Q3FY21 Company Update - Action Construction Equipment - ICICI Direct

Action Construction Equipment (ACE) reported highest ever quarterly numbers led by a revival in infra & construction activities coupled with spillover from Q2. Revenue for the quarter came in at Rs. 400.4 crore, up 38.4% YoY. Segment revenue for crane, CE, material handling & agri equipment were Rs. 257.3 crore, Rs. 38.8 crore, Rs. 31.3 crore, Rs. 73 crore respectively. Gross margins contracted ~96 bps YoY on account of higher input costs. However, price hike in November is expected to have curtailed contraction. Further down the line, positive operating leverage and a decline of 8% YoY in employee cost aided operating performance. Consequently, EBIDTA increased 101.7% YoY to Rs. 45.2 crore with an expansion of ~ 354 bps in EBIDTA margins, which came in at 11.3%. Subsequently, ACE reported a net profit of Rs. 30.9 crore, up 145.3% YoY.

Valuation & Outlook

Taking cognisance of Q3FY21 numbers, the management commentary on growth, sustained margins & overall industry scenario, we expect ACE to post revenue, EBIDTA & PAT CAGR of 23%, 32.6% & 41%, respectively, as we roll over and introduce FY23E numbers. Better outlook, improving financials and a healthy balance sheet call for a target price upgrade. Hence, we value ACE at 9x FY23 EV/EBIDTA to arrive at a target price of Rs. 160 (earlier Rs. 100). We maintain our BUY rating on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ActionCons_CoUpdate_Jan21.pdf

Shares of ACTION CONSTRUCTION EQUIPMENT LTD. was last trading in BSE at Rs.129 as compared to the previous close of Rs. 131.7. The total number of shares traded during the day was 64189 in over 1859 trades.

The stock hit an intraday high of Rs. 139 and intraday low of 127.4. The net turnover during the day was Rs. 8430729.

Source : Equity Bulls

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