ICICI Direct has a buy call on Ashoka Buildcon with a target price of Rs 180. The current market price of Ashoka Buildcon is Rs 141.65. Time period given by the brokerage is one year when Ashoka Buildcon price can reach the defined target. The view of the brokerage on the company:HAM projects to add to revenues from Q3FY19E: ABL’s orderbook (OB) was at a strong Rs 1,0783 crore, consisting of 78 per cent roads projects 22 per cent power transmission distribution.

Of the recently won five HAM projects, four are under financial closure documentation process and one is under term sheet negotiation.

ABL is confident of achieving financial closure commencing commercial work for all five HAM projects in H2FY19E.

Also, the equity requirement for these five HAM projects is about Rs 470 crore.

Furthermore, with a robust bidding pipeline worth about Rs 25,000 crore, the company aims to win more HAM project orders worth about Rs 5,000-7,000 crore about Rs 1,000-1,500 crore in the power transmission distribution division, respectively, in FY19E.

Consequently, we expect ABL’s construction revenues to grow at 22.9 per cent CAGR to Rs 5,440.0 crore in FY18-20E. Toll hikes, traffic growth drive gross toll collections: ABL’s gross toll collections grew 6.3 per cent YoY in Q1FY19 to about Rs 253.0 crore.

Additionally, all of its toll projects saw strong traffic growth leading to about 15 per cent growth in toll collections at key projects.

Further, Bhandara and Durg projects are due for rate revision in September 2018.

With strong traffic growth ahead, we expect toll collections at Rs 1,168.2 crore in FY20E. CGD business to diversify product portfolio; aid revenue growth: The company has been facing clearance issues from petroleum explosives division for its Ratnagiri CGD business.

However, it expects this issue to be resolved soon and project work to commence in Q2FY19.

Also, the company recently received LoI for laying, building, operating or expanding local gas distribution network for two geographical areas – Chitradurga Davanagere districts (Karnataka) and Latur Osmanabad districts (Maharashtra).

The authorisation granted for both projects is for 25 years.

Under these contracts, ABL is to connect about 10,000 houses in Maharashtra and about 1 lakh houses in Karnataka.

CGD work in Maharashtra is expected to start in Q4FY19E.

The company has equity requirement of about Rs 120 crore for these projects in addition to about Rs 50 crore for Ratnagiri project, which would be funded by internal accruals. Traffic growth momentum to sustain; maintain BUY: Considering the strong track record, robust orderbook, well funded BOT project portfolio and huge opportunities ahead, we stay positive on Ashoka’s long term prospects.

Hence, we expect EPC revenues to grow robustly at 29.7 per cent CAGR to Rs 4,156.2 crore.

There has even been a strong revival in traffic growth across its project portfolio, which is expected to be sustainable, going forward.

We continue to maintain our BUY recommendation with an SoTP based target price of Rs 180/share.

We value ABL’s BOT projects at Rs 26.5/share, EPC business (net of debt) at Rs 111.7/share (7.0x FY20E EV/EBITDA) and ACL at Rs 42.3/share.