahluwalia Contracts is engaged in business with large industrial houses, corporates, institutions and Government authorities. These clientele demand strict adherence to timely delivery, quality and costs. If their expectations are not met with, it may damage the company’s brand and prevent repeat orders.Ahluwalia Contracts has a track record of not paying dividend frequently to its shareholders, the company recommended dividend at Rs 0.30 per share in FY23 to the shareholders. The company largely depends on Government orders, any delay in receiving payment could impact its operations. Also slowdown in Government spend could impact its order inflow and revenues.The promoters have pledged its shares, which is 5.4% of its 55.32% stake, as on September 30, 2023. Further rise in pledged shares by promoter could impact investors sentiment towards the stock..Click on the attachment to read the full report:.Birlasoft - Robust Order Book Brings Strong Earning Visibility: HDFC Securities.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Ahluwalia Contracts - Robust Industry Outlook, Supported By Momentum In Order Inflows: HDFC Securities

Looking at the government’s initiatives on infra sector, we expect that company could see large order inflow opportunities.

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