Buy Ajax Engineering Ltd For Target Rs. 770 By JM Financial Services
To ride the wave of mechanisation; growth to remain concrete
Ajax Engineering (Ajax) is a leading concrete equipment manufacturer with a comprehensive range of concrete equipment, services and solutions across concrete application value chain. Since its inception in 1992, Ajax has a comprehensive product portfolio of SLCM (Self Loading Concrete Mixer) and batching plants for concrete production, transit mixers for concrete transportation, boom pumps, concrete pumps and self-propelled boom pumps for placement of concrete, slip-form pavers for paving of concrete and 3D concrete printers for depositing concrete. It is one of the largest SLCM manufacturers globally and market leader in India with c.75% market share. Increasing share of mechanisation given its benefits over manual mixing will drive industry growth. We like Ajax given its leadership in the fast growing SLCM market, comprehensive product portfolio, strong management pedigree, strong in-house design, development and engineering capabilities, lean balance sheet and superior return ratios. We expect EPS growth of 16% CAGR over FY25-28E. We value Ajax at 25x Jun’27 EPS to arrive at a target price of INR 770. We initiate with BUY.
* Industry outlook robust backed by rise in mechanisation: India’s concrete consumption is expected to grow at 8% CAGR over FY24-29E led by rising construction activity. Concrete is produced through manual and mechanised methods, with manual accounting for c.75% share in the country. Mechanised methods offer benefits such as consistent quality, improved efficiency, cost savings, and greater adaptability and could contribute c.41% of total concrete consumption by FY29E (vs. 17%/25% in FY19/24).
* Market leader in SLCMs; expanding non-SLCM portfolio: Ajax offers a comprehensive range of 141 equipment variants across the concrete application value chain. In the last decade, it has sold 33k+ units including 30k SLCMs. As of FY25, its dealer network comprised of 51 dealers across 22 states in India, and the company is accessible to its customers through 111 touch points. Ajax is the market leader in SLCMs in India with 75% market share. It is also expanding its non-SLCM portfolio, which saw revenue growth of 22% CAGR over FY22-25.
* Margins to moderate amid transition; EPS growth robust at 16% over FY25-28E: The new CEV-5 emission norms have been introduced in India in Jan’25 and Ajax is undergoing a transition. Gross margin is likely to fall by 150-200bps due to cost increase, which will be partly absorbed by Ajax. Given the operating leverage and other cost-saving measures, EBITDA margin will dip by 50-100bps. NWC (ex-cash) has risen to 44 days in FY25 amid transition and is expected to normalise in FY27E. Backed by strong revenue growth of 15% CAGR, we expect EPS growth of 16% CAGR over FY25-28E.
* Initiate coverage with BUY and price target of INR 770: We like Ajax given its leadership position in fast growing SLCM market, comprehensive product portfolio, strong in-house design, development and engineering capabilities, strong management pedigree, lean balance sheet and superior return ratios. We expect EPS growth of 16% CAGR over FY25-28E. Currently, Ajax is trading at 21x/18x FY27/28E EPS. Among all peers, Action Construction (ACE) is closest to Ajax and is currently trading at 28x/26x FY27/28E consensus EPS. Given the larger trading history for ACE, we value Ajax at a slight discount at 25x June-27 EPS to arrive at a target price of INR 770. We initiate coverage with BUY.
Ajax Engineering (Ajax) is a leading concrete equipment manufacturer with a comprehensive range of concrete equipment, services and solutions across concrete application value chain. Since its inception in 1992, Ajax has a comprehensive product portfolio of SLCM (Self Loading Concrete Mixer) and batching plants for concrete production, transit mixers for concrete transportation, boom pumps, concrete pumps and self-propelled boom pumps for placement of concrete, slip-form pavers for paving of concrete and 3D concrete printers for depositing concrete. It is one of the largest SLCM manufacturers globally and market leader in India with c.75% market share. Increasing share of mechanisation given its benefits over manual mixing will drive industry growth. We like Ajax given its leadership in the fast growing SLCM market, comprehensive product portfolio, strong management pedigree, strong in-house design, development and engineering capabilities, lean balance sheet and superior return ratios. We expect EPS growth of 16% CAGR over FY25-28E. We value Ajax at 25x Jun’27 EPS to arrive at a target price of INR 770. We initiate with BUY.
* Industry outlook robust backed by rise in mechanisation: India’s concrete consumption is expected to grow at 8% CAGR over FY24-29E led by rising construction activity. Concrete is produced through manual and mechanised methods, with manual accounting for c.75% share in the country. Mechanised methods offer benefits such as consistent quality, improved efficiency, cost savings, and greater adaptability and could contribute c.41% of total concrete consumption by FY29E (vs. 17%/25% in FY19/24).
* Market leader in SLCMs; expanding non-SLCM portfolio: Ajax offers a comprehensive range of 141 equipment variants across the concrete application value chain. In the last decade, it has sold 33k+ units including 30k SLCMs. As of FY25, its dealer network comprised of 51 dealers across 22 states in India, and the company is accessible to its customers through 111 touch points. Ajax is the market leader in SLCMs in India with 75% market share. It is also expanding its non-SLCM portfolio, which saw revenue growth of 22% CAGR over FY22-25.
* Margins to moderate amid transition; EPS growth robust at 16% over FY25-28E: The new CEV-5 emission norms have been introduced in India in Jan’25 and Ajax is undergoing a transition. Gross margin is likely to fall by 150-200bps due to cost increase, which will be partly absorbed by Ajax. Given the operating leverage and other cost-saving measures, EBITDA margin will dip by 50-100bps. NWC (ex-cash) has risen to 44 days in FY25 amid transition and is expected to normalise in FY27E. Backed by strong revenue growth of 15% CAGR, we expect EPS growth of 16% CAGR over FY25-28E.
* Initiate coverage with BUY and price target of INR 770: We like Ajax given its leadership position in fast growing SLCM market, comprehensive product portfolio, strong in-house design, development and engineering capabilities, strong management pedigree, lean balance sheet and superior return ratios. We expect EPS growth of 16% CAGR over FY25-28E. Currently, Ajax is trading at 21x/18x FY27/28E EPS. Among all peers, Action Construction (ACE) is closest to Ajax and is currently trading at 28x/26x FY27/28E consensus EPS. Given the larger trading history for ACE, we value Ajax at a slight discount at 25x June-27 EPS to arrive at a target price of INR 770. We initiate coverage with BUY.
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