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Key Investment Thesis:
Strong order book to drive robust execution ahead:
Ahluwalia Contracts India Ltd. has a strong order book of Rs 8162.7 crore as of FY23 end (2.9 times book to bill) which was at an all-time high. Furthermore, the company also received orders worth Rs 4178 crore in Q1 FY24.
Thereby, taking the order book to ~Rs 12000 plus crore, provides strong growth visibility for the next three years. The company has a bid pipeline of Rs 4000-5000 crore and is targeting further orders worth Rs 2000 plus crore in FY24.
We highlight that the company has guided for 20% plus revenues growth in FY24. Given the robust orderbook, we expect strong revenue compound annual growth rate of ~23% over FY23-25E to Rs 4296 crore.
Operating leverage led margins improvement to boost profit after tax further:
Going ahead, the company has guided for 11% plus margins in FY24 versus 10.7% in FY23 led by operating leverage led benefits and benign raw material regime.
With strong execution, stabilised raw material prices, price escalation in ~72% of the order book, we expect margins to improve to 11% and 11.5% in FY24 and FY25, respectively versus 10.7% in FY23.
Strong topline growth coupled with margins expansion is likely to drive 31% earnings CAGR over FY23-25E.
About the stock:
Ahluwalia Contracts is a leading construction company with five decades of expertise.
The company largely carries out engineering, procurement and construction spanning residential/commercial complex, hotels, hospitals, institutional/corporate offices, IT parks, railway station redevelopment, metro station/depot, parking lot etc.
The order book stood at Rs 8162.7 crore as of FY23 (2.9 times book to bill). Ahluwalia enjoys a healthy balance sheet and is a net cash company (net cash of Rs 585 crore in FY23).
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