Tuesday, January 6, 2009
Ahluwalia Contracts (India) Ltd (ACIL), promoted by Mr. Bikramjit Ahluwalia in 1979, is an Engineering-Procurement- Construction (EPC) company.
Multi Bagger: Ahluwalia Contracts (India) Ltd
Recommended Price Rs 32.10
Ashish Chugh, Investment Advisor Report
Dated: Jan 05, 2009
ACIL.
Ahluwalia Contracts (India) Ltd (ACIL), promoted by Mr. Bikramjit Ahluwalia in 1979, is an Engineering-Procurement- Construction (EPC) company with business interests in the construction of Buildings including Malls, Multi- storeyed residential complexes, offices, Hotels, IT parks and Hospitals. The company which has been primarily involved in civil construction in the residential and commercial real estate segment has now diversified into the urban infra BOT space.
Ahluwalia Contracts (India) Ltd (ACIL) currently operates in two areas of business – Construction & Ready Mix Concrete, and derives over 90% revenues from Construction business.
Completed Projects:
The company’s experience of comprises execution of projects across a wide spectrum which includes Corporate Buildings, Residential Complexes, Hospitals, Hotels, Malls & Government Buildings and Government projects. Some of the projects executed by the company are given as under:-
Current Projects:
The company has an order book of Rs 3750 crores as on 31st October 2008.
Some of the current projects are :-
The company has bagged one of the largest housing construction contracts in the country - the Residential Complex for Commonwealth Games 2010. The value of the township project is Rs 688 crores. The project was awarded by Emaar MGF Construction This is the largest project ACIL has received so far.
The company has bagged and order worth Rs 229 crores for upgradation and renovation of Dr. S P M Swimming pool complex in New Delhi for the Commonwealth Games.
Awarded Hotel Leela Venture, Chankyapuri, New Delhi project worth of Rs 83 crores.
Vedanta Aluminum, Orissa Project worth of Rs 118.55 crores.
NBCC, Kundli, residential Project worth of Rs 99.26 crores.
Elphinston Mills, Mumbai project worth of Rs 73.00 crores.
Henkel Switchgear, Mumbai project worth of Rs 130.78 crores.
Housing project at Gurgaon from Emaar MGF worth Rs197 crores.
Office Building for IDBI at BKC, Mumbai worth Rs 97 crores.
Office Building for PNB at BKC, Mumbai worth Rs 54 crores.
BOT Projects:
ACIL has ventured into the urban infra space with a maiden Rs 72 crores order on BOT basis from Rajasthan State Road Transport Corporation (RSRTC) for the construction of a model bus terminal with a commercial complex at Kota (Rajasthan). The total plot area is 26,343 sq meters, out of which 3,300 sq meters built up area for bus terminal is to be handed over to RSRTC and the remaining 23,000 sq meters commercial space will be licensed to the company for 40 years. The company will develop a total of 2, 50,000 sq ft at the existing site, where it proposes to develop a commercial complex, budget hotels, multiplex, etc. ACIL plans to bid for similar projects in Rajasthan, UP, Punjab, Uttaranchal, etc.
ACIL also plans to enter the asset ownership space in the multi level car parking segment. It had executed similar projects on a cash contract basis and hence, is pre-qualified in this space for BOT projects.
Conclusion:
The stock of Ahluwalia Contracts has seen a sharp fall from a high of Rs 393 touched in January 2008 to its current price of Rs 32. This is inspite of the fact that there has been a growth in both the topline and bottomline of the company in the first 6 months of the current FY - Topline has grown 50% and bottomline over 30% in the first half of the current FY.
The stock has been down primarily on concerns of a slowdown in Infrastructure spending by the government, and slowdown in real estate sector. Also, of late, a large FII has been pressing sales on the counter. We believe another reason for the depressed investor sentiment in the stock is probably due to the uncertainty regarding slow work progress at the Residential Complex at Commonwealth Games Village. Since Emaar MGF lacks sufficient liquidity to execute the project, it has approached the government for loan to execute the project – we believe that the issue will be sorted out soon and the stock of Ahluwalia Contracts can see a sharp upmove as soon as the uncertainty is lifted.
The company has a debt of Rs 55 crores as on 31st March 2008 –which is much lower than the peer group with similar revenues/ order book. The company’s market cap of Rs 200 crores looks small given its order book of Rs 3750 crores. The company’s operating profit for FY 08 was Rs 110 crores and the current market cap is infact less than 2 years of operating profits and less than 20% of the current FYs expected revenues. Promoters holding 74% stake in the company gives added confidence.
Ahluwalia Contracts is also bidding for the Stadium renovation projects for the Commonwealth Games. The company has bid for the Jawaharlal Nehru stadium renovation project worth about Rs 400 crores and the Talkatora stadium renovation project worth about Rs 250 crores. Besides, there are a few other stadium renovation projects to be undertaken in Delhi itself and Ahluwalia Contracts is prequalified for all the projects. Ahluwalia Contracts being a large player in civil construction segment in the NCR, we expect the company to continue to bag a few more large orders for Commonwealth Games. ACIL also plans to enter the asset ownership space in the multi level car parking segment. The company has bid for eight multilevel car parking projects, out of which it expects to win two to four projects. The average sizes for these projects are in the range of Rs 125-160 crore.
Ahluwalia Contracts has an order book of Rs 3750 crores (as on 31st October 2008). A significant portion of this order book comprises orders linked to the Commonwealth Games scheduled for end 2010. With the new government headed by Smt. Sheela Dixit in Delhi now in place, we may see the execution of these projects being put on the fast track from now onwards, since these projects have to adhere to strict time schedules. The concerns of slowdown as far as Ahluwalia Contracts is concerned therefore may be unfounded, even though a slowdown for one or two quarters is not totally ruled out.
