Buy Action Construction Equipment - Motilal Oswal

Action Construction Equipment Ltd (ACCE.IN; Mkt Cap USD 96.1b, CMP Rs 47, Buy)

Action Construction Equipments Ltd's 3QFY11 results were above estimates on all key parameters.

Revenue growth of 71% YoY was driven by 82% YoY growth in crane revenues.

Tax rate increased from 24.8% to 29.3% because the tax favourable facility was running at full capacity. The effective rate is set to come down to 25% levels from FY12 once the new unit in Uttarakhand gets commissioned.

There has been a ramp up in the tractor side of the business and we believe that the topline surprises may come from that end. ACE will remian a key beneficiary of the boom in the infrastructure and construction industries and the duopolistic nature of its crane business has the potential to usher positive surprises on a regular basis.

Post the 3QFY11 results and concall, we have upgraded our revenue and earnings estimates by 3% and 5% for FY11 and 2.5% and 6% for FY12 respectively. The stock is trading at cheap valuations of 9x FY12E EPS. We reiterate our target of Rs. 80 and upgrade the stock to BUY.

Source : Equity Bulls

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