Buy Action Construction; target of Rs 57: MLR Securities

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Buy Action Construction; target of Rs 57: MLR Securities

MLR Securities is bullish on Action Construction Equipment (ACE) and has recommended buy rating on the stock with a target of Rs 57 in its April 13, 2011 research report.

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MLR Securities is bullish on Action Construction Equipment (ACE) and has recommended buy rating on the stock with a target of Rs 57 in its April 13, 2011 research report.

"Action Construction Equipment (ACE) is into manufacturing of construction equipments. The company is the market leader in mobile cranes and is increasing its presence in several other construction equipments also."

"Action Construction , 9mth FY11 Net Sales saw 63% jump yoy, likely to report 59% yoy growth in Net Sales in FY11e and 25% yoy in FY12e. Low levels of mechanization and huge investment plans in the construction industry augurs well for construction equipment manufacturers like ACE. Large client base with presence in all major Infrastructure, Construction, Heavy Engineering and Industrial Projects across the country through a wide product range. EBITDA margins likely to show improvement as company plans to start passing on the rise in raw material prices in the past few quarters. Established segments like pick & carry cranes, mobile tower cranes, fixed tower cranes, crawler cranes likely to grow at 20%. Pick and carry cranes capacity to increase from 4800 units/annum to 9000 units/annum, Fixed tower cranes capacity to increase from 150 units/annum to 300 units/annum in FY11. New production unit for tractors to come up in FY12, capacity likely to double from present 4,000 units/annum to 8,000 units/annum. Market share likely to increase going ahead in products like back hoes, forklifts, etc. as new capacity comes up."

"The stock is currently trading at 11.3 and 8.4 x FY11e and FY12e EPS of 4.2 and 5.7 respectively. We spoke to the management and we believe that the stock has the potential to surprise on the upside on account of increase in sales volumes and recommend a buy with a target price of Rs 57 (10 x FY12e EPS)," says MLR Securities research report.

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To read the full report click on the attachment