Initiating coverage | Capital Goods
March 18, 2015
Action Construction Equipment
BUY
CMP
`42
Turn-around on the Cards…
Target Price
`54
Action Construction Equipment (ACE) is among the leading crane manufacturers in
Investment Period
12 Months
the Indian construction equipment (CE) market with a share of 35% in the Pick and
Carry crane market. ACE’s product portfolio comprises of a range of Cranes,
Stock Info
Backhoe Loaders and Forklifts, Tractors, and Harvesters.
Sector
Construction Equip.
Business set to turn-around: Recent announcements in the Union Budget 2015-16
Market Cap (` cr)
417
strengthen our view that Cranes, CE, and Material Handling (MH) business
segments are up for revival. Considering ACE’s strong market positioning, wide
Net debt (` cr)
128
pan-India dealership network, long-standing relationship with customers who give
Beta
1.5
repeat business, and wide range of product portfolio, we expect segment volumes
52 Week High / Low
49/12
and blended realization to catch-up from here-on. We expect ACE to post
Avg. Daily Volume
107,463
an18.8% top-line CAGR during FY2015-17E to `838.5cr. Demand recovery,
Face Value (`)
2
coupled with cost cutting initiatives at the floor level, higher localization initiatives,
focus on lowering imports, and expected decline in Mild Steel (forms biggest raw
BSE Sensex
28,736
material component) prices, strengthens our view that ACE is well positioned to
Nifty
8,723
absorb fixed costs and experience margin expansion. Accordingly, EBITDA margins of
Reuters Code
ACEL.BO
the company would expand from 3.0% in FY2015E to 8.2% in FY2017E. Since its last
Bloomberg Code
[email protected]
round of capex in FY2011-12, with the onset of infra capex down-cycle, poor
demand led Cranes, CE and MH division plants to run at sub-50% capacity
utilization levels. ACE’s Management highlighted that there is no need for the
Shareholding Pattern (%)
company to pursue any major capex, until their revenues cross `1,200cr. In
Promoters
68.3
absence of any major capex, we expect entire benefits of EBITDA margin
expansion to trickle down to PAT level (PAT margins to expand from 0.9% in
MF / Banks / Indian Fls
3.3
FY2015E to 4.6% in FY2017E). In-line with strong growth in profitability and
FII / NRIs / OCBs
0.4
improved cash flow generating potential, RoEs would improve from 1.7% in
Indian Public / Others
28.1
FY2015E to 11.3% in FY2017E.
Compelling valuations at current levels: We are optimistic that ACE would be able
to maintain its numero uno position in the domestic Pick and Carry cranes
Abs. (%)
3m 1yr 3yr
segment. Further, the company’s wide range of product offerings, wide pan-India
Sensex
1.7
31.6
66.4
distribution network, and recent cost cutting initiatives, put ACE in a strong
ACE
10.2
195.4
28.1
position. Given the backdrop of strong earnings growth and RoE expansion, we
assign a P/E multiple of 14.0x to our FY2017E EPS of `3.9 and arrive at a price
target of `54 for the stock. Being a turnaround story, we alternatively checked
3-Year Daily price chart
ACE’s stock on EV/sales multiple. At target P/E multiple of 14.0x, the implied
50
45
FY2017E EV/sales multiple comes in at 0.75x, which is comforting. Given the
40
28.4% upside from the current market price of the stock, we initiate coverage on
35
30
ACE with a BUY recommendation.
25
20
Key Financials
15
Y/E March (` cr)
FY14
FY15E
FY16E
FY17E
10
Net Sales
615
594
660
839
5
0
% chg
(7.9)
(3.3)
11.0
27.1
Net Profit
4
5
10
38
% chg
(37.6)
30.4
93.5
276.8
EBITDA (%)
3.9
3.0
4.7
8.2
Source: Company, Angel Research
EPS (`)
0.4
0.5
1.0
3.9
P/E (x)
103.7
79.5
41.1
10.9
P/BV (x)
1.4
1.3
1.3
1.2
RoE (%)
1.3
1.7
3.2
11.3
RoCE (%)
3.4
4.2
5.3
13.1
Yellapu Santosh
EV/Sales (x)
0.9
0.9
0.8
0.6
022 - 3935 7800 Ext: 6828
EV/EBITDA (x)
22.0
28.7
16.6
7.5
[email protected]
Source: Company, Angel Research; Note: CMP as of March 17, 2015
Please refer to important disclosures at the end of this report
1
Initiating coverage | Action Construction Equipment
Construction Industry to see strong revival
In the last few years, Construction spending has witnessed a sharp decline.