The stock having dropped over 90% from a high of Rs 393 touched in January 2008 to the current levels of Rs 32 looks attractive for investment.
Tuesday, January 6, 2009 0
Japanese equity research firm, Nomura Securities, picked 5 Titans and 6 Heroes among Indian Companies which will have better growth prospects. Analysis: Nomura report on Indian Companies Nomura released "Titans- Heroes- Mortals" report on Asian Companies which will give an idea about the future growth prospects of the Indian Companies. Blog readers should treat it as another aid in their research to pick good companies but not as an investment advice. In stock markets, entering at right price is also important along with picking a great stock. I am bullish on IVRCL Infra and Glenmark but am waiting for right price.  Research firm followed the Graham and Dodd approach of value investing in picking Titans and Heroes. Company released similar report on China (7 titans and 12 heroes), Korea (2 titans and 2 heroes only), Malaysia (2 titnas and 2 heroes), Singapore (7 titans and 3 heroes) and Taiwan (7 titans and 2 heroes) Companies. Nomura views on economy and stocks: 1. Asia is in a best position than America but few companies tend to have control over their own destiny and equities will perform relatively badly against bonds. 2. There have been no signs of a turnaround during the past quarter in purchasing management indices or export orders to suggest that Asian equity markets will sustain a rally on the back of changing growth expectations. Companies appear to be locked in a classic inventory build-up, since the demand shock did not allow them to adjust their production schedules quickly enough. Moreover, working capital requirements have tightened and trade finance remains difficult to obtain for exporters. 3. We entered the second half of 2008 with an Overweight stance on China and India, since both countries had low export-to-GDP ratios and were prime beneficiaries of falling commodity prices. 4. We continue to have a bias in the short term toward value, since we can still find financial assets trading below intrinsic value or creditworthiness, such as convertible bonds. We would look to re-weight growth stocks as 4Q08F earnings are released and as companies guide down expectations further during 1Q09F. 5. Our favoured sector is infrastructure. My view: India is in best position to take the leadership position in economy but lack of great political leadership and corruption are our main problems. India needs a visionary leader to steer us through the current troubled waters. Titans-Heroes-Mortals report: Titans: Best Indian Companies in their sectors and will use the current opportunity to strengthen their position in their segment.  1. Reliance Industries : I have some doubts over the company performance over short term. 2. Larsen and Toubro: I already said enough about this Company. 3. NTPC: Good stock but what about stock market returns. 4. Hindustan Unilever: Good sales but what about valuations. 5. Sun Pharma : Best Pharma stock and will continue to announce bumper results in the coming quarters.  Heroes: Future stars- favorite stocks for growth investors. 1. Tata Power: Positive growth prospects but I have some doubts on financial front. 2. Maruti Suzuki: More clarity is needed. 3. IVRCL Infra : Rare infra company which is not facing any financial troubles. IVRCL is a must buy when markets correct in the coming months. 4. Marico: Good Company but I always try to accumulate growth stars. 5. Piramal Healthcare: Company is making strategic moves but take time. 6. Glenmark: Company will outperform other Pharma stocks if market conditions improve. This is a must buy when market corrects to reasonable levels.  Mortals: Never become leaders 1. Unitech 2. TVS Motors  Stock market news: 1. Indraprastha Gas Limited (IGL) will continue to enjoy monopoly in the National Capital Region (NCR). 2. Cement stocks will be in limelight for some more days due to better than expected results estimates. 3. Tata Communications is the dark horse, according to many analysts. 4. Hats off to Narendra Modi for announcing new industrial policy for Gujarat. We need such concrete measures at centre to face current slow down. 5. I am positive on growth prospects of Mundra Port but current valuations are not sustainable. 6. Best auto companies by sales are Hyundai in 4-wheelers and Yamaha in 2-wheelers. Unfortunately, both Companies are not listed in the Indian stock markets. GDP estimates by Goldman Sachs:  1. GDP growth in 2007-08 was at: 9% and expected to cross 10% in 2008-09 (at that time). 2. (Now) GDP growth estimate in 2008-09: 6.7%. My estimate is 6.2-6.5%. Fiscal deficit is expected to touch 6-8% of GDP in this financial year. Just imagine what will happen to our economy if the money from the stimulus packages will not be used in a proper way. Do you know why these politicians prefer real estate and infrastructure? Not to build India but to build their coffers in the election year which is very easy for them in these 2 sectors? 3. GDP growth estimate in 2009-10: 5.8%. My estimate is around 5%. Special mention: Hats off to Brokers for successfully creating a "feel good atmosphere" in a gloomy economy. Politicians need to learn some tricks from these stock brokers. Special thanks to Mohit Singhania and Ramakrishna (NRIs). Recession news: 1. Sweden based Software company UIQ, jointly owned by Sony Ericsson and Motorola filed for bankruptcy. 2. U.S. jobless rolls reached a 26-year high in the week ended December 20. 20 lakh Americans lost jobs in 2008. 3. GM'a U.S. sales plunged to a 49-year low in 2008. 4. What will happen to economy? 5. Indian Companies are set to announce worst results in 6 years. ICICI Bank, Bajaj Auto, Tata Motors, Ranbaxy and ONGC are some of the poor candidates. 6. BPO Companies may create 1 lakh jobs in the next 3 months if Obama will not create any hurdles. 7. Indian IT companies will announce worst results in the recent years. 8. Germany set to announce grand stimulus package with tax cuts. US may soon follow. 9. Barack Obama is seeking Congress support to announce $800 billion bailout package with more stress on tax cuts ($300 billion) to improve the consumption power of people. 10. Madoff scam is worsening day by day. 11. Construction activity reached worst ever recorded levels in England. 12. What can happen to American Banking sector in 2009? 13. 10 best economic books of 2008. |