Action Construction Equipment - Q2FY21 Company Update - ICICI Direct

ACE's Q2FY21 performance was outright better than our estimates and management guidance. Underperformance of crane segment was largely due to unexpected supply chain constraints faced by the company due to which ACE lost 10-15% of revenue during the quarter. Nonetheless, upbeat numbers in material handling & agri equipment segment aided overall margins and bottomline. Revenue for the quarter was at Rs. 268.3 crore, flat YoY. Gross margins fell ~180 bps YoY due to higher input costs. However, cost rationalisation efforts led to a decline of 15% & 27% in employee & other expenses, respectively. Hence, EBIDTA increased 19.8% YoY to Rs. 24.2 crore, with a margin expansion of ~ 150 bps. Subsequently, ACE reported a net profit of Rs. 14.59 crore vs. a loss of Rs. 4.2 crore in Q1FY21.

Valuation & Outlook

The worst seems to be over for ACE as post-monsoon resumption in infrastructure activities led by return of migrant labour has resurrected 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 6.9x FY22E EV/EVITDA, which calls for an upward revision in our target price given the better than expected recovery in demand. Thus, we value ACE at 9x FY22E EV/EBIDTA to arrive at a target price of Rs. 100 per share. We revise our rating from HOLD to BUY.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ActionCons_CoUpdate_Nov20.pdf

Shares of ACTION CONSTRUCTION EQUIPMENT LTD. was last trading in BSE at Rs.87.35 as compared to the previous close of Rs. 77.2. The total number of shares traded during the day was 133110 in over 1741 trades.

The stock hit an intraday high of Rs. 89.8 and intraday low of 78. The net turnover during the day was Rs. 11402289.

Source : Equity Bulls

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