Buy Action Construction Equipment Ltd For Target Rs.320 - ICICI Direct
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Strong performance led by cranes segment…
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
Q2FY22 Results: ACE reported its Q2FY22 results.
* Revenue for the quarter came in at | 360.9 crore, up 35% YoY & 12% QoQ
* Absolute EBIDTA came in at | 34.8 crore, up 15.2% QoQ and 43.8% YoY
* PAT came in at | 23 crore vs. | 14.6 crore in Q2FY21 & | 19.3 crore in Q1FY22
What should investors do? ACE continues to tread on its growth path. Even with a disrupted H1FY22, the management has guided for 20-25% growth
* We continue to remain positive and retain our BUY rating on the stock
Target Price and Valuation: We value ACE at | 320 i.e. 15x EV/EBIDTA (FY23E).
Key triggers for future price performance:
* Strong growth in FY22E & 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: We also like NRB in our capital goods coverage.
* 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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