Ahluwalia Contracts (India) Ltd.

BSE Code - 532811, NSE Code -AHLUCONT

BUY, CMP - Rs 155, TP - Rs 225
52Week High/low - Rs246/147
The Business:

Ahluwalia Contracts (ACIL) is one of the largest and fastest growing companies in the Infrastructure
sector with a much diversified business model the company is mainly in commercial/residential space –
Diversified within the context of construction companies would be presence in commercial, residential,
power, irrigation, roads, infrastructure including airports/ports etc and geographic presences. The
company has the long history in the civil construction and undertakes government as well as private
order book around 70%. Off late company stock price has received the beating for the latest CWG
contract issue in which company had executed the project worth Rs 14bn (games village of Rs6.9bn &
swimming pool complex of Rs2.3bn).

Diverse Business Model: -

In the competitive business environment ACIL has emerged as a smart player with diversified business
verticals and strong list of client base from government as well as private sector, it includes players like
Tata, Fortis, Ranbaxy, Artemis, Apollo Hospital, DLF, Government of Singapore, CPWD, Reliance, Hyatt
HCL, Maruti, PWD.
5% 7% Institutional
18% 12% Hotel
Residential

1% Infrastructure
6% Hospital
BOT

34% Commercial
17%
Retails

Sources: Company
Details of Order Book:

Company has a gross order book of Rs.5300 crore and a net order book of around Rs.3400 crore as on
31st March 2010, representing a growth of nearly 30% in gross order book over March 31, 2009. With
net order book of Rs.3400 crore and FY10 at Rs.1567 it stands at 2.2x which gives revenue visibility for
next two years. During the FY11 company has bagged order worth Rs 981 crore, the management in
order to improve the order book is looking to reduce its exposure on the private sector and had added
the new players like Indian Oil Corporation, HDIL and Institute of Chartered Accountant of India.
Hospital
7% Infrastructure
Commercial 19%
15%
BOT
2%
Retails
4%
Hotel
14%

Residential Institutional
32% 7%

Sources: Company
Valuations

In the recent past Ahluwalia Contracts (ACIL) stock price had been corrected from level of Rs 216 on
October 14 to Rs 186 because of Government led inquiry on CWG contracts irregularities, but in the
recent press release management had cleared all the issue relating to double payment from CPWD and
there is possibility that impact of inquiry might be minimal as the company had delivered the project on
time apart from small complaints related to furniture’s. Compare to its peers, company had a strong
balance sheet with Debt to Equity of around 0.3 times, Working capital cycle of around 8 – 10 days and
Cash balance of around Rs 1300mn puts it in top position. As per the PE methodology on very
conservative side I am assigning the PE of 9x to FY12E Earnings of Rs 25.Thus at the CMP of Rs 155
looking the past performance of the company with respect to return ratio, working capital management
and the strong order book in the FY11 I recommend to buy with target price of Rs 225 an upside of
around 45% from the current level.
ACIL (Rs mn) FY08 FY09 FY10 FY11E FY12E
Income from Operations 8801 11641 15677 20380 26086
YoY growth 31% 32% 35% 30% 28%
EBITDA 1063 1446 1688 2242 3130
EBITDA margin (%) 12.1% 12.4% 10.8% 11.0% 12.0%
PAT 516 577 817 1097 1583
YoY growth 66% 12% 42% 34% 44%

Key Ratios FY08 FY09 FY10 FY11E FY12E

EPS (Rs) 8 9 13 17 25
EPS Growth 66% 12% 42% 34% 44%
PER (X) 19 17 12 9 6
ROCE 47% 41% 44% 43% 43%
ROE 41% 32% 32% 30% 30%