Shares of Ahluwalia Contracts (India) Ltd have surged by an impressive 18% in today’s intraday trading session. This remarkable increase follows the announcement of a significant construction order from the Airports Authority of India (AAI).
The company’s stock reached a new all-time high of ₹1,542 apiece, marking a noteworthy milestone in its trading history.
The new terminal at Darbhanga Airport
The catalyst behind this surge is the awarding of a ₹572 crore contract for the construction of a new terminal building, allied structures, and external development works at Darbhanga Airport in Bihar.
This project will be executed under the Engineering Procurement and Construction (EPC) model, and the company expects it to be completed within 24 months.
Consistent order wins fuel growth
This recent order win is the second major contract secured by Ahluwalia Contracts in just over a month. On June 10, the company announced a ₹98.80 crore order from Indian Financial Technology and Allied Services for MEP work at the Enterprise Computing and Cybersecurity Training Institute in Bhubaneshwar.
Additionally, earlier in June, the company received an order worth ₹88.15 crore from Daffodil Hotel Private Limited for civil work at Park Hyatt Goa.
These consistent order wins have significantly boosted the company’s financial performance. Ahluwalia Contracts’ shares have surged by 91% year-to-date and an astonishing 624% over the past four years. This year’s performance has already surpassed the 63% return achieved in 2023, and the company’s prospects appear bright for the future.
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Robust financial performance
Ahluwalia Contracts has demonstrated robust financial performance in recent quarters. In the March 2024 quarter, the company reported a nearly 35% increase in consolidated revenue from operations, reaching ₹1,163.66 crore compared to ₹863.05 crore in the same period the previous year.
For the entire FY24, revenue from operations grew by nearly 36%, amounting to ₹3,855.29 crore, up from ₹2,838.39 crore in the previous fiscal year.
The company’s net profit for the March 2024 quarter surged by more than 177% to ₹199.8 crore, compared to ₹72.16 crore in the same quarter the previous year. For the full FY24, net profit grew by 93% to ₹374.82 crore, up from ₹193.97 crore in the previous fiscal year.
Strategic focus on private sector revenue
Ahluwalia Contracts strategically focuses on increasing its private sector revenue share by targeting high-quality clients. The company’s unexecuted order book stood at ₹11,179 crore at last count, which is expected to be executed over the next 24-30 months. The company is targeting ₹2,000-3,000 crore in new orders for FY25, including projects in the private sector.
Arihant Capital Markets noted that Ahluwalia Contracts’ FY25 margins are expected to exceed 10%. However, the June quarter was expected to remain sluggish due to labour shortages and the monsoon season.
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A strong order book and growth potential
In FY24, Ahluwalia Contracts’ gross order book increased to ₹111,799 million from ₹81,627 million in FY23, marking a 37% year-on-year growth. The distribution of its order book includes 38% from central government projects, 23.5% from state governments, 34.9% from the private sector, and 3.4% from overseas government projects, according to the company’s Q4FY24 investor presentation.
The construction sector in India is poised for substantial growth, with projections indicating it will reach $1.4 trillion by 2025. An estimated investment requirement of US$966 million by 2040 highlights the significant opportunities in this sector.
There is increasing demand for commercial spaces such as offices, hotels, retail, and entertainment units, evidenced by the absorption of 31.9 million square feet of office space across India’s six largest cities in 2020.
Urbanisation and infrastructure development
Urbanisation trends indicate that by 2030, over 40% of India’s population is expected to reside in urban areas, up from 33% currently. This shift is driving demand for 25 million additional mid-end and affordable housing units.
Under the National Infrastructure Pipeline (NIP), India has earmarked a $1.4 trillion investment budget, with allocations of 24% for renewable energy, 18% for roads and highways, 17% for urban infrastructure, and 12% for railways.
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Future outlook
Ahluwalia Contracts’ recent successes and strategic focus on private sector revenue and high-quality clients position the company for continued growth. With a strong order book, impressive financial performance, and a favourable macroeconomic environment, the company is well-positioned to capitalise on the significant opportunities in India’s construction sector.
The future looks bright for Ahluwalia Contracts as it continues to secure substantial projects and deliver strong financial results. Investors remain optimistic about the company’s prospects, and the stock’s impressive performance reflects this confidence.
As the company continues to execute its strategic plans and capitalise on growth opportunities, Ahluwalia Contracts is set to remain a key player in India’s booming construction industry.