Construction spending growth on a yoy basis during FY2011-12 witnessed a
double digit growth. Since then (during FY2013-14) spending has been on a
declining growth trend. In FY2015, Construction spending is expected to report a
4.5% yoy increase.
Exhibit 1: Construction Spending Growth (yoy)
25.0%
20.7%
20.0%
14.2%
15.0%
10.0%
7.4%
4.5%
5.0%
2.5%
0.0%
FY11
FY12
FY13
FY14
FY15
Source: MoSPI, Angel Research
The new government in the last few months (1) passed an ordinance with amends
to land acquisition bill, (2) increased foreign direct investment (FDI) in Defense and
Railways sectors, (3) is working on merging the Power and Coal ministries, (4)
merged/ abolished committees/ Ministerial groups for quicker Infra projects’
clearances, (5) exempted environmental clearance (EC) for Irrigation projects with
command area of up to 2,000 hectares, (6) made banks to adopt ‘5/25 lending
structure’, where loans can now be made up to 25 years (vs. earlier 15 years), with
an option to refinance after every 5 years, (7) delegated powers for grant of forest
clearances to the regional state level offices,
(8) enabled online filing for
clearances to construct road overbridge (RoB) and road underbridge (RuB),
(9) increased limits on sand mining, (10) EC through the e-portal route for Infra
projects, (11) brought more clarity on Real Estate Investment Trusts (REITs) and
Infrastructure Investment Trusts (InvITs), and (12) empowered Ministry of Road
Transport & Highways (MoRTH) to appraise and approve projects on its own up till
`1,000cr and made changes to Model Concession Agreement (MCA). Also,
positive commentary in the Union Budget FY2015-16, higher budgetary allocation
towards Infra sub-sectors, assurance to provide quicker clearances, and
opening-up of new funding avenues, indicate the government’s intent to revive the
ailing Infrastructure sector.
As highlighted below, budgetary allocation towards some of the key Ministries
which would impact the government’s Infra spending has been increased by
52.7% yoy to `83,255cr in FY2015-16E. The government’s reformist agenda and
its upbeat mood to spend towards the Infra sector creates a favourable outlook
towards the Infra sector in the near-to-medium term.
March 18, 2015
2
Initiating coverage | Action Construction Equipment
Exhibit 2: Budgetary Allocation for FY2015-16
Actual
Revised
Budget
Change
Details of the Ministry (` in cr)
(2013-14)
(2014-15)
(2015-16)
(%)
Ministry of Housing & Urban Develop.
6,703
7,547
10,068
33.4
Ministry of Roads & Highways
14,891
16,770
33,049
97.1
Ministry of Water Resources, River
86
103
138
34.0
Development & Ganga Rejuvenation
Ministry of Railways
27,072
30,100
40,000
32.9
Total Budgetary Allocations
48,752
54,520
83,255
52.7
Source: Union Budget Docs, Angel Research
In order to understand growth drivers for the CE sector, we try to study the outlook
of some of the key Infra sub-verticals.
Roads & Highways
Taking into consideration
(1)
97.1% yoy increase in budgetary allocation (to
`33,049cr), (2) ~100,000km of rural roads construction across the country (at
different stages), and (3) government target to construct another ~100,000km of
rural roads in years to come, we expect the outlook for the Road sector to improve
form here on. In addition to higher award activity, reform announcements
strengthen our view that road construction/ day would pick-up from 4.3km/day in
FY2014 to 11.8km/day in FY2016E.
Exhibit 3: MoRTH Road Activity (in kms)
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015E
FY2016E
Construct
Target to Award
Awarded
Source: NHAI, Media Publication, Angel Research
On the whole, we expect `90,000cr of road construction (MoRTH + State
Highways + Rural) business opportunity to emerge during FY2016-17E. Our
above-stated estimates factor major contribution of private road Engineering
Procurement and Construction (EPC) players.
Power
The government has timely announced its support to ensure faster completion of
~87GW of Thermal Power plants, which are under different stages of construction.
