Ahluwalia Contracts Q2FY18 Concall Summary

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Financial  Highlights

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  • Attained a Turnover of Rs.334.55 Crores & PAT of Rs.25.7 Crores, in comparison of a turnover of Rs.290.36 Crores & PAT of Rs.19.98 Crores in Q2 FY2017.
  • Achieved a Year-on-Year growth of 15% in revenue and 29% growth in PAT.
  • EPS of the Company for Q2 2018 stood at Rs.3.85 as compared to Rs.2.98 for the Q2 FY2017
  • During Q2 FY2018, the company’s EBITDA margin is 14.89% as compared to 13.88% and PAT margin is 7.70% as compared to 6.85% in the corresponding period.
  • In HY FY2018, company has achieved a turnover of Rs.838.74 Crores and a PAT of Rs.55.28 Crores in comparison to a turnover of Rs.596.62 Crores and a PAT of Rs.41.79 Crores.
  • Year-on-Year growth is 41% in terms of revenue and 32% in PAT.
  • EPS of the company for HY1 FY2018 is 8.25 as compared to 6.24 in HY1 FY2017.
  • EBITDA margin is 12.33% and PAT margin is 6.59%.
  • EBITDA margin is upgraded from 12-13% to 13-14%. Expected to maintain the same range in the upcoming year too
  • Gross debt levels is at 53 crores. Margins are higher because of belt tightening exercises and increased efficiency.
  • GST is not included in the EBITDA and only accounted as a part of the revenue.

Reasons for Upswing In the company’s results

  • After demonetization, Q2 and Q3 results were expected to be on an upswing, revenue growth was attributed to the increase in the margins in terms of order book growth. Total targets of new order inflow is pegged at about 1200 Crores
  • Won 800 Crores worth of orders till year date, and about 250 Crores in L1 order. These new orders are adding to the inflows.
  • Revenue growth is expected to 15% plus accounting for maintaining.

Impact of GST

  • Actual growth is 23-24% and Net of GST is 15%.
  • Impact of GST is forecasted to be around 8-9%.
  • In terms of value it is estimated at 26-27 Crores. Despite the slump due to GST, the company is expected to on course to achieve a revenue growth of 15%.

Order Book

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  • Current order book is 3575 Crores at the end of Q2 is 3266 Crores. In the current order the fixed price order is 65 Crores.
  • In terms of slow moving orders we have around 300-400 Crores; management for market to turn to liquidate these orders.
  • Net order book of the company as on September 30, 2017 stands at 3266 Crores to be executed in the next 24 to 30 months.
  • Additional orders of 300-400 crores is expected to be added in the order books post L1 orders.
  • NBCC has come up with orders in Sarojini Nagar and Netaji Nagar in the NCR region, each order worth of 1000 crores each.
  • In terms of Private sector contracts, improvements are visible, in the form of commercial building, extending the existing contracts as such. Hence, 300-400 Crores in revenues in expected.
  • Moving into FY2019, opportunity is going to increase, competition will be lease, hence management is gearing up for that in terms of building war chest.
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Sector Wise Splitup

  •  Government is 63% and private sector is 37%.
  • In terms of segment wise, commercial – 6%, hospital – 18%, infrastructure is 25%, institutional is 27%, residential private is 23% and residential government is 14%.
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Working Capital

  • Revised the bill of quantities. Pursued the clients to keep on releasing payments while holding a certain percentage of billing. These measures were undertaken to ensure the working capital were not affected.

Debt and Interim Cash Flows

  • Debt has gone negligible from the balance sheet, and the interest bearing customer advances has come down as compared to the last year. (Customer Advances stood at 141 Crores)
  • Management is under deliberations to roll Dividends by end of next year.
  • Company is pursuing and making a shift to look at larger contracts, scale is changing in terms of business model
  • With the elections approaching, much bigger contracts are expected since the government is expected to increase the capital expenditures.
  • To take a bigger piece of the government planned capital expenditures, company is investing in newer techs and tie-ups to build core competencies.

CAPEX

  • CAPEX is expected to be around 15-20 Crores.
  • Till date company has spent around 11 Crores in terms of upgrading the existing machinery, maintenance and repairs.

Medium Term Outlook

  • Private residential is extremely sluggish and there is a very less uptick, although in the near future consolidation is happening.
  • In the private commercial space, there is increased activity in the metros in the institutional side.
  • In the public side, Government continues to be bullish on the education and healthcare side with lots of focus on convention center on new airports and also large government entities.
  • Government entities are keen to make their offices for training centers in major cities which could expand the order book for us. This is one area of focus where our expected order is going to come from.
  • In the next round of general housing, the company remains bullish on affordable housing which is expected to pick up.

Scenario post RERA

  • Post RERA, consolidation is observed with major players being formed. These are serious player and disciplined. Hence, bidding is a less competitive.
  • Residential private sector is not really company’s preferred area of focus. Company is concentrating a lot on the potential waiting to be tapped in the private and public other areas.

Competition

  •  Management is shifting the focus back to private sector, due to increased competition.
  • Two and a half years ago, there were many players but right now, it is mainly limited to only 4 companies namely Ahluwalia, Shapoorji, L&T, Nagarjuna and JMC.
  • Local players who were active in Mumbai, Delhi doing government contracts through public welfare department have come up and the rates have gone down by 10-12%

Joint Venture

  • Bidding independently on contracts for the range of 500-800 Crores and for contracts above 800 crores, company would partner with potential partners to hedge risks associate with bigger contracts.
  • The nature of JV would be in the case of partnership for tech, already in JV with Precast Tech, to supplement affordable housing but again it cannot be firmly specified and would vary on a project by project basis.

NBCC

  •  NBCC projects tends to come with land clearance, company’s liability is only limited to environmental clearance and other miscellaneous clearance from local authorities.
  • Other opportunities with NBCC stems from redevelopment of institutional headquarters for various government entities.
  • Another project of interest would be the aviation ministry has plans to come up with a lareg airport. Tender offer has come out from Guwahati which is to the tune of 800 Crores.

KOTA Project

  • Project has earned a revenue of 36 Lakhs till this quarter since inception; accounting loss is 2.39 crores, Cash loss of 38 Lakhs accumulated for this half year.

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