Buy Action Construction Equipment; target of Rs 345: Emkay Global Financial

Emkay Global Financial is bullish on Action Construction Equipment has recommended buy rating on the stock with a target price of Rs 345 in its research report dated November 11, 2022.

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November 14, 2022 / 21:53 IST

26 Aug, 2025 12:21

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Emkay Global Financial's research report on Action Construction Equipment

ACE reported 36%/30%/55% YoY growth in Sales/EBITDA/PAT for the quarter, on the back of strong growth in the Cranes and Construction-Equipment (CE) segments. Sales growth in the Cranes/CE segments stood at 48%/36%, respectively. Cranes saw 28% volume growth. Management has revised its revenue guidance to >25% for the year which requires a growth of ~5% for H2. ACE saw ~10% YoY growth in H2FY22; hence, the base is not low. We assume 28% YoY revenue growth for FY23. ACE expects gross-margin expansion in coming quarters due to softening commodity prices. We estimate EBITDAM at 9.7-10.1% over the next 2 years vs 9.3% currently.

Outlook

Given the current sales run-rate, expectation of improvement in gross margin, uptick in buying activity and enquiry conversions, we revise FY23E/24E EPS by 16%/15%, respectively, on the back of similar revenue growth. We roll forward our valuation to Dec23 and arrive at TP of Rs345/share (Rs240 earlier), based on 21x PER. Our increase in TP factors-in the EPS increase (~15%), roll over and the PER upgrade. Our PE of 21x is a 10% premium to 5-year average P/E of ~19x, owing to FY23E-25E RoE of ~16% vs ~13.5% in the past 5 years.

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