Ahluwalia Contracts share price: Nuvama ups target, says this

Nuvama has revised the target price for Ahluwalia Contracts (ACIL) to Rs 1,094, maintaining a 'BUY' rating following the company's strong Q1FY26 performance. Ahluwalia Contracts has posted Q1FY26 top line of about Rs 1,000 crore, up 9% YoY, following which the brokerage has adjusted its target price from Rs 1,080 to Rs 1,094 apiece.

The company's revenue increase was accompanied by a notable improvement in margins. Ebitda margin increased 200 basis points (bps) YoY (down 160 bps QoQ) to 8.6 per cent as slow-moving orders neared completion; execution of high-margin orders commenced; and approvals were received for certain large orders.

Adjusted PAT soared 67% YoY. The figures highlighted the operational efficiency and strategic execution of projects by ACIL, Nuvama said.

ACIL's strategic initiatives have also been recognised with its robust order intake and execution. "Robust order intake, execution pickup in large projects and improvement in margin remain key positives for the company, Nuvama said as it maintained ‘BUY’ on Ahluwalia Contracts with a revised target price of Rs 1,094 (earlier Rs 1,080) based on a valuation rollover to Q1FY28E (22x P/E)."

The company's order book remains healthy, ending the quarter with around INR166bn, showcasing a book-to-bill ratio of 4x. The company is poised to leverage these orders effectively, with management targeting additional orders worth INR80bn in FY26E.

Nuvama highlighted several project-specific updates, including the CSMT project. Management anticipates generating a peak monthly revenue run rate of approximately INR600-700mn from this project, aiming to achieve INR4bn revenue in FY26E.

Financial stability remains a strong suit for ACIL, despite a slight increase in the working capital cycle. However, the "Net debt-to-equity remains at (0.5)x," indicating a strong financial position.

Nuvama also noted that ACIL's focus has shifted towards lucrative segments amidst high competition for public sector orders. The company has reduced its focus on the residential segment, now prioritising retail, commercial, and institutional segments.

With item-rate contracts constituting approximately 55% of the order book and the remainder being EPC contracts, ACIL's diversified approach is expected to sustain its growth momentum. These strategic pivots reflect the company's adaptive strategies in striving for superior margins.