In order to address issues impeding the sector, the government has set ambitious
coal production targets to address fuel linkage issues, assured quicker EC and
March 18, 2015
3
Initiating coverage | Action Construction Equipment
forest clearance (FC) clearances for power projects, and opened up new avenues
of fund raising for power developers. In the recent Union Budget 2015-16E, the
Finance Minister (FM) announced that Power PSUs would increase their yoy capex
outlay by 6.8% to `54,910cr.
Exhibit 4: Power PSUs Capex (` cr)
25,000
20,000
15,000
10,000
5,000
0
NTPC
PGCIL
NHPC
DVC
THDC
NEEPCO
SJVNL
Source: Company, Angel Research
We expect revival in the Power capex cycle to be led by PSUs and Power Gencos.
We see strong visibility over 15GW of Thermal and Hydro Power projects to be
awarded by PSU Gencos, which have EPC works scope.
Exhibit 5: Power PSUs’ capex (` cr)
Power Gen.
Size
Contract Size
Project Details
Type
(MW)
(` cr)
Udangudi, TANGEDCO
Thermal
1,320
6,600
Manuguru, TSGENCO
Thermal
1,080
5,400
Darjeeling, NTPC
Hydro
120
300
Khargone, NTPC
Thermal
1,320
6,600
Kothagudem, APGENCO
Thermal
800
4,000
Nellore, APGENCO
Thermal
800
4,000
Nashik, MAHAGENCO
Thermal
660
3,300
Para, MAHAGENCO
Thermal
250
1,300
Sagardighi, WBPDCL
Thermal
500
2,500
Patratu, JSEB
Thermal
1,320
6,600
Ghatampur, Nevyeli Lignite
Thermal
1,980
9,900
Harduagunj, UPRVUNL
Thermal
660
3,300
Bhanswara, RRVUNL
Thermal
1,320
6,600
Satpura, MPPGCL
Thermal
660
3,300
Dondaicha, MAHAGENCO
Thermal
1,980
9,900
Totals
14,770
73,600
Source: Company, Govt. website, Media Publications, Angel Research
In the recent budget, the FM has shown thrust towards Renewable Energy by
raising Renewable Energy capacity target to 175GW by 2022. NTPC recently got
approval to set up 15GW of grid-connected solar power projects under National
Solar Mission (NSM).
March 18, 2015
4
Initiating coverage | Action Construction Equipment
On the whole, considering Power PSUs’ capex and the EPC opportunity from
Power Gencos, we expect overall award activity to be northwards of ~`91,495cr
during 4QFY2015-FY2017E. For our calculation purpose, we have excluded EPC
works originating from both, Renewable Energy and Private Power Genco
Developers.
Irrigation & Water Treatment
Irrigation & Water Treatment also happen to be the focus area of the government.
This can be gauged from the following announcements in the Union Budget
FY2015-16E, (1) `1,000cr allocation towards “Pradhan Mantri Krishi Sinchayee
Yojna (PMKSY)” for assured irrigation, (2) `4,173cr budgetary allocation towards
Water Resources and Namami Ganga project (clubbed under other Ministry), and
(3) announcement on National River Linking Project (NRLP). Even though
budgetary allocation in the recent Union Budget was increased by 34.0% yoy to
`138cr, we expect higher state government spending and private sector
participation in irrigation to increase as some large ticket projects could be
implemented on PPP basis. We expect an opportunity northward of `6,104cr to
emerge from this vertical over FY2016-17E.
Railways
Recent announcements by the Railway Minister, like (1) allowing 100% FDI in select
sub-segments in Railways, (2) decentralization of tendering process, (3) rewarding
railway officers for delivering results (with 2% of the project value as incentives),
(4) increase in freight tariff rates, (5) willingness to modernize and upgrade
Railway resources through PPP route, (6) monetize idly lying land bank of Railways,
(7) increase dependency on Alternate energy, (8) shift in focus from announcement
of new trains in the Budget to improvement of existing train services, indicate
Railways Ministers intent to revive the ailing Indian Railways (IR).
In the Rail Budget FY2015-16, the Railways Minister announced that in the next
five years, IR would spend `856,000cr with focus on network decongestion and
expansion. As a first step, in order to arrange long-term financing, IR signed a
MoU with Life Insurance Corporation (LIC) to raise `150,000cr in the form of
bonds (on an average `30,000cr worth of bonds would be issued every year by
Railway entities).
