Leading brokerage firm Hem Securities has given a buy rating to the stock of Action Construction Equipment Ltd. Action Construction Equipment Ltd Q4 FY22 consolidated revenues came in at ₹511 Cr, up by 11% YoY and 16.9% QoQ. Op Profit for Q4FY22 stood at ₹52 Cr, down by 8.2% YoY and up 19% QoQ and Op margins for Q4FY22 came at 10.19%, -213bps YoY and +18bps QoQ.
1. ACE Stock Outlook
The current market price of the stock is Rs 215. 15 apiece. Its 52-week high is Rs 291.75 and 52-week low is Rs 175 apiece. According to Hem Securities, if you buy the stock at the CMP of Rs 207 It can give you a likely return of 21% with a target price of Rs 250. It has given 188% return in 5 years.
2. ACE Revenue Growth
Management has given a revenue growth guidance of 15% in crane segment, 20%-25% in material handling, 15%-20% in agricultural equipment and 30%-35% in construction equipment in FY23. They are confident of getting 100cr-150cr revenue from defence in FY23. Management aims to reach 2500cr revenue by FY24-25. Company may not see 500cr topline in Q1 or Q2 as H1 usually contributes 40% to the overall annual topline.
Cranes revenue comprises 73% whereas, construction equipment, material handling and agricultural equipment contributed 10%, 9.5% and 7.5% respectively. Company has started execution of 4X4 multipurpose tractors for Indian army. Capacity utilization for cranes stands at 70%-75% whereas, utilizations in Material Handling is at 75% and Construction equipment and agriculture stands at 30%-35%.
Company has faced a DE growth in backhoe loader segment but is lower than the average industry fall in the same segment. They have a given a revenue guidance of 15%-20% for FY23. ACE has received a breakthrough order of 40 backhoe loaders from Border Road Organization, Ministry of Defence (MoD). They have received a contract from the government of The Republic of Ghana for establishing an assembly plant in Ghana for a consideration of USD 24.98 million. The manufacturing facility will have an installed capacity of 4,500 tractors, 600 Backhoe Loaders, 6000 Agricultural implements and 3000 tipping trailers manually.
4. ACE Valuation
According to Hem Securities, "We believe company will continue to post good results in the coming few quarters on the back of robust construction activities. Company's entry in Ghana will open export markets in Africa region. Steel comprises 60% of the total raw material cost and recent announcements from GOI regarding export duty on steel will reap benefits for the company. We give a "BUY" rating on the stock and value the stock at 22x of FY23E earnings to arrive at a target price of Rs. 250.
5. About ACE
ACE is India's leading Material Handling and Construction Equipment manufacturing company and are market leaders in Mobile Cranes & Tower Cranes segment. In addition to Mobile Cranes, ACE also offers Mobile/Fixed Tower Cranes, Crawler Cranes, Truck Mounted Cranes, Lorry Loaders, Backhoe Loaders, Vibratory Rollers, Piling Rigs, Forklifts, Warehousing Equipment, Tractors, Harvesters and other Agri Machinery. The market capitalization of ACE is Rs 2562 crore.
The stock has been picked from the brokerage report of Hem Securities. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.