Ahluwalia Contracts’ (ACIL) reported weak results in 3Q26 as PAT at INR 553mn (up 12% YoY) missed JMFe of INR 609mn (consensus: INR 691mn) impacted by lower margins. Reported PAT at INR 540mn included provisions made of INR 13mn w.r.t to new Labour Codes. Execution in 3Q26 (down 10% QoQ) was impacted due to GRAP stage 4 enforced (pollution related part ban on construction activity) in NCR region (42% of Dec-25 backlog). ACIL indicated that even Jan-26 was impacted due to GRAP. Accordingly, it has lowered revenue guidance for FY26 to 10-15% growth (earlier: 15-20% growth). Led by strong YTD inflows of c.INR 90bn (ex GST), L1 position of INR 25bn and robust bid pipeline of INR 70bn, ACIL targets order inflows of INR 100bn/INR 60bn for FY26/27E. Backed by strong backlog, ACIL is confident of 15-20% revenue growth in FY27E which appears conservative and we have factored 22% revenue growth. Factoring lower FY26 revenues and limited margin expansion ahead, we expect EPS cuts of 11%/8%/4% in FY26/27/28E. We expect robust EPS CAGR of 31% over FY25-28E. We like ACIL given its asset light business, lean balance sheet, consistent FCF generation and strong return ratios despite moderate margins. ACIL is currently trading attractively at 15x/12x FY27/28E EPS. Maintain BUY with a revised price target of INR 1,155 (19x Sept-27E EPS).
▪ Earnings below JMFe impacted by lower margins: Revenue/EBITDA grew by 11%/15% YoY to INR 10.6bn/INR 974mn (JMFe: INR 10.5bn/INR 1bn). Execution was impacted by GRAP stage 4 enforced (pollution related part ban on construction activity) in NCR region. EBITDA margins expanded by 30bps YoY to 9.2% (JMFe: 9.7%). Adjusted for ECL provisions of INR 32mn, margins stood at 9.5%. Interest costs declined by 22% YoY to INR 114mn (JMFe: INR 140mn).
▪ Order backlog robust at INR 187bn; execution for big ticket projects to pick-up in FY27: With robust inflows of c.INR 59bn (ex GST) in 9MFY26, ACIL’s backlog strengthened to INR 187bn (4.2× TTM revenues) as of Dec-25. In 4Q26 so far, ACIL has won inflows of c.INR 31bn which will further drive the backlog. With a strong bid pipeline of c.INR 70bn and L1 position of c.INR 25bn, ACIL expects inflows of INR 100bn for FY26E followed by c.INR 65bn in FY27E (moderation YoY on higher base and focus on execution of robust backlog). ACIL expects execution to pick up from FY27 onwards led by new big ticket orders like Gems & Jewellery park and Central Vistats coming in execution and ramp up in execution of CSTM station redevelopment project.
▪ Lowers FY26 revenue guidance; investing in machinery to support execution of big ticket projects: With c.42% of ACIL’s order backlog coming from the NCR region, NGT restrictions and GRAP implementation has impacted execution leading ACIL to lower revenue growth guidance to 10–15% (earlier 15–20%) for FY26E. ACIL has maintained its 10% margin guidance for FY26/27E. ACIL plans to incur capex of INR 3bn each for FY26/27E as several big ticket projects coming in execution stage and it plans to invest in heavy machinery.
▪ Maintain BUY with revised price target of INR 1,155: We like ACIL due its asset light business, lean balance sheet, consistent FCF generation over last decade and strong return ratios despite moderate margins. Robust backlog of INR 187bn (4.2x TTM revenue) as of Dec-25, provides multi year growth visibility. Factoring lower revenues in FY26 and limited margin expansion ahead, we see EPS cuts of 11%/8%/4% in FY26/27/28E. Having said that, backed by robust order backlog. we expect EPS CAGR of 31% over FY25-28E. ACIL is currently trading attractively at 15x/12x FY27/28E EPS. Maintain BUY with a revised price target of INR 1,155 (19x Sept-27E EPS).