Even though the above mentioned initiatives would not make IR efficient
immediately, but all these announcements are in the positive direction. In the
long-run, with a gradual improvement in the health of IR, we expect gradual uptick
in the Railway capex cycle. Till then IR would have to continue to depend on
government funding. The government in the Union Budget FY2015-16E increased
yoy allocation towards IR by 32.9% to `40,000cr. Again, if we look into the details,
`14,170cr would flow towards the new lines construction and RoB/RuB works
(reflecting 28.8% yoy increase). Notably, we have excluded award activity flowing
in from any of the PPP projects and new monetization avenues identified by the
Railways Ministry.
March 18, 2015
5
Initiating coverage | Action Construction Equipment
Exhibit 6: Railways Capex Cycle (` cr)
Particulars
FY2015- BE
FY2015- RE
FY2016- BE
(%)
New Lines (Construction)
8,569
8,984
12,830
42.8
Road Safety Work - RoB/RuB
2,287
2,017
1,340
(33.6)
Totals
10,856
11,001
14,170
28.8
Source: Indian Railways, , Angel Research
Coal Mining
Intending to tackle the fuel security issue, the government initiated (1) amends to
Mines & Mineral (Development and Regulation) bill, (2) re-auction/ auction of the
coal/ mineral resources, and (3) made favourable announcements to make
Thermal Power plants more efficient. The Government of India (GoI) has guided at
Coal India (accounts for over
80% of the domestic produce) doubling its
production from 494mn tonne in FY2014 to 1bn tonne by FY2020E.
Exhibit 7: Coal India Sales Volume (mn tn)
700
600
500
400
300
200
100
0
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015E FY2016E FY2017E
Source: Company, Angel Research
With conclusion of Phase I and II coal block auctions, we expect coal production
from the private sector to increase from ~30mn tonne to ~60mn tonne in the next
1-2 years. Most of the coal blocks auctioned have all the clearances in place. On
the whole, we expect domestic coal production to see 115mn tonne of incremental
production during FY2016-17E. We expect `38,640cr worth of capex investments
to be made during FY2016-17E.
Urban Rail Transport
In the Union Budget FY2015-16, the government increased allocation towards
Metro Railway services for 11 cities, where either works are ongoing or are yet to
commence. We expect works across Ahmedabad, Nagpur, Lucknow and Mumbai
(expansion) to gain traction in FY2016-17E, whereas works across other cities
would commence in the next 3-5 years. We expect ~`16,000cr worth of Infra
award activity from this vertical to private players in the next 1-2 years (assuming
awarding from only these 4 cities).
March 18, 2015
6
Initiating coverage | Action Construction Equipment
Large Infra Projects- DFC & DMIC
The government’s focus on larger Infra projects (such as Dedicated Freight
Corridor [DFC]) and Delhi Mumbai Industrial Corridor [DMIC]) would also
contribute to the revival of Infra award activity.
DFC is a `120,000cr project covering ~3,300km, connecting Mumbai to Delhi on
the Western Corridor and Ludhiana to Kolkata on the Eastern Corridor. With more
than 80% of the land acquired, and majority of the clearances in place, award
activity would gain momentum across packages. These 2 corridors are expected to
commence operations in March 2018.
DMIC (Phase I) is a gigantic `540,000cr project, developed across the 1,500km
stretch on the Western corridors of DFC. Currently, land acquisition is going on at
Dholera, Shendra, and Pithampur stretches. Soon we expect civil works award
activity to commence.
On the whole, we expect awards to the tune of `174,400cr from these large ticket
Infra projects in the next 1-2 years.
Real Estate & 100 Smart Cities
The government has called for “Housing for all” by 2022, where it plans to build
6cr homes (4cr in rural and 2cr in urban areas). In line with its vision to have
Pucca house for everyone by
2022, the government in the Union Budget
FY2015-16, increased allocation under various ministries to `22,407cr. The
ambitious target set under “Housing for all” scheme translates to 85 lakh new
homes every year.
As per Cushman Wakefield report, new launches declined 12% yoy across top
8 cities (Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata,
Mumbai Metropolitan and Pune) to 1.53 lakh housing units in CY2014, reflecting
weak absorption trends. Research firm RNCOS, predicts urban housing shortage
of 1.8cr units in 2012, which is expected to grow at a CAGR of 6.6% for the next
10 years till 2022. Considering the demand-supply mismatch, GDP revival, decline
in interest rates, and improvement in home-buyer affordability, we expect the Real
Estate sector to see strong growth in FY2017E.
