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Action Construction Equipment Ltd

13th April 2011

BUY Share Price (INR) Target (INR) Return (%) Beta (Sensex)

Action Construction Equipment Ltd (ACE) is into manufacturing of construction equipments. The company is the market leader in mobile cranes and is increasing its presence in several other 47 construction equipments also.
57 The stock is currently trading at 11.3 and 8.4 x FY11e and FY12e

EPS of 4.2 and 5.7 respectively. We spoke to the management and we believe that the stock has the potential to surprise on the upside on account of increase in sales volumes and recom1.14 mend a buy with a target price of 57 (10 x FY12e EPS).
21%

Investment Rationale
Market Data Total Shares (mn) Mar Cap (INR mn) 52 Wk High/Low (INR) Avg Qtr Dly Vol (000's) 92.9 4426.0 75/38 225.6  9mth FY11 Net Sales saw 63% jump yoy, likely to report 59%

yoy growth in Net Sales in FY11e and 25% yoy in FY12e
 Low levels of mechanization and huge investment plans in

the construction industry augurs well for construction equipment manufacturers like ACE
 Large client base with presence in all major Infrastructure,

Construction, Heavy Engineering and Industrial Projects across the country through a wide product range
 EBITDA margins likely to show improvement as company

Shareholding Promoter DII FII Other 65.67 9.34 5.12 19.87

plans to start passing on the rise in raw material prices in the past few quarters
 Established segments like pick & carry cranes, mobile tower

cranes, fixed tower cranes, crawler cranes likely to grow at 20%
 Pick and carry cranes capacity to increase from 4800 units/

annum to 9000 units/annum, Fixed tower cranes capacity to increase from 150 units/annum to 300 units/annum in FY11
 New production unit for tractors to come up in FY12, capac-

Stock Code NSE BSE Bloomberg Reuters
Source : MLR, Company 1

ACE 532762 ACCE IN ACEL.BO

ity likely to double from present 4,000 units/annum to 8,000 units/annum
 Market share likely to increase going ahead in products like

back hoes, forklifts, etc. as new capacity comes up Key Risks
 Sharp increase in steel prices, slowdown in construction ac-

tivities, competition from other players.
MLR Investment Research

2 12.3 15.413. Quarterly Results | Standalone | INR mn Quarterly Results Net Sales Net Sales Growth (%) Operating Expense EBITDA EBITDA Margin (%) EBITDA Growth (%) Other Item Depreciation Interest Tax Minority Interest PAT Non Recurring Item Adjusted PAT Adjusted PAT Margin (%) Adjusted PAT Growth (%) Share Capital Face Value (INR) Adjusted EPS (INR) Dec-10 1.9 17.7 Sep-10 1.5 12.2 12.0 1.8 898.5 179.7 19.6 Jun-10 1.2 106.6 24.0 69.1 70.5 976.3 179.183.1 4.5 1.6 79.1 Mar-09 769.4 Mar-10 1.7 8.8 0.9 754.2 1.6 96.062.6 128.8 2.5 7.0 1.4 79.671.8 11.2 34.0 28. Action Construction Equipment Ltd (ACE) was promoted by Mr.8 768.8 60.8 96.9 Jun-09 804. ACE has production facilities in the state of Haryana and Uttarakhand with dealership network spread all over India. fixed tower cranes.8 2.5 19. Delhi.8 32. Company 2 MLR Investment Research .3 50.6 6.0 0. (Mechanical) and MBA from FMS.6 54.7 179.1 21.6 71.077.8 15.4 36.1 4. back hoes.2 179.2 133.Action Construction Equipment Ltd 13th April 2011 Company Background Action Construction Equipment Ltd (ACE) is into manufacturing of construction equipments like pick & carry cranes.8 2.433.1 86.291.2 5.2 3.0 0.8 34.4 114.2 58.1 9.7 899.4 123.537.2 13.7 9. He has completed B.5 90.9 66.8 2.5 5.4 1.3 145. The company also added tractors to its product line in the year 2009.6 59.1 6.8 2. crawler cranes.0 0.6 179.5 5.6 6.6 6.2 72.0 9.1 Source : MLR.0 1.1 34.3 44.1 13.8 2.5 13.2 18.7 90.5 179.0 7.8 8.0 7.0 1.1 Dec-09 1.8 2.5 17.2 42.8 8.5 185.3 7.2 106.3 14.E.3 5.7 1.6 179. mobile tower cranes. Vijay Agarwal possesses over 38 years of experience in material handling and heavy engineering industry and has held esteemed positions in different reputed industrial organizations for two decades.816.8 2.2 5.0 0.3 8.8 78.0 Sep-09 970.0 0.1 108.7 85. Mr.3 54. etc.304.5 9.5 59. Vijay Agarwal in the year 1995 and went public in the year 2005.6 11.1 19. forklifts.0 1.

