Monday, December 7, 2015

Buy ACIL on declines


Ahluwalia Contracts (India) Limited is an India-based company, which is engaged in the business of construction and related activities. The Company is also engaged in built operate transfer (BOT) operations by building and operating commercial complex under concession service arrangements. It is engaged in building institutional buildings and corporate office complexes, industrial complex buildings, multistoried housing complexes and township development projects, hospitals, medical colleges and laboratory buildings, five-star hotels, educational and technical institutes, schools and auditoriums, and gymnasiums and sport complexes. Its projects include International Convention Center, Mumbai; Sale Residential Towers for HDIL whispering Towers, Mumbai; DDA Houses on Desin & Built Basis, New Delhi; Police Head Quarter Building, Bihar, Patna, and PNB Head Office Building, New Delhi, among others.

Financials :

Ahluwalia Contracts (India) Ltd (ACIL) posted 17.2 per cent y-o-y growth (highest Q2 growth in last 7 years) in its Q2FY16 standalone sales to ₹280 crore (6.6 per cent lower than our expectations). The growth in sales was driven by better execution in its key business segments and projects. ACIL boasts of strong fundamentals (27.2 per cent revenue CAGR during FY15-17E).

The operating profit margin improved by 56 bps to 12.5 per cent (160 bps above our expectation), aided by 134 bps y-o-y reduction in employee cost to 5.9 per cent (as a per cent of revenue). The profit before tax grew sharply by 56.2 per cent y-o-y to ₹25.8 crore aided by higher other income (up 27.8 per cent y-o-y to ₹3.2 crore) and lower interest cost (down 19.3 per cent y-o-y to ₹7.5 crore). The growth in PAT was restricted to 17.4 per cent y-o-y to ₹19.1 crore (19.2 per cent ahead of estimates) due to higher tax rate of 26 per cent v/s 1.6 per cent in Q2FY15.

Our Recommendation : 

The scrip has been forming higher bottom and higher tops indicating a possible bull run.  Buy on declines to around Rs.250 and hold for 12-15 months time frame for a target price of Rs.350

Equity Research Team :

Smart Investor
No.24 Pattamal Plaza
3rd Cross Kammanahalli

Mobile / Whatsapp -08105-737-966