The government announced the ‘100 Smart cities’ program, and as a first step,
city-wise task forces were identified for
3 cities viz Ajmer, Allahabad and
Visakhapatnam. Even though the Smart city program is a long-term play, we
expect increase in Civil and Real Estate works across these 3 cities in the next
2-5 years. On a whole, the Smart city Program opens up a huge window of
opportunity for Civil construction companies.
We have only considered the government spending targets, which in our view,
could open civil construction opportunity worth `14,565cr.
Manufacturing/ Industrial Capex
In order to understand how the Corporate Capex Cycle is likely to shape-up during
FY2016-17E, we studied the 110 widely tracked companies of the BSE 500 index.
Based on Bloomberg consensus estimates, capex spends during FY2016-17E for
these companies are expected to be northward of ~`450,000cr.
On the whole, we expect Infrastructure spending to pick-up, led by government
spending. With government increasing emphasis on Roads & Highways and Urban
Infra verticals, we expect Industrial Capex cycle to join the race soon.
March 18, 2015
7
Initiating coverage | Action Construction Equipment
CE market to report strong growth
With slow-down in the Infra capex cycle, as per Off Highway Research estimates,
CE Industry sale volumes also witnessed 15.0% yoy decline in FY2012 and 8.8%
yoy decline in FY2013.
Exhibit 8: CE Industry Sale Volumes
80,000
50.0
45.0
70,000
40.0
60,000
30.0
50,000
22.0
20.0
40,000
10.0
8.4
30,000
-
20,000
(8.8)
(10.0)
10,000
(11.0)
(15.0)
0
(20.0)
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
CE Sales (Unit volumes)
yoy growth (%)
Source: Off Highway Research, Angel Research
As per Off Highway Research estimates ~60,655 CEs were sold in FY2014,
reflecting 8.4% yoy growth. Of the total FY2014 CE sales, 49.5% were Backhoe
Loaders, followed by Crawler Excavators (accounting for 19.0% of CE sales), and
Mobile Cranes (accounting for 10.7% of CE sales). Again, if we split the Mobile
Cranes market, then Pick and Carry Cranes accounted for 86% of the total
volumes. The remaining domestic Mobile Crane market was constituted by
Crawler Cranes, Truck Mounted Cranes and Rough Terrain Cranes.
Exhibit 9: CE Industry Sale Volumes (FY2014)
Motor Graders,
Total of 60,655 CE
0.5%
units sold in FY2014
Crawler
Excavators, 19.0%
Backhoe Loaders,
49.5%
Others, 17.3%
Wheeled Loaders,
3.0%
Mobile Cranes,
10.7%
Source: Off Highway Research
The above table clearly highlights that a major chunk of the Indian CE market in
FY2014 was constituted by Earthmoving and Road Construction Equipments.
March 18, 2015
8
Initiating coverage | Action Construction Equipment
In line with the CE industry volumes, which have seen de-growth, industry level
Pick-n-Carry crane volumes also reported de-growth. Average sale volumes for the
industry declined from 7,092 units (in FY2006-09) to 5,860 units (in FY2010-14).
Exhibit 10: Pick-n-Carry Cranes Industry Volumes
9,000
FY06-09 avg. sales: 7,092
8,000
7,000
FY10-14 avg. sales: 5,860
6,000
5,000
4,000
3,000
2,000
1,000
0
Yrly. Sale Vol.
Avg. Sale Vol. (FY06-09)
Avg. Sale Vol. (FY10-14)
Source: Company, Angel Research
With government emphasizing increased spending towards Roads & Highways and
Urban Infra verticals, we are optimistic that Infra capex cycle would pick-up from
here on. Higher Infrastructure spending in our view would lead to multiplier effect
on the entire CE sector. ACE being a market leader in the Pick-n-Carry Cranes space,
would resultantly benefit from such government focus on the infrastructure sector.
