Buy Action Construction Equipment, says SP Tulsian

SP Tulsian of sptulsian.com told CNBC-TV18, "Action Construction Equipment is making the tower and mobile crane and they are market leader in that, having market share of 50 percent. Recently company has launched or has gone in to the production of agri, defence and road construction equipments also. Those divisions or all three are not showing that kind of traction and company is in fact making losses also on the EBIT level.""However, their main business tower and mobile crane is doing really very well. Entire profitability of the company is coming from that – that is number one. Number two if you see the capacity of about 12,000 pieces of crane and 9,000 of all agri, road and defence equipments they all can get ramped up in their two plants which they have one in Faridabad and second in Haryana," he added. "Third is a technocrat entrepreneur; see the promoter they are IITs and second generation has also come and joined the company. So, the consistent improvement on all front that is the capacity, innovation and the market share of the existing product that is the tower and mobile crane in which they are operating, I am quite impressed.""Come on the financial performance for first half they have a topline of about Rs 300 crore, operating profit of closed to about Rs 7.5 crore with profit after tax (PAT) of Rs 3 crore. I see this FY16 probably as flat year but the real good growth of may be 40 percent plus on topline and bottomline can be seen for FY17 and FY18. So if you go by the equity the company has an equity of closure to about Rs 20 crore, face value is Rs 2, net worth is about Rs 315 crore.""Their debt is only Rs 140 crore on net worth of Rs 315 crore and that too the major portion of their debt is used for the working capital finance. The promoter stake as I said that it is a technocrat promoter and all in spite of that the promoter stake is very high at 68 percent. Its market cap is just Rs 440 crore.""If you take the enterprise valuation (EV) also it is about Rs 550 crore. So, I think that looking to the product profile, looking to the growth potential even the new products for which they have launched that is defence, road and agri we have been seeing good demand picking up in all three. So, one can buy now at the current price of about Rs 45 for a target of Rs 56 in next six months or so," he said.