0 36.7) 2.6 (0.4 (13.5) (387.8) 8.0 15.6 FY11e 392.8 66.1) 50.3 0.0) 53.0 (0.0 11.4 2.6 0.0 2.Action Construction Equipment Ltd 13th April 2011 Key Ratios & Cash Flow | Consolidated | INR mn Key Ratios Net Sales Growth (%) EBITDA Margin (%) EBITDA Growth (%) Adjusted PAT Margin (%) Adjusted PAT Growth (%) Total Asset Turnover (x) Debt Equity Ratio (x) RoE (%) EV/EBITDA (x) BVPS (INR) P/BV (x) DPS (INR) Dividend Yield (%) Adjusted EPS (INR) Adjusted P/E (x) FY09 5.1 187.0 2.3) (52.4 3.1) (225.7 8.7) (310.1 6.7 5.1 22.8 2.6 (41.8) (188.3 44.2 11.3 (37.6 (154.5) 37.4 1.2 20.1 44.8 0.4 8.9 1.0 9.6) 13.5 FY10 (0.2 34.6 11.1 23.6 12.6 91.0 2.3 (13.1 0.0 8.2 14.2 3.0) (67.5) 85.2) (30.3 FY12e 25.1 (24.2 0.8 1.2 24.5) (176.3) 24.9 (2.0 24.2 FY10 235.1 5.2 0.1 2.2 5.5 1.2) 30.2 21.2) (22.0 2.2) 9.6) (358.2 21.1 (24.8 2.2) (146.5 3.6) 4.1 Source : MLR. Company 3 MLR Investment Research .3 6.2 15.2 FY11e 59.1) FY12e 527.4 6.3 (0.8 16.3) 13.1 4.6 17.6 18.0) 280.4 0.5 0.4 Cash Flow PAT Deferred Tax Liability Interest(1-Tax%) Minority Interest Fixed Asset Net Current Asset FCFF Interest(1-Tax%) Loan Fund Minority Interest Minority Capital FCFE FY09 198.5 18.4) (89.1 (11.0 (12.

9 2.9 (1.249.8 2.382.5 1.7 0.6 FY12e 185.9 FY10 179.425.5 51.3 44.429.6 89.8) 392.0 FY10 4.589.3 3.0 74.9 596.370.8 1.6 7.2 988.494.064.6 110.1 130.9 55.7 369.9 198.3 190.008.6 53.9 7.302.012.7 1.9 36.6 823.0 7.630.1 195.274.2 1.075.409.3 FY09 179.633.4 61.2 2.9 FY11e 6.0) 235.Action Construction Equipment Ltd 13th April 2011 Income Statement & Balance Sheet | Consolidated | INR mn Income Statement Net Sales Operating Expense EBITDA Other Item Interest Depreciation Tax Minority Interest PAT Non Recurring Item Adjusted PAT Dividend FY08 4.488.0 32.6 52.4 301.5 4.7 351.2 6.8 546.0 0.5 93.8 1.281.1 214.0 341.8 1.7 935.382.1 92.5 20.012.4 430.8 268.5) 527.5 1.189.6 FY11e 185.5 1.077.795.9 FY09 4.6 3.4 3.901.901.7 301.4 1.279.234.1 2.1 83.0 1.120.4 (13.9 1.729.0 1.3 0.4 139.2 527.2 Source : MLR.6 1.3 (12.0 807.0 71.831.8 388.4 2.063.0 0.8 2.3) 198.0 2.6 1.0 1.3 717.9 10.8 3.6 560.4 4.0 1.6 1.8 1.9 (13.8 1.550.038.8 1.3 1.852.300.5 2.9 36.0 1.265. Company 4 MLR Investment Research .3 703.9 58.8 (11.2 73.8 1.425.069.1) 341.9 FY12e 8.831.8 1.1 112.2 92.7 1.8 2.852.884.1 2.1 392.8 4.579.122.663.8 6.5 2.885.1 185.8 3.5 764.3 391.5 33.9 756.6 235.4 7.9 Balance Sheet Share Capital Reserve Total Equity Loan Fund Minority Capital Deferred Tax Liability Total Capital Fixed Asset Investment Cash Inventory Other Current Asset Total Current Liabilitiy Net Current Asset Total Asset FY08 179.6 36.7 95.2 7.

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