Ashoka Buildcon targets H2 margin recovery as asset monetisation supports balance-sheet improvement

Investment View and Target Price

PL Research retains a BUY rating on Ashoka Buildcon despite weak near-term execution, supported by the stock trading below book value and retaining valuation support. The target price has been reduced to Rs 150 from Rs 152 following modest estimate cuts.

PL Research reduced its FY27E and FY28E sales estimates by 2.3 per cent and 2.7 per cent, respectively. EBITDA estimates were cut by 2.3 per cent and 2.7 per cent, while EPS estimates were reduced by 1.0 per cent and 1.4 per cent, respectively.

Q1FY27 Financial Performance

Ashoka Buildcon reported a soft Q1FY27, with newly commenced projects ramping up slowly and domestic road awarding remaining weak. Standalone revenue declined 1.7 per cent year on year to Rs 1,287.9 crore, 10.7 per cent below PL Research's estimate of Rs 1,441.7 crore.

Standalone EBITDA fell 23.9 per cent year on year to Rs 93.0 crore and was 27.6 per cent below estimate. EBITDA margin declined 211 basis points year on year to 7.2 per cent, affected by front-loaded mobilisation, establishment, employee and administrative costs related to new projects and verticals. Adjusted PAT increased 2.7 per cent year on year to Rs 31.5 crore, although it was 29.2 per cent below estimate, as lower finance costs partly offset the operational weakness.

Consolidated revenue declined 21 per cent year on year to Rs 1,500 crore, while consolidated EBITDA fell 55 per cent. This reflected BOT and HAM assets monetised in FY26 moving out of the consolidated accounts. Jaora-Nayagaon toll revenue grew 7.5 per cent year on year to Rs 74.9 crore.

Management Guidance and Earnings Outlook

Management lowered FY27 revenue-growth guidance to 10-15 per cent from 20 per cent, citing a flat first quarter and supply-chain uncertainty. Reported EBITDA margin guidance was reduced to 9-9.5 per cent from about 10 per cent.

Management expects H1 FY27 to remain subdued, followed by a material recovery in H2 as projects ramp up. It aspires to an FY28 EBITDA margin of 10.5-11 per cent as better-priced projects contribute.

PL Research forecasts standalone FY27E revenue of Rs 6,507.6 crore, EBITDA of Rs 585.7 crore and adjusted PAT of Rs 272.3 crore. FY28E forecasts are Rs 7,646.0 crore, Rs 707.3 crore and Rs 395.6 crore, respectively.

Order Book and New Business Opportunities

Ashoka Buildcon's order book stood at Rs 15,250 crore, equivalent to around 2.6 times trailing standalone revenue. Around 63 per cent comprises roads and railways, while around 33 per cent is from power transmission and distribution.

Management guides for Rs 6,000-8,000 crore of order inflow during the remaining three quarters of FY27, in addition to Rs 780 crore secured in Q1. Around Rs 1,800 crore of L1 projects are expected to convert in Q2.

The bid pipeline is around Rs 1.75 lakh crore and includes NHAI and MoRTH, state and railway projects, power transmission and distribution, renewable EPC and international opportunities. Weak domestic road awards are prompting the company to focus more on railways, transmission and distribution, buildings and international markets.

Asset Monetisation and Balance Sheet

Asset monetisation remains an important balance-sheet catalyst but has been deferred. The sale of the six remaining ACL SPVs is now expected to close for four assets by September or early October 2026 and for the other two in Q3 or Q4FY27, compared with the earlier June timing for the first set.

Expected aggregate realisation remains Rs 1,150 crore, including around Rs 700 crore from the first four assets, although a Rs 30-40 crore holdback is possible. Chennai ORR monetisation is targeted by December 2026, while Jaora-Nayagaon monetisation is targeted by March 2027 or H1FY28.

Standalone debt is around Rs 1,200 crore, including around Rs 700 crore of third-party debt. Management expects standalone debt to reduce to Rs 500-600 crore after monetisation. Working capital increased by around Rs 250 crore sequentially due to mobilisation advances. Power transmission and distribution receivables embedded in unbilled revenue and debtors are expected to be released by December 2026.

Valuation

PL Research values Ashoka Buildcon using a sum-of-the-parts approach. It applies an 8 times multiple to FY28E core EPC PAT of Rs 286.2 crore, deriving a core EPC equity value of Rs 82 per share. Book value of investments of Rs 69 per share is then added to arrive at the target price of Rs 150.

Key Monitorables

• H2 execution and margin recovery.
• Conversion of the order pipeline.
• Timely monetisation of the remaining SPVs and other assets.
• Release of power transmission and distribution receivables.
• The pace of domestic road awards.