Buy Action Construction Equipment Ltd For Target Rs.300 - ICICI Direct
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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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