Ahluwalia Contracts faces margin reset as Rs 206.6 billion order book supports growth

Investment View and Valuation

In its August 17, 2026 Q1FY27 result update, Prabhudas Lilladher retained its BUY recommendation on Ahluwalia Contracts (India), despite a sharp earnings miss and a reset in management guidance. The broker reduced its target price to Rs 930 from Rs 1,045 after cutting its FY27E and FY28E estimates.

Prabhudas Lilladner's positive view rests on the stock trading at about 15 times revised FY27E EPS versus its 10-year average of about 18 times. The broker also highlighted the company's debt-free balance sheet and substantial order book as supports for medium-term growth.

Q1FY27 Financial Performance

Ahluwalia Contracts reported standalone Q1FY27 revenue of Rs 11,258 million, up 12% year-on-year and broadly in line with the broker's estimate of Rs 11,054 million. However, EBITDA fell 44% year-on-year to Rs 482 million, 49% below the estimate of Rs 940 million.

The EBITDA margin dropped to a historic low of 4.3%. Higher depreciation of Rs 322 million, which the report considers recurring following recent capital expansion, and finance cost of Rs 164 million also weighed on earnings.

Reasons for Margin Pressure

Management attributed the margin pressure to three factors:

• Finalisation of the AIIMS Jammu bill at Rs 290 million lower than expected was booked in raw-material costs and caused an estimated 260 basis point impact. Management expects no further downside from this item and plans arbitration.
• NCR projects, accounting for about 50% of the order book, faced a government-mandated 35% to 40% wage increase and a skilled-labour shortage during the festival period. This caused an estimated 150 basis point company-level impact.
• Higher staff and indirect development costs from mobilisation for Central Vista, Dalias and DLF Downtown accounted for the balance of the margin pressure.

Management Guidance and Execution Outlook

Management lowered FY27 revenue-growth guidance to 12% to 15% from 15% to 20% earlier and ruled out a double-digit EBITDA margin in FY27. It expects the margin to recover towards about 8.6% over the next three quarters and return to double-digit levels only in FY28.

NGT-related action in Delhi and Haryana is an explicitly identified Q3FY27 risk that management cannot yet quantify. FY27 order-inflow guidance was halved to Rs 40 billion to Rs 50 billion from Rs 80 billion as Ahluwalia Contracts adopts a more selective bidding approach amid material and labour-cost volatility.

Forward bids include higher shuttering, steel, staff and safety costs. The company is pursuing item-rate compensation claims with NCR clients, although these claims are not contractually assured.

Order Book and Project Execution

The net order book stood at Rs 206.6 billion, equivalent to about 4.6 times trailing 12-month revenue and executable over three to three-and-a-half years. Gross order book was Rs 297.1 billion, up 33% year-on-year, while Q1FY27 order inflow was Rs 5,128 million.

Balance Sheet and Working Capital

The balance sheet remains a key support, with gross debt of about Rs 20 million and cash of Rs 9,200 million. Working capital was about 119 days, and management expects improvement as election-delayed Assam receivables are collected.

Key Risks

• Further labour and material-cost inflation.
• Uncertain NGT disruption in Delhi and Haryana.
• Project approval delays.
• Weak order inflows.
• Uncertainty around compensation claims from NCR clients.

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