Ahluwalia Contracts India has a strong position, almost being the key player in the infrastructure sector, with a diversified order book likely to fuel growth over the next 3-4 years. The latest report from Axis Securities also pointed towards strong positioning on the edge of infrastructure development spurt by the government coupled with the rise in private investment in the economy. The brokerage house pointed out that Ahluwalia Contracts India is most likely to see significant revenue growth. It has, therefore upgraded the stock from a ‘hold’ rating to a ‘buy’ recommendation, but maintaining the target price at ₹1,340.
In the article, we will be discussing the key factors that make Ahluwalia Contracts India look promising for the short term, according to Axis Securities- robust order book and healthy intake and solid financial position.
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Solid Order Book: The Backbone of Ahluwalia Contracts India
The first main reason that has infused positivity in Ahluwalia Contracts India is a strong and diversified order book. As of the latest available reports, the order book of the company stands at a healthy ₹16,846 crore, thereby providing for strong revenue visibility over the next 3-4 years. The order book includes both public and private sector projects and has that kind of portfolio that minimizes the risk but offers steady revenue streams from different sectors.
Management of Ahluwalia has projected high double-digit growth for FY25 and FY26, primarily relying on the strength of the current order book and its ability to garner new orders. According to a report by Axis Securities, such a growth trajectory would perfectly align with strategic goals of the company in metros, airport buildings, as well as urban infrastructure projects. Half of the order book belongs to private sector projects. Therefore, with more attractive margins and faster execution, the long-term stability of the order book is assured.
New Order Intake: Strong Pipeline in the Future
Apart from a strong existing order book, there is also significant momentum coming through in new order intake by Ahluwalia Contracts India. So far in FY25, the company has secured orders worth ₹6,600 crore, and management expects to see another ₹3,500 to ₹4,000 crore in the pipeline of new orders before the end of FY25. This is an important sign of the growing pipeline of the company; Axis Securities believes it to be robust and high-pitched with private sector projects.
The private sector projects in the form of item-based orders are expected to provide higher margins and faster execution as against the company’s public projects. Axis Securities mentioned that about 50% of the executable order book of the company consists of private sector projects, which means the company Ahluwalia Contracts India is all set to capitalize on the high-margin, fast-moving opportunities.
The company has began to expand its order book by focusing on private sector tenders, mainly in metros, airports, and infrastructure projects in urban regions. These sectors are strategic for the growth of the company as they provide higher margin orders in the majority and facilitate smoother project executions. For these reasons, of efficient high margin projects execution with commitment to quality by the company, Axis Securities expects quicker project execution by Ahluwalia Contracts India during the next couple of years.
Financial Strength: A Debt-Free Company with Strong Cash Reserves
Ahluwalia Contracts India’s financial health is also another big reason the brokerage house is giving a ‘buy’ recommendation. The company is in an enviable financial position, with no net debt on its balance sheet and good cash buffers amounting to about 9% of its total market capitalization. These cash buffers, therefore, supply the company with a good cushion to protect it against any market volatility, which would prevent any sort of disruption in the smooth running of the company without further debt financing.
In terms of financial performance, the company also reaps strong return on investments (ROI) ratios, reflecting its ability to generate profits relative to its invested capital. Combining these with debt-free financials positions Ahluwalia Contracts India as financially sound and capable of sustained growth.
The company is also financially buoyant to invest in other ventures without excessive risk. This is quite critical as infrastructure projects are mostly capital-intensive, requiring substantial capital investment before much can be done on the project. Ahluwalia Contracts India will be in a position to tender for new projects but still be financially stable with a debt-free balance sheet and high cash reserves.
Healthy Market Environment: Government Focus on Infrastructure
Ahluwalia Contracts India also happens to enjoy a very favorable market environment: the focus of the Indian government to boost economic growth through infrastructure development, and private investment revival in infrastructures, which are likely to be better financed and faster-executing projects.
Axis Securities said, “Infrastructure spends are now a joint effort by the government along with private investments and we believe these have been positives for companies such as Ahluwalia Contracts India. Its ability to garner a large mix of projects from both public and private sectors would ensure it benefits well from government spending as well as augmented investments from the private sector in the coming years.
Valuation: Attractive Upside Potential
The report from Axis Securities has a detailed valuation of the potential upside in shares of Ahluwalia Contracts India, for which it expects increase in revenue, Ebitda, and APAT by a CAGR of 21 per cent, 26 per cent, and a 33 per cent respectively over FY24-FY26.
Ahluwalia Contracts India is trading at 19x FY26E EPS, which the brokerage finds an attractive entry point based on the growth prospects of the company. Axis Securities has placed a target on the share at 22x FY26E EPS and has come up with a target price of ₹1,340 per share, which is an upside of 13% from CMP. This valuation goes hand in hand with its solid order book, robust new orders, and its financial fitness.
Axis Securities upgrades rating on Ahluwalia Contracts India to buy from hold
Axis Securities upgraded the rating on the stock of Ahluwalia Contracts India to buy from hold after correction in the recent stock price and strong business prospects. According to the firm, the recent correction would be an attractive entry point for investors who are keen to gain exposure to the company, which has a healthy financial structure and stable growth prospects.
Axis Securities, in the report, discusses several reasons that motivated the upgrading rating of the stock: a well-stacked order book for the company, high-margin private sector projects, and a debt-free financial position. The brokerage firm believes that the stock has a bright prospect of sustaining impressive growth in the coming years because of generating constant new orders and productive project executions.
Conclusion: Bright Prospects for Ahluwalia Contracts India
Ahluwalia Contracts India is poised to perform well, given a highly diversified order book and a healthy pipeline of new orders and a debt-free financial position. With market conditions being supporting, the focus of the company on high-margin private sector projects suggests that revenue growth will be strong in the near term as well.
Axis Securities upgraded its stock recommendation on the equity to ‘buy’ on the basis of excellent fundamentals and attractive valuation. The target price set on the stock has been at ₹1,340 per share. The potential upside, from the current market prices, stands at 13%. It appears to be a promising pick for investors who are dwelling on India’s growth story on infrastructure growth.