MULTIBAGGER STOCK RECCOMENDATION - AHLUWALIA CONTRACTS

Ahluwalia Contracts India

BSE CODE : 532811
NSE CODE : AHLUCONT
CMP : 113.05

52 WEEK HIGH/LOW : 246 / 108.35
MARKET CAP : 753.14 Cr.
PE : 10.27
INDUSTRY PE : 13.19
EPS : 11.68 BOOK VALUE : 40.50  

Ahluwalia Contracts India ltd. (ACIL) is a E.P.C (Engineering-Procurement- Construction) company. Its well diversified premier Building & Structural construction company with over 45 years of experience. Company has developed various projects in the domain of Building, Complexes, Hospitals, 5 Star Hotels, Large Institutes, Medical colleges and Laboratory buildings, Multi-Storied Housing Complexes, residential Township projects & various Sport Avenues and Complexes. ACIL is few of the companies in India who are pre-qualified to bid for most of the mega building projects in the country.

Strong Order Book :

Currently, Company has order Book of over 5,000 Crores which will be increased to 6,000 in next 18 months. Few of its current projects are Mumbai and Bangalore metro project, High-End hotels for ITC and HDIl, Airport modernization in Ranchi, 6x660MW ultra mega power project in M.P. for Reliance Infrastructure (ADAG), etc. ACIL has bagged a DBOT project from Rajasthan State Road Transport Corporation (RSRTC), to build a bus terminal along with commercial complex, at Kota, Rajasthan. ACIL is trying to increase its exposure in power and urban infrastructure which will help in order book rising upward in next 18 months.

Strong Cash Flow :

ACIL is among the few companies in the construction sector that have been consistently generating substantial positive cash from operations. Cash on hand stands at Rs1.7bn and capex is estimated at Rs600mn p.a. over FY11-FY12.

Excellent Client Base :

Company is well diversified among big names which has sound financial health. Presently, About 30% of orders are from government sector & the 70% are from private sector. Few of the clients are ITC, HDIL ( Hotels)  Reliance Infrastructure ltd. (Power), Ranch Airport (Aviation), Mumbai and Bangalore metro ( Metros), DBOT (Road) ( Government Sectors). Residential ( DLF Gurgaon, Metropolis Bangalore, South City Kolkatta,etc. ), Commercial projects for SEBI, Maruti, Apollo Tyres, etc.

Financial :

As per Financial : 31th December, 2010 – The company’s net profit stood at Rs 1,414 lakh, as compared to Rs 2,642 lakh for corresponding quarter of 2009, a decrease of 47%, which was due to slowdown on top-line. Most of the negative news is priced in and ACIL is expected to delivery better result in FY11-12. Indian government aims to spend $1,000 billion on infrastructure in next 5-10 years and ACIL is poised to benefit in long run with superior technology, vast experience, Strong Order book, stable profit margin and good and visible earning.

Strong ShareHolding Pattern :

As of  Dec (2010), Promoter is Holding 72.61%, FIIS 4.98% and DIIS 8.66%. Public only owns approx. 4%. More recently, Nalanda Singapore-based firm had acquired 1.4% stake in Ahluwalia Contracts on Dec 17th for Rs 12.3 crore ($2.7 million). Only 15% is available for retailer. Strong promoters & Increasing DIIS supporting Robust Future Ahead.

Valuation :

ACIL has strong order book and increasing by 20% in next 18 months. Good sale is clearly visible. profit margin is expected to be same if not better which itself give high growth as per current valuation. At the CMP of Rs.119, the stock is trading at FY11E 9x which is very attractive valuation. There are very few companies with good cash flow, strong order book, less debt and healthy profit margin clearly visible in infrastructure space. Stock has corrected almost 60% in last 4 months on the news of CWG Scam, Small/Mid Cap correction, Below expected return and Overall weak market sentiments. Long Term investor with time-horizon of over 18 months, can BUY @ 113 till 100 in systematic way for Target 200 in next 18-24 months to make decent return and take benefit of Infrastructure growth.