Emkay Global Financial's report on Action Construction Equipments
ACE reported sales growth of 12% yoy in Q4FY22, led by growth of 17%/13% in construction equipment (CE)/cranes segments. The company reported its highest-ever quarterly revenue in Q4. Despite a lower gross margin, EBITDAM improved to 9.4% from 9% in Q3FY22 on account of operational efficiency. For FY22, ACE reported 33%/28% YoY growth in sales/EBITDA, outperforming the construction equipment industry. It is evaluating backward integration or acquisition of smaller companies. ACE expects to grow its revenue by 15% given the present demand scenario. Lower steel prices could in the future help to improve the gross margin.
Outlook
We cut our FY23E/FY24E EPS by ~2.5%/5.6% and introduce FY25E EPS of Rs14.4. We build in sales/EBITDA/ PAT CAGRs of 13%/15%/17% during FY22E-FY25E. We roll forward our valuation to Jun’23 and lower the TP to Rs240 from Rs270. Maintain Buy.
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