Action Construction Equipment Ltd - Rs 9.00
Incorporated in 1995, Action Construction Equipment Ltd (ACE) is the undisputed leader in hydraulic mobile crane manufacturing with a market share of more than 50% in India. These cranes are rough terrain, pick and carry types which are most commonly used in several core industries apart from construction. According to the functions & application, ACE makes different types of hydraulic cranes ranging from 3 tons to 18 tons capacity. Deriving more than 65% of total revenue, this forms the core product of the company. Along with, it also manufactures mobile tower which are used basically for civil construction. It makes self-erecting & self-folding cranes with inbuilt generators that can work from 6 to 12 storied buildings. Under material handling and construction equipment category, ACE manufactures various types of back hoe loaders, wheeled loaders, forklift trucks etc with a lifting capacity of 1.5 to 10 ton. In its endeavor to increase its product portfolio, ACE over a period of time, has entered into marketing tie-ups with leading foreign companies like Autogru PM Italy, Maber-Italy, Zoomlion- China and Tigieffee SRL-Italy which facilitate the availability of latest technology and machines from around the world. Thus it is also engaged into importing CKD units, assembling them at its plant, marketing them in India and even proving after sales support. Its imported fixed tower cranes from China with maximum lifting height of 240 meters are very well accepted in Indian market and hence company commands 35% market share. Besides, from last fiscal, ACE started importing high value equipments like crawler cranes, piling rigs, concrete pumps etc from Zoomlion-China, thereby expanding its product range further. Interestingly, company has also got into production of 35 HP tractors (with a 4 cylinder engine) which are used for construction and industrial purposes and already succeeded in selling 70 of them last year. To sum up, apart from infrastructure development, due to the versatility of the ACE equipment to satisfy a vast range of possible applications, company’s product are being successfully used in many sectors like power projects, ports & shipyards, dams, metro rail, roads, coal mines, steel industry, engineering industry, railways, cement, petroleum, defense, chemicals and fertilizer plants, building, construction etc.
Presently, ACE has three manufacturing facilities with two in Haryana & one in Uttaranchal with combined production capacity of more than 8500 units including tractors. It has a well spread network of 5 regional offices and 60 sales and services centers across India. These centers are fully equipped to provide genuine spare parts and services by company trained engineers as and when required. Due to world class product and excellent track record, ACE has a huge clientele including all the big corporates, industrial houses & PSU like Reliance, Tata, Aditya Birla, L&T, Punj Lloyd, ABG, IVRCL, NCC, Essar, Unitech, BHEL, NTPC, Gammon, Indian railways to name a few. In order to tap the international market, ACE has got CE Certification for most of its manufactured products.Although miniscule currently, company has exported its products to U.A.E., Qatar, Sultanate of Oman, Kuwait, South Africa, Kenya,Nigeria, Mauritius, Sri Lanka, Nepal, Bhutan, Bangladesh, Singapore and Portugal. As a part of its long term strategy, ACE intends to produce or deal in every type of construction equipment so as to become complete solution provider for any infrastructure entity. To achieve this mission, company is contemplating to venture into manufacturing of road construction equipments in near future. Initially it plans to produce tandem vibratory roller and double drum rollers, concrete batching plant and subsequently expand to pavers, sprayers etc. In long term, ACE also wants to get into excavator segment as well which is currently dominated by L&T. After acquiring a Romanian company in 2007, company has recently signed an MOU to acquire a Chinese company.
Importantly, the market for the construction equipment has increased rapidly due to unprecedented rise in development of infrastructure activities in the country. Further, the momentum will be maintained in long run as the Indian economy is in a takeoff phase and has developed necessary strengths to achieve the target of being a developed nation by the year 2020. Although it may take a hit in short term due to global economic turmoil and tight liquidity scenario, but sooner or later it will be back on track as the situation improves. Financially company has done excellent for FY08 and reported excellent set of nos for H1FY08. However for the Dec qtr, suddenly its topline, bottomline as well as operating margin fell drastically, maybe due to ongoing slowdown in construction activities. Despite this for the first three quarters it has recorded 25% increase in sales to Rs 352 cr and 20% fall in profit to 22 cr. Thus it has already clocked an EPS of Rs 2.40 till date. Favorably, its input cost has come down considerably as steel constitutes nearly 55~60% of raw material cost. On a conservative basis, it may end FY09 with topline of Rs 425 cr and bottomline of Rs 25 cr leading to an EPS of Rs 3 on current equity of Rs 18 cr having face value as Rs 2/- per share. Its a debt free company and even has Rs 12.50 cr as unutilized amount from its IPO proceed of Rs 60 cr in 2006 which it may utilize for its future capex & growth plans. Considering the company’s leadership position and future prospect of construction equipment industry, investors can buy this scrip at current level for a price target of Rs 25 in 18~24 months.
Presently, ACE has three manufacturing facilities with two in Haryana & one in Uttaranchal with combined production capacity of more than 8500 units including tractors. It has a well spread network of 5 regional offices and 60 sales and services centers across India. These centers are fully equipped to provide genuine spare parts and services by company trained engineers as and when required. Due to world class product and excellent track record, ACE has a huge clientele including all the big corporates, industrial houses & PSU like Reliance, Tata, Aditya Birla, L&T, Punj Lloyd, ABG, IVRCL, NCC, Essar, Unitech, BHEL, NTPC, Gammon, Indian railways to name a few. In order to tap the international market, ACE has got CE Certification for most of its manufactured products.Although miniscule currently, company has exported its products to U.A.E., Qatar, Sultanate of Oman, Kuwait, South Africa, Kenya,Nigeria, Mauritius, Sri Lanka, Nepal, Bhutan, Bangladesh, Singapore and Portugal. As a part of its long term strategy, ACE intends to produce or deal in every type of construction equipment so as to become complete solution provider for any infrastructure entity. To achieve this mission, company is contemplating to venture into manufacturing of road construction equipments in near future. Initially it plans to produce tandem vibratory roller and double drum rollers, concrete batching plant and subsequently expand to pavers, sprayers etc. In long term, ACE also wants to get into excavator segment as well which is currently dominated by L&T. After acquiring a Romanian company in 2007, company has recently signed an MOU to acquire a Chinese company.
Importantly, the market for the construction equipment has increased rapidly due to unprecedented rise in development of infrastructure activities in the country. Further, the momentum will be maintained in long run as the Indian economy is in a takeoff phase and has developed necessary strengths to achieve the target of being a developed nation by the year 2020. Although it may take a hit in short term due to global economic turmoil and tight liquidity scenario, but sooner or later it will be back on track as the situation improves. Financially company has done excellent for FY08 and reported excellent set of nos for H1FY08. However for the Dec qtr, suddenly its topline, bottomline as well as operating margin fell drastically, maybe due to ongoing slowdown in construction activities. Despite this for the first three quarters it has recorded 25% increase in sales to Rs 352 cr and 20% fall in profit to 22 cr. Thus it has already clocked an EPS of Rs 2.40 till date. Favorably, its input cost has come down considerably as steel constitutes nearly 55~60% of raw material cost. On a conservative basis, it may end FY09 with topline of Rs 425 cr and bottomline of Rs 25 cr leading to an EPS of Rs 3 on current equity of Rs 18 cr having face value as Rs 2/- per share. Its a debt free company and even has Rs 12.50 cr as unutilized amount from its IPO proceed of Rs 60 cr in 2006 which it may utilize for its future capex & growth plans. Considering the company’s leadership position and future prospect of construction equipment industry, investors can buy this scrip at current level for a price target of Rs 25 in 18~24 months.
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