ACE Construction targets 40-45% sales growth in FY12

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Action Construction Equipment  (ACE) has been a very strong mover in the past couple of trading sessions. It picked up around 10% in the past month.

Sorab Agarwal, Managing Director of the company, in an interview with CNBC-TV18's Ekta Batra and Reema Tendulkar, said that the last year was very good for the company and expects a topline growth of 40-45% this year.

Agarwal further said, "The overall momentum in our new different equipment category like forklifts, tower crane and tractors, which started in the last three-four years, will grow by around 70-80%. On the whole, we are targeting about 40-45% growth in the current year."

Below is the verbatim transcript of the interview. Also watch the accompanying video.

Q: In FY11, your revenue was up around 62%. You have a strong growth target for FY12 as well. What are your key growth drivers for FY12?

A: Last year was pretty good. In this year, we have been expecting a topline growth of about 40-45%. Our traditional mobile crane grows at 20-25%. The overall momentum in our new different equipment category like forklifts, tower crane and tractors started in the last three-four years will grow by around 70-80%. On the whole, we are targeting about 40-45% growth in the current year.

Q: With 40-45% growth, what are you expecting in terms of your profitability and margins? What's the kind of performance?

A: Definitely, there has been some cost pressures in the last six-seven months. Now, we have started pushing up price increase. We have been targeting our bottomline growth of around 70% for FY12. Hopefully, our margins at EBITDA levels should stabilise at about 11-11.5% this year.

Q: This is an increase from close to about 8% that you did last year. Could you tell us the price increase that you are considering? How soon will that take place?

A: We are pushing prices all across at 3%. Simultaneously with value engineering and raw material costing, we would reduce by about 1.5-2% in the next two-three months. Hopefully by the end of the year, we should be able to increase our profit margins around 3%.

Q: What does your orderbook currently stands at? What is the breakup with regards to your orderbook in terms of segment and capacity utilisation? You started a new plant in January. What have you been doing?

A: Generally, our orderbook across the product segment remains at two-three months. Our products are similar to commercial vehicles. People don't wait for four-six months.

Generally, we can maintain the two-three months orderbook and beyond that, it is not feasible for us. With respect to utilisation for pick and carry cranes, we have set up a new facility that started in January. We can produce about 800 cranes per month.

Currently, we have been doing about 450 units in a month. All the incremental growth for this as well as next year is already factored in that plant. With respect to pick and carry, we can double our number over the next two years from the new setup plant.

Similarly for forklift, tower cranes and other products, we have capacity available to increase our business to around 40-50% in those plants.

Q: You saw some private equity interest with Avendus Private Equity picking up some amount of stake in the company. Would you be looking at hiving off certain amount of stake to any other private equity players?

A: Nothing is planned as of now. Generally, we meet most of our capex requirements from our internal accruals. Avendus has taken the stake from the open market. We have been looking at an acquisition in India, but unfortunately, somebody else bid us out.

Now, we are very clearly looking at an acquisition in China. Hopefully it should go through in the next two-three months. For funding that, we might raise some debt or capital from the market in another month or two months' time.

Q: What's the corpus for the China facility?

A: It should be in the tune of Rs 30-40 crore.