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Sturdy performance...

About the stock: Action Construction Equipment (ACE) is an Indian construction equipment and material handling company.

* ACE has eight manufacturing and one R&D site in Faridabad, Haryana

* The company has a capacity of 12000 construction equipment and 9000 tractors annually

* ACE’s product portfolio is divided into four main categories viz. agricultural equipment, construction equipment, road construction equipment and earth-moving machinery

Q1FY22 Results: ACE reported Q1FY22 results.

* Revenue for the quarter came in at | 321.5 crore, up 218% YoY & down 29.7% QoQ.

* Absolute EBIDTA came in at | 30.2 crore, down 39.5% QoQ vs a loss in Q1FY21

* PAT came in at | 19.3 crore vs. 38.8 crore in Q4FY21 & a loss in Q1FY21

What should investors do?

ACE continues to tread on its growth path. Even with a disrupted Q1, the management has guided for 15-20% growth

* We continue to remain positive and retain our BUY rating on the stock

Target Price and Valuation: We value ACE at | 300 i.e. 15x EV/EBIDTA (FY23E)

Key triggers for future price performance:

* Strong growth in FY22 & FY23E with sustained EBIDTA margins.

* Construction equipment segment growing and occupying a larger pie in overall revenue contribution

* Upcoming government & private capex providing fillip to the sector

Alternate Stock Idea: Apart from ACE, in our capital goods coverage, we also like NRB Bearings.

* It offers a play on needle roller bearings, which are largely used in auto applications

* BUY with a target price of | 175 per share

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