HDFC Securities Bullish On Two Construction & Development Companies, Sees Upside Upto 75.32%

HDFC Securities is bullish on two construction & development stocks - Ashoka Buildcon and Kolte Patil Developers. Ashoka Buildcon is one of the leading highway developers in India and Kolte Patil Developers is a rural real estate developer company. Ashoka Buildcon is a mid-cap company and Kolte Patil Developers is the small-cap company.

Recently both companies posted their Q4FY23 results which showed strong performance. The stock-broking firm feels that the price can rise to 75.32%

1. Buy Kolte Patil Developers shares at a Target price of Rs 380 (24.59% upside potential)

Kolte Patil reported the highest-ever annual presales of 3.3msf (+21% YoY), valued at Rs 22.3bn (+28% YoY), with an average realisation of Rs 6,817 per sq. ft. (+6.4% YoY). 49% of the sales came from sustenance inventory. Its flagship project Life Republic (LR) contributed 50% towards presales. For FY23, KPDL added Rs 39bn worth of projects.

Pune market contributed 80% towards the sale which the small-cap company is expecting to bring down to 70% by FY25. While for FY24, the company expects presales of Rs 28bn on the back of Rs 53bn worth of project launches with an area of 7.3msf (3msf to be launched in H1FY24). Around 30-40% of FY24 presales are expected to come from sustenance inventory.

Even the stock broking firm including the company expects to add Rs 105bn worth of projects, of which Rs 25bn worth was added in May'23. Further, the company expects to fund its GDV addition via internal accrual and from the Rs 2.1bn received from Marubeni Corp towards its investment in the Pimple Nilakh project.

Thus, based on the comfortable liquidity position with net D/E at 0.11x (board approval of 0.50x)
paves the way for accelerated BD activities. We maintain BUY, with an unchanged SOTP-based target price of Rs 380.

Share Price Movement
The latest closing price of this small-cap stock is Rs 305.80, it was up 2.80% over the previous day's closing price. In the last one year and three years, its share price has rallied by 24.87% and 98.19% respectively.

2. Buy Ashoka Buildcon shares at a Target price of Rs 135 (75.32% upside potential)

Ashoka Buildcon reported an operationally strong quarter with revenue/EBITDA/APAT beating our estimates on all fronts. On the back of strong order inflows (OI), the FYTD24 order book (OB) stands at Rs 181bn (~2.8x FY23 revenue). The standalone gross/net debt stood at Rs 8.8/5.9bn as of Mar'23 vs. Rs 8.5/5.8bn as of Dec'22.

The balance equity requirement for HAM assets as of Mar'23 stands at Rs 1.7bn, of which Rs 1.1/0.6bn would be infused in FY24/25. ASBL has guided for an FY24 capex of ~Rs 1bn. It also guided that FY24 revenue will grow 20-25% YoY while guiding for an EBITDA margin of 8.75-9.25% and OI of Rs 80-100bn. It expects to close FY24 OB at Rs 200bn+.

Therefore HDFC Securities maintains a BUY, with a target price of INR 135/sh (9x Mar-25E EPS rollover).

Share Price Movement
The latest closing price of this mid-cap stock is Rs 76.50, it was marginally down 0.75% over the previous day's closing price. In the last one year and three years, its share price has rallied by 6.47% and 55.17% respectively.

Disclaimer
The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the author, and the brokerage firm are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.