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Ahluwalia Contracts: Strong Orderbook Buoys Growth Prospects in a Competitive Market

18 July 20244 mins read by Angel One
Explores the financial performance, recent project wins, and future outlook for Ahluwalia Contracts (India) Ltd , a small-cap company in India's construction sector.
Ahluwalia Contracts: Strong Orderbook Buoys Growth Prospects in a Competitive Market
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Ahluwalia Contracts (India) Limited has recently secured several significant orders, underscoring its strong market presence and ability to win high-value projects. One of the notable contracts awarded by the Airports Authority of India involves the construction of a new terminal building and allied works at Lal Bahadur International Airport, Varanasi, on an Engineering Procurement and Construction (EPC) model. This domestic contract, valued at Rs. 893.48 crores (excluding GST), is expected to be completed within 36 months.

Robust Q1FY25 Orderbook

Ahluwalia Contracts India Ltd (ACIL) has secured a significant order inflow in recent quarters, indicating strong business performance. The company’s Q1FY25 orderbook stands at a healthy Rs. 11,179.93 crore, which is expected to be executed within the next 2 to 2.5 years. This strong orderbook provides revenue visibility and is a positive indicator for future growth.

Financial Growth Over the Past Decade & FY24

ACIL has shown remarkable growth over the past ten years. The company’s compounded sales growth rate stands at 15%, while its compounded profit growth rate over the same period is an impressive 55%. The stock price’s compound annual growth rate (CAGR) is 30% over the last decade. Additionally, the Return on Equity (ROE) has been consistently strong, averaging 16% over these ten years.

ACIL’s financial performance in FY24 reflects growth amidst challenges. The company achieved a turnover of Rs. 3,855.29 crore and a profit after tax (PAT) of Rs. 375.55 crore, translating to an EPS of Rs. 56.06. However, the EBITDA margin for Q4 FY24 was impacted by labor scarcity and an election-related slowdown, coming in at 8.96%. Management expects margins to improve in FY25 due to the healthy orderbook and an anticipated increase in government projects.

New Projects and Developments

ACIL is actively pursuing new projects and exploring growth opportunities. The company is currently implementing SAP with PwC, which is expected to be completed within 9 to 12 months. This move towards digitalization could enhance operational efficiency. Notably, ACIL has emerged as the L1 bidder for two airport projects – Varanasi Airport and Darbhanga Airport – showcasing its expertise in large-scale infrastructure development.

Challenges and Opportunities

ACIL faces some challenges, including labor scarcity and election-related slowdowns that have impacted margins. However, the company is looking to mitigate these challenges by focusing on private sector projects, which typically offer better margins compared to government projects. Opportunities exist in the residential, commercial, and institutional sectors, which ACIL is actively targeting for future growth.

The company faced margin pressures in 4Q FY24 due to labor scarcity and election-related slowdowns. However, management expects margins to improve in FY25, driven by a healthy order book and new government projects. Private sector projects offer better margins compared to government projects. The company is also facing challenges in Bihar due to funding issues and labor scarcity affecting project execution.

Future Outlook

ACIL’s future outlook appears promising. The company is expecting an order inflow of around Rs. 7,000 crore for FY25, which would significantly contribute to its revenue growth. The focus on private sector projects and a healthy orderbook position ACIL for continued growth in the competitive construction sector.

Ahluwalia Contracts (India) Limited, a listed company with a PAN-India presence, is engaged in civil construction and the execution of turnkey projects. The company specialises in constructing institutional and industrial buildings, corporate office complexes, multi-storied housing complexes, township development projects, hospitals, medical colleges, hotels, educational and technical institutes, schools, gymnasiums, and sports complexes.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

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