shares overview construction & contracting civil Ahluwalia Contracts India

Ahluwalia Contracts India (updated - 02 July 2010)
Ahluwalia Contracts (India) (ACIL), a medium-sized urban infrastructure player, has seen its stock price shoot up by almost two times in the past one year, partly due to a continuous rise in orders.

Also, the stock’s return over six months is superior to ET Realty Index’s performance. While the index fell by 18%, the scrip gained 3% during the period.

ACIL is a construction contractor operating in commercial, residential and industrial space. A little over half of its order book comes from private sector contracts with the rest coming from the government.

Real estate residential projects account for one-third of its order book with industrial and commercial projects contributing the rest.

The company is keen to reduce its dependence on residential real estate business, given the segment’s higher volatility. As part of this strategy, it recently ventured into build-operate-transfer (BOT) business model for urban infrastructure. The new division has bagged an order worth Rs 72 crore for the development of a bus terminal in Kota, Rajasthan.

ACIL has an order book of Rs 5,300 crore as of end-March 2010, which is 3.4 times FY10 revenue. The orders are executable within the next two years.

The firm has also added 11 new orders worth Rs 500 crore to the order book. Its revenue expanded at a compounded annual growth rate of 32% over the past three years while net profit grew 41% during the same period on the back of improved operational efficiency. ACIL ended FY10 with Rs 1,599 crore in revenue and Rs 81 crore in net profit.

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The firm has relatively comfortable debt-equity ratio of 0.49 on a consolidated basis. This is lower than the average 0.7 for medium-size infrastructure companies. ACIL has also generated positive operating cash flows over the past five years thanks to better working capital management.

Going forward, the company expects to maintain its current growth rate with higher focus on highway projects. At annual earnings per share (EPS) of Rs 13, the stock is trading at 15 times its earnings, compared to its peers JMC Projects and BL Kashyap that are trading at earning multiples of 19 and 11, respectively.