Ashoka Buildcon faces execution test as Q1 miss cuts FY27 guidance

Investment View and Q1 FY27 Performance

Anand Rathi Research retained its HOLD rating on Ashoka Buildcon following a muted Q1 FY27 performance and a reduction in management guidance. The broker sees healthy order-book visibility, diversification and asset monetisation as medium-term supports, while execution recovery and EBITDA-margin improvement remain key monitorables. The target price was reduced to Rs 145 from Rs 164.

Standalone Q1 FY27 revenue was Rs 12.9bn, down about 2 per cent year on year and below Anand Rathi's estimate of about Rs 14.5bn. EBITDA was about Rs 0.9bn versus the broker's estimate of about Rs 1.2bn, while EBITDA margin was 7.2 per cent compared with the estimated 8.6 per cent. Reported PAT and adjusted PAT were both Rs 315m.

The shortfall reflected supply-chain constraints and initial costs on newly commenced projects, affecting execution and profitability. Management expects these initial costs to rationalise as projects ramp up, supporting a gradual improvement in execution and margins.

Order Book and Diversification

Q1 FY27 order inflows were about Rs 8bn, including a Guyana highway project worth about Rs 3.2bn and a Gems and Jewellery Park project worth about Rs 4.7bn. The firm order book stood at about Rs 153bn, equivalent to roughly 2.6 times book-to-bill and providing around two to 2.5 years of revenue visibility. Another Rs 18bn of orders was at L1.

Overseas and private-client contribution rose to about 22 per cent from about 12 per cent in Q1 FY26, reducing dependence on domestic roads. Management retained FY27 order-inflow guidance of about Rs 60bn to Rs 80bn across roads, railways and power transmission and distribution, supported by a bidding pipeline of about Rs 1trn.

Lower Guidance and Execution Outlook

Management lowered FY27 revenue-growth guidance to 10-15 per cent from about 20 per cent and reduced EBITDA-margin guidance to 9-9.5 per cent from about 9.5-10.5 per cent. It expects margin improvement in H2 FY27 as newly mobilised projects ramp up and is targeting an EBITDA margin of about 10-10.5 per cent in FY28E.

Working capital is temporarily elevated by about Rs 2.5bn because of new projects. FY27 capex, including international operations, is guided at about Rs 1.3bn.

Asset Monetisation and Debt Reduction

Asset monetisation remains central to deleveraging. Consolidated gross debt and net debt declined to about Rs 27.7bn and Rs 18.3bn, respectively, in June 2026 from about Rs 68.3bn and Rs 65.3bn in June 2025. Standalone gross debt and net debt declined to about Rs 11.7bn and Rs 9.1bn from about Rs 16.5bn and Rs 14.4bn.

Management plans to monetise four remaining HAM assets by September 2026 for about Rs 7bn and the other two by March or June 2027 for about Rs 4bn, subject to conditions and receipt of PCODs from NHAI. Chennai ORR and Jaora-Nayagaon are also targeted for monetisation by end-FY27 and Q1 FY28, respectively.

Deferred consideration of about Rs 5.5bn from previously monetised BOT assets remains contingent on NHAI approval for toll extensions.

Estimates, Valuation and Risks

Anand Rathi cut FY27E and FY28E revenue estimates by 3.9 per cent and 5.2 per cent, respectively. EBITDA estimates were reduced by 9.0 per cent and 8.7 per cent, while adjusted EPS estimates were cut by 14.1 per cent and 3.8 per cent.

The Rs 145 target price is based on a sum-of-the-parts valuation, including core construction valued at 7 times FY28E adjusted EPS, existing BOT annuity assets, expected post-tax monetisation proceeds, surplus cash net of debt and HAM equity commitments. At the CMP of Rs 114, the broker estimated that the ex-investments core construction business traded at 4.6 times FY27E and 2.9 times FY28E earnings.

Key downside risks are weaker order wins, sluggish execution and margin pressure.