Real estate player Ahluwalia Contracts (India) Ltd may return over 40 percent to investors in the next one year, if HDFC Securities’ latest evaluation on the company’s stock price is to be believed.
The brokerage has maintained a ‘buy’ rating on Ahluwalia Contracts but reduced the target price to Rs 402 per share from Rs 430.
The revised target price still has an upside potential of over 40 percent. Ahluwalia Contracts (India) shares traded 1.22 percent lower at Rs 274.25 apiece on the NSE on Friday.
HDFC Securities has also downgraded the company’s FY20/31 estimated EPS by 6.6/6.6 percent to factor in approximately Rs 1060 billion of non-moving projects, it said in a research report.
“AHLU (Ahluwalia Contracts) has witnessed strong order inflows during FY19 but somehow there has been quarterly execution misses leading to failure in achieving FY19 annual guidance. FY20 is no different with a weak quarterly start amidst tight liquidity conditions. We remain sceptical on AHLU achieving its FY20E growth guidance,” the report said.
The real estate company has a strong balance sheet with gross debt negligible at Rs 40 crore. Ahluwalia Contracts posted net revenues of Rs 316.8 crore in the first quarter compared to Rs 403.9 crore in the corresponding period last year.
However, the key risk to the upside may come in the form of a slowdown in government spending, high inflation and stalled projects, the report by HDFC Securities said.
Ahluwalia Contracts shares have fallen over 16 percent so far this year and the one year return on the stock is -14 percent. In the last five years, the smallcap real estate stock has returned over 91 percent to investors.