Buy This Multibagger Small Cap Engineering Stock, Shares Can Jump 19%, Gave 39.96% In 1 Month

ICICI Direct in its recent report on Action Construction Equipment Ltd. (ACE) has recommended 'buy' the stock of the company for a target price of Rs 365 apiece. Given the target price, the stock is likely to surge 19% in 12 months. It is a small-cap engineering sector company with a market cap of Rs 3,665.98 crore.

ACE is an Indian construction equipment and material handling company. ACE has eight manufacturing and one R&D site in Faridabad, Haryana. ACE's product portfolio is divided into four main categories viz. agricultural equipment, construction equipment, road construction equipment and earth-moving machinery.

Stock Outlook

The current market price of the stock is 307.85 apiece. The 52-week low of the stock is Rs 175 apiece, which was recorded on 12 May 2022, and the 52-week high is Rs 316 apiece, which was recorded on 09 September 2022, respectively.
 

Returns of Investment

The shares in the past 1 week surged 6.93% and in the past 1 month around 39.96%, respectively. Over 1 year the stock gave a positive return of 39.87%. Whereas over the 3 years, the stock gave a multibagger return of 312.67% and in the past 5 years, the stock gave a multibagger return of 341.05%, respectively. 

 

Rationale

Significant traction in tendering activity points to a strong capex cycle. Tendering activity has seen a robust pace as tenders worth Rs 369031 crore have been issued despite macro concerns. Tendering activity has seen 58% YoY growth. From a pre Covid level, the tendering activity is up 240% YoY.

Fresh projects investments have almost doubled from FY20 levels, with private share coming with a strong rebound. Order inflow in Q1FY23 was at Rs 52090 crore vs. Rs 36138 crore in Q1FY22. We believe ACE is likely to benefit in terms of strong volumes, operating leverage and strong b/s .

With construction equipment, agri segment expected to perform better in coming quarters coupled with focus on backward integration, ACE is on course to achieve its Rs 2500 crore revenue target by 2024E. We build in revenue, EBITDA, PAT to grow 23.1%, 41.6, 43.7%, respectively, in FY22-24E

Buy for Rs 365 target price

For the past year, ACE has remained richly valued given its clean balance sheet, above 65% market share in cranes, contract from Ghana government and introduction of newer products, which will drive strong double-digit volume growth in the medium term.  "We continue to remain positive and retain our BUY rating on the stock. We value ACE at Rs 365 i.e. 20x P/E on FY24E EPS," the brokerage firm said.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.