Action Construction Equipment - Company Update - Q1FY21 - ICICI Securities

Action's Q1FY21 performance was dire as the company registered a loss. Crane segment (~70% of revenue in FY20) was the worst hit due to standstill in infrastructure activities. Revenue for the quarter was at Rs. 100.9 crore, down 65.6% YoY. Crane segment revenue was at Rs. 49.8 crore, down 77% YoY. Total crane volumes were at ~299 units vs. ~1316 units in Q1FY20. Gross margins expanded ~160 bps YoY on account of lower input costs & trade purchases. However, unabsorbed fixed overheads led ACE to report an EBIDTA loss of Rs. 3 lakh. On the expenses side, employee expenses declined 23% YoY coming in at Rs. 14.85 crore while other expenses declined 61% YoY to Rs. 7.87 crore. Subsequently, ACE reported a net loss of Rs. 4.2 crore vs Rs. 11.9 crore profit in Q1FY20.

Valuation & Outlook

Worst seems to be over for ACE as post-monsoon resumption in infrastructure activities led by return of migrant labour is expected to usher demand. ACE with a strong balance sheet, improved working capital and leadership position in crane segment is well placed to benefit from the same. Currently, ACE is trading at 8.1x FY22E EV/EVITDA, as the stock has performed well in recent days, thus leaving us with little upside. We value ACE at 9x FY22E EV/EBIDTA to arrive at a target price of Rs. 68 and revise our rating from BUY to HOLD.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ActionCons_CoUpdate_Aug20.pdf

Shares of ACTION CONSTRUCTION EQUIPMENT LTD. was last trading in BSE at Rs.61.45 as compared to the previous close of Rs. 61.45. The total number of shares traded during the day was 88898 in over 857 trades.

The stock hit an intraday high of Rs. 65.4 and intraday low of 60.45. The net turnover during the day was Rs. 5627078.

Source : Equity Bulls

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