'Buy' This Stock For 14.2% Upside In 1 Year

Brokerage firm Emkay Global has picked Action Construction Equipment's stock to 'Buy' with a potential upside of 14.2%, in 1 year.

Target Price

The Current Market Price (CMP) of Action Construction Equipment (ACE) is Rs. 262. The brokerage firm has estimated a Target Price for the stock at Rs. 300. Hence the stock is expected to give a 14.2% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 262
Target Price	Rs. 300
1 year return	14.20%

Company performance

Action Construction Equipment (ACE) reports sales/EBITDA growth of 35%/44% YoY in Q2FY22, which has been aided by growth across most of its business segments. For H1FY22, revenue has increased by 85%. Although the commodity inflation in key raw materials (steel) was significant, ACE's gross margins (~22%) were stable YoY. In the H1FY22, Cranes/Construction Equipment (CE)/Material Handling (MH) segments have delivered strong sales improvements of 114%/57%/107%. Their exports stood at ~7% of sales in H1.

Comments by Emkay Global

About the stock, Emkay Global stated, "We reiterate Buy with a Mar'23 Target Price of Rs. 300 (unchanged) and assign a 1-year fwd PE of 20x, which is at a 10% premium to 5-year average PE. Key risks: higher commodity inflation, value dilutive QIP capital allocation, and infrastructure slowdown."

The brokerage firm added, "QIP capital is expected to be used for inorganic options, which should support the bottom line. This includes the possibility of an acquisition of a small-sized local manufacturer, operating in one of ACE's key existing businesses and benefiting the company's pricing power and market share."

About the company

ACE Is India's leading material handling and construction equipment manufacturing company with a majority market share in Mobile Cranes and Tower Cranes segment, Crawler Cranes, Truck Mounted Cranes, Lorry Loaders, Backhoe Loaders/Loaders, Vibratory Rollers, Forklifts, Tractors & Harvesters and other Construction Equipment. Their plants are fully equipped to produce around 12000 Construction Equipment and 9000 Tractors annually.

Disclaimer

The above stock has been picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

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