Ahluwalia Contractors Q3FY17 Concall Summary

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Financial Highlights

Ahluwalia Q3FY17 Performance
  • Turnover was 358.08 crores, PAT was 24.45 crores corresponding to last year turnover of 319.95 crores & 19.84 crores respectively in Q3FY17
  • EPS for Q3 stood at 3.65 as compared to 2.96 in last year Q3
  • EBITDA margin was 13.19% as compared to 12.36% in the corresponding quarter last year and PAT margin stands at 6.83% as compared to 6.20% in the corresponding period last year
  • For 9 months the company achieved a  turnover of 954.68 crores and PAT of 65.65 crores in comparison to a turnover of 865.89 crores and a PAT of 57.71 crores in the corresponding period of FY16
  • For 9 months EPS was 9.8 in FY17 as compared to  8.6 in FY16
  • For 9 months EBITDA margin stood at 13.61% as compared to 12.41% & PAT of 6.88% as compared to 6.66% in the corresponding last year
  • Current Debt level outstanding is 70 crores working capital from the bank & the rest 28 crores from unsecured loan from the promoter. Right now the total debt is 101 crototak
  • Debtors day is 155 days. Company has Debtors of 555 crores & inventory is 207 crores & trade receivable is 297 crores & total working capital is approximately 130 day

Operational and business highlights 

  • There is bit slow down & company is cautious around the time of elections. The company from south have become aggressive.
  • The company has seen improvement in working capital, the payments have been struck in private players. It is looking to liquidate some of the inventory
  • The company has acquired inventory worth about 80 crores & in the next year it may acquire another 30-40 crores
  • The company sees competitive intensity going up. Some players who were notbidding have started bidding like B.L.Kashyap & Billimoria.
  • Over a couple of years the company sees the ticket size increasing. The government departments are coming up with larger packages as far as bids are concerned. Competition will increase a little bit & then the company may see some foreign players coming in the long run which will be good for the industry
  • The company does not see any traction in the affordable housing & expects only closer to next round of general elections
  • There is no income tax receivable outstanding, the company has received whatever it had to come
  • The company has 2 arbitrations going on, one with Emaar for games village & one with CPWD for the stadium & there are half a dozen other arbitrations which are going on with various clients which are expected to. The company got another award with the Art of living Foundation for whom the company had done residential project in the outskirts of Bangalore. The award was in company’s favor to the tune of 8 crores
  • The company has been associated with metros like Bangalore, Delhi & Mumbai metros. There are at least 6 metros coming in different cities & company will continue to bid on these. The company has a precast tie up with Russian company. The company is looking to grow MEP verticals also

Order book 

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  • The company received orders of 1450 crores in the financial year till date.
  • Net order book of the company as on December 31, 2016, stood at 4013 crores to be executed in the next two to two-and-a-half months.
  •  The target for the entire year was about 1600 crores. The company is already done 1450 crores in last quarter & the company’s target is 1600 crores to 2000 crore
  • The order pipeline stands at about 1200 crores
  • The order pipeline comprises of hospital project in Calcutta which company has bid, Convention center & residential project for government. There is also a large private sector residential project with one of the known corporate in Mumbai & there are some MEP projects in Delhi & NCR for which company has bid. 
  • Order inflow is 1450 crores & out of which 85% is government. Out of total order book of 4000 crores, public sector is 68%.
  • The breakup of order book is commercial 5%, hospital 22%, infra 12%, institutional 29%, residential private 23%, residential government 8%. Infra & Industrial would be about 12.5%. Residential government is about 7.8%
  • The geographical break up of order is North 63%, East 14%, West 23
  • The company is expecting redevelopment order from NBCC, NBCC are coming out with one or two large tenders in next 30-45 days. The average ticket size would be around 700-800 crore.
  • The company has order from NBCC to the tune of 120 crores. This order from NBCC has built in escalation clause. This his fixed price contract is awarded about two-and-a-half years ago after which the project was a non-starter because there was a dispute on the ownership of land between two government entities, DDA and CRPF, so that was resolved and this project began eight-nine months ago. This is the large datacenter for National Intelligence Grid, otherwise, there is no fixed size contract and generally all the tenders which come from the public sector come with an escalation clause
  • Out of 4000 crores, one can discount 400 crores & they do not drag company balance sheet. So virtually the order book is currently around 3600 crores
  • The prices of steel came down after the NBCC order which is beneficial to the company. Over the entire year, NBCC should tender out anywhere between 3000 to 4000 crores, so company target would be to bag at least one project.
  • The company has no L1 orders. The quantum of price fixed orders is 120 crores, which is the order from NBCC
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Order foreclosure  

  • About 400 crores of orders are moving at a relatively slower pace, the company is renegotiating & trying to extricate, get bank guarantees released & tell them that the company will come back as & when they have a line of sight on their funding. The basic idea of the company here is to insulate itself from overhead risks & potential escalation risk & it has been successful to quite a large extent. For example, Jaypee where the company is able to get to foreclose the contract. 
  • In 9 months the company has roughly 200 crores of projects foreclosed.
  • The company has a potential loss of about 50 crores due to 2.5 months Bihar projects foreclosure. There has been escalation done & Chief Minister has announced an early inauguration of the convention centre in patna. So the company is hoping to conclude one  project in the next 3 months & other project by the end of the year
  • The company has been able to lease out about 60% of quota assets & in about middle of FY18 the leasing should be about 100%. The company is expecting revenue of about 1 crore every month by middle of FY18. The company is realizing about 30 lakhs in this quarter.

Focus of debt reduction  

  • The company is planning to infuse equity to the tune of 30-35 crores, to bring interest cost down & make the virtually zero debt company
  • The promoters are extremely focused for the last two years to make it a zero debt company
  • The company wants to continue to reduce interest burden & that is why it is infusing money & wants to use portion of the proceeds which comes in to bargaining power as far as procurement is concerned.

Quota 

  • As far as quota is concerned, the company does not want to kind of have a distress kind of a deal, & wants to bide Its time. Since now the realestate is down the company is hoping that in about a year & a half time it will pick up & able to monetize the asset
  • The company has a quota revenue of 30 lakhs for the quarter
  • The size of quota asset right now is about 80 crores financially & physically about 3.5 lakh square feet.
  • The company promoters are infusing capital at price of 285, which is worked on a formula of allotment of shares.

Guidance  

  • Guidance to the year stood for 10-15%, the growth for the year was 12-13% & next year the target would be upward of 15% 
  • EBITDA target for next year is between 13.5% to 14% & after that the company is expecting to cross 14%
  • Over a medium period of 2-4 years the company sees a revenue growth of 15-20%. 
  • The CAPEX for next year would be in the range of 30-35 crores. For 9 months the company had around 14 crores CAPEX. The company is acquiring certain new machinery so the capex is needed

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