Accumulate Action Construction Equipment - Motilal Oswal

Action Construction Equipment (ACCE.IN; Mkt Cap USD115.7m, CMP Rs56, Accumulate)

Motilal Oswal initiates coverage with an Accumulate on Action Construction Equipment Ltd. with a 18 month price target of Rs.80- valuing the company at 15.6x P/E multiple on FY12 estimated earnings.

INVESTMENT ARGUMENTS

* A 8-9% expected GDP growth over FY11-12 should drive revenues of user industries - Construction and Infrastructure.

* Duopolistic nature of crane manufacturing market coupled with higher user demand to aid a 35% revenue growth for ACE.

* Replacement sales for the mobile cranes and spare parts should start contributing in a bigger manner to the sales as the company has been in business for more than the expected life of the cranes.

* Positive Free cash flow and funds flow from preferential issue at Rs. 65.53/share could fund pursuit of inorganic growth opportunities.

Source : Equity Bulls

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