Recommendation Rationale
• New Launches and Business Development: The management has guided a pre-sales CAGR of 30%-35%, maintaining confidence in achieving this target. In Q2FY25, the company launched ‘Arvind Aqua City,’ with total bookings at Rs 500 Cr for the quarter, bringing cumulative bookings to approximately Rs 600 Cr, including Rs 93 Cr from Q1FY25. Projects valued at Rs 4,000-5,000 Cr are expected to be added during the fiscal year, with the majority of launches concentrated in H2FY25 following Aqua City (~Rs 1,000 Cr). Management remains optimistic about achieving these targets through upcoming launches, which include: a) A high rise in Bannerghatta, Bangalore, b) A new phase of Greatlands, c) An additional phase for Orchards, and d) A new Surat project. These projects are expected to collectively add approximately Rs 1,500 Cr in GDV. Additionally, the management has guided toward an MMR deal, which is progressing and anticipated to be announced soon, despite some delays. The NH47 project has seen strong traction, with 2/3rd of the Rs 900 Cr launch value sold. The company is also actively scouting for new projects that align with its strategic criteria and is well-positioned to undertake such expansions.
• Balance Sheet Strength and Low Leverage: The company reported a net debt of Rs (195) Cr and an operating cash flow of Rs 106 Cr as of Q2FY25. Booking values for the quarter stood at Rs 464 Cr, with collections at Rs 249 Cr. The company can add leverage in the range of Rs 250-300 Cr on its books, complemented by unutilized capital of ~Rs 600 Cr from its HDFC platform. This capital flexibility enables the company to pursue new projects and meet its pre sales guidance of Rs 4,500-5,000 Cr in BD for the fiscal year.
• Strong execution capabilities and sales performance: The management remains confident in deploying these resources to support upcoming years’ growth targets. The company’s execution capabilities and strong sales performance have resulted in faster bookings and collections. Its estimated unrealized operating cash flow stands at Rs 2,986 Cr as of Q2FY25, positioning the company at a key inflexion point. With robust operational momentum, it is well prepared to undertake major upcoming launches and projects comfortably, aligning with its growth objectives.
• Sector Outlook: Positive
Company Outlook & Guidance: We continue to remain positive on the company’s long-term prospects.
Current Valuation: 8X FY26E EV/EBITDA based valuation
Current TP: Rs 1,085/share (Earlier TP: Rs 1,085/share).
Recommendation: With a 40% upside from the CMP, we maintain our long-term BUY rating on the stock.
Financial Performance: ASL reported revenue of Rs 265 Cr, reflecting substantial growth of 256% QoQ. EBITDA stood at Rs 66 Cr, with a margin of 25%, up by 101.6 bps QoQ. The company’s Adj PAT surged by 370% YoY to Rs 40.7 Cr, driven primarily by a reduction in unrecognized revenue from Rs 2,538 Cr to Rs 1,853 Cr YoY. ASL’s strategic focus on horizontal and JD projects has contributed to the improved EBITDA margins and a 16% QoQ increase in PAT margin. Pre-sales reached Rs 464 Cr, marking a 26% YoY increase, while collections were at Rs 249 Cr, down by 5% YoY. The company’s net debt further decreased by Rs 137 Cr this quarter, reaching Rs (195) Cr. This reduction in net debt reinforces ASL’s solid financial position and strengthens its ability to capitalize on growth opportunities.
Outlook
• The company is confident in achieving its guidance of 30-35% growth in pre-sales. With a total inventory of approximately Rs 10,000 Cr (ongoing, upcoming, and BD), it is positioned at a transformative point, from which exponential growth is expected. The company is prepared to expand across different geographies and is inclined to undertake more vertical projects in the future. Its balance sheet strength supports a substantial increase in BD while maintaining growth momentum.
Valuation & Recommendation
• We continue to value the company at an 8X EV/EBITDA to arrive at a target price of Rs1,085/share, showing a 40% upside from the CMP.
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