Introduction
Fundamental analysis is most important before any investment. Ashoka Buildcon Ltd. is one of the leading infrastructure companies in India, with a robust presence in engineering, procurement, and construction (EPC) projects, including roads, highways, and power transmission lines. The company has established itself as a strong player in the sector with a reputation for timely delivery and operational efficiency. Over the years, it has built a formidable track record with its contribution to some of India’s key infrastructure projects. This has translated into consistent financial growth, making Ashoka Buildcon an attractive stock for both short-term traders and long-term investors.
Ashoka Buildcon has the potential to become a multibagger stock given its solid fundamentals and growth prospects. In this blog, we will dive into its detailed financial analysis, future targets, and why it should be on your watchlist for potential gains.
Table of Contents
Company Overview
Founded in 1976, Ashoka Buildcon has evolved from a small contracting firm to one of India’s premier infrastructure development companies. It is engaged in a wide spectrum of construction projects that include roads, highways, power transmission, and distribution, among others. Over the last decade, Ashoka Buildcon has expanded its reach both geographically and sector-wise, with a keen focus on EPC and Build-Operate-Transfer (BOT) projects.
The company’s strength lies in its engineering excellence and its ability to execute large-scale projects in record time, which has earned it various accolades and awards. With over 6000 km of roads and highways constructed across India and various power projects under its belt, Ashoka Buildcon is well-positioned to ride the wave of India’s infrastructure development.
Ashoka Buildcon’s Financial Performance
First, take a glance at the balance-sheet dashboard of the company, and lets understand step-by-step.
Sales, Net Profit & Operating Profit Analysis
The financial snapshot of Ashoka Buildcon demonstrates consistent growth in sales and profits. Here’s a breakdown of the company’s performance over the past few years:
- Sales: In March 2023, Ashoka Buildcon reported a turnover of ₹8,100 crore, which is expected to grow to ₹10,974 crore by March 2025.
- Net Profit: The company recorded a net profit of ₹771 crore in March 2023, significantly up from ₹160 crore in March 2020, with predictions of ₹583 crore by March 2025.
- Operating Profit: From ₹1,393 crore in March 2019 to a projected ₹2,378 crore in March 2025, Ashoka Buildcon’s operating profit has steadily increased, demonstrating strong operational efficiency.
Operating Profit Margins (OPM)
The OPM stood at 31.07% in 2020, but it has slightly decreased to 21.68% by March 2025 as per predictions. However, the margins remain healthy and indicate efficient cost control.
Earnings Per Share (EPS)
The Earnings Per Share (EPS) has shown a remarkable growth trajectory, increasing from ₹5.89 in March 2020 to ₹27.73 in March 2022. The EPS is expected to stabilize at ₹20.07 by March 2025. This strong EPS performance highlights the company’s capacity to generate significant shareholder returns.
Return on Equity (ROE):
The Return on Equity (ROE) has been fluctuating, but it still reflects strong value creation for shareholders. In March 2022, the ROE peaked at 55.87%, but it is expected to level out at 24.78% by March 2025, which remains a solid indicator of the company’s ability to generate returns from its equity base.
Asset and Liability Distribution:
- Assets: The company’s asset base is mainly comprised of Other Assets at ₹12,165 crore, alongside fixed assets amounting to ₹6,689 crore, and minor holdings in investments and other assets.
- Liabilities: On the liabilities front, Ashoka Buildcon has ₹5,450 crore in borrowings, ₹11,335 crore in other liabilities, and a strong reserve base of ₹2,080 crore. This balance sheet strength reflects the company’s financial prudence.
Stock Market Performance
At present, Ashoka Buildcon’s stock is trading at ₹258 with a PE ratio of 13.3, making it an undervalued stock in the infrastructure sector compared to its peers. Given the company’s strong fundamentals and growth potential, we foresee a short-term target of ₹280 and a long-term target of ₹320, with a stop loss of ₹235 for risk management.
Future Prospects and Potential to Become a Multibagger
Ashoka Buildcon’s future is tied to India’s infrastructure boom, supported by government initiatives like Bharatmala and Smart Cities Mission. As India pushes forward with plans to improve its road networks, urban infrastructure, and power transmission systems, Ashoka Buildcon is well-positioned to benefit from these opportunities.
With an order book brimming with new projects, the company is likely to witness steady growth in the coming years. Moreover, its strong operational margins, healthy cash flows, and near debt-free status make it a promising candidate for becoming a multibagger stock in the infrastructure space.
FAQs
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Conclusion
In conclusion, Ashoka Buildcon is a stock that offers great potential for both short-term traders and long-term investors. With its leadership position in the infrastructure sector, solid financials, and strong growth prospects, it is well-positioned to become a multibagger stock. For investors looking for a mix of value and growth, Ashoka Buildcon presents a compelling opportunity. As always, ensure to manage your risk by setting a proper stop loss and regularly reviewing the stock’s performance.
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