ACE to gain from CE market revival
Having set its foot-hold successfully in the domestic Cranes market, at a time when
GDP was growing over
8%, ACE in FY2008-09 diversified in to MH and
Agri-Equipments (especially Tractors) business. In FY2011-12, ACE went for
aggressive capacity expansion across sub-verticals. Since completion of the capex,
end-user Infra industry experienced a sharp slowdown, as it grappled with various
structural issues related to land acquisition, getting requisite clearances and project
funding. As a result the entire CE industry witnessed a sharp de-growth in business
and ACE was no exception to it.
Exhibit 11: Segment-wise Revenue mix (FY2014)
FY14 Revenues
(`614.9 cr)
30%
59%
11%
Cranes
MH & CE
Agri Equip.
Source: Company, Angel Research
March 18, 2015
9
Initiating coverage | Action Construction Equipment
Starting as a Crane manufacturer, over the years, ACE diversified in to MH and
Tractors business. ACE in FY2014 reported a major 59% of its sales from Cranes
segment with a majority of the sales being accounted by Pick-n-Carry cranes. The
MH&CE segment contributed 11% of revenues, where revenues from Forklifts were
a major contributor at the segment level. The Agri Equipments segment contributed
30% to total sales, mainly led by tractors.
Notably, ACE enjoys strong market positioning in the domestic Pick-n-Cary Cranes
market (with 35% market share) and Forklifts market (with 18% market share). We
expect the company to be able to maintain its market share across these
2
categories, as the overall pie is likely to see sharp growth. In addition to Pick and
Carry cranes, ACE also manufactures Self Erecting Mobile cranes used in
construction of buildings up to 4/5 floors, and Fixed Tower cranes which are used
in the construction of high-rise buildings.
With outlook for the entire CE industry expected to improve, we are optimistic that
both, Crane and MH-CE segment sale volumes for ACE would catch-up from here
on. Even though many new players, especially MNCs, have entered Indian markets
in the last few years, the current unfavorable USD-INR rates make imports costlier.
Hence, foreign competition may not be a threat to the domestic players’ growth
outlook.
Further, with revival in the Construction sector, we expect a majority of the
Construction companies to first put their idly lying Construction Equipments into
use and then pursue CE purchases. We therefore expect domestic CE players’ sale
volumes to report strong growth from FY2017E onwards. On the backdrop of
sharp catch-up in demand, despite increased competition across segments, we
expect ACE to maintain its current market share.
Exhibit 12: ACE Market Positioning
Segment
Market
Equipment Type
Competitors
Application
Type
Share (%)
Cranes
Supports equipment in construction projects;
Pick n Carry Crane
35
Escorts, TIL, Indo Farm
Lift and move Stone slabs for realty projects
Crawler Cranes
ND
Tata-Hitachi, Escorts
Power, Industrial & Infra projects
Fixed Tower Cranes
ND
Potain, Escorts
High Rise Buildings
MH & CE (Material Handling & Other Construction Equipments)
JCB, BEML, Escorts,
Backhoe Loaders/ Wheeled Loaders
1
Load-Unload, Move, Erect Aggregates
Tata-Hitachi
To lift and stack material in Manufacturing/
Forklifts
18
Godrej, Voltas (Kion), Toyota
Logistics/Warehousing units
Road Compactors
ND
Escorts, JCB, L&T Komatsu
Used mainly for Road Construction
Agri Equipment
Tractors
1
M&M, Escorts, Tafe
Farming purposes
Hind Agro, CLASS, John
Harvesting of grain crops (mainly Paddy &
Harvesters
2
Deere
Wheat)
Source: Company, Angel Research; Note: Market share calculated on Volume basis, ND- Not Determined
March 18, 2015
10
Initiating coverage | Action Construction Equipment
Business segments set to revive
On ACE’s expanded capacity base, slowdown in overall Infrastructure spending
led to 24.3% and 25.9% (CAGR) volume de-growth during FY2012-14 across
Cranes and MH-CE business segments, respectively. This de-growth across
business segments reflect lower utilization levels and decline in overall asset-
turnover ratios (from 3.9x in FY2012 to 1.9x in FY2014), which further translated
to a decline in the EBITDA margin (from 6.0% in FY2012 to 3.9% in FY2014) and
Net margins (from 3.2% in FY2012 to 0.7% in FY2014).
Strong volumes to drive Crane segment sales
We expect the Cranes segment to report a
16.7% volume CAGR during
FY2015-17E to 3,558 units. On the backdrop of demand revival and higher
realization, we expect the Cranes segment sales to report a 22.2% CAGR during
FY2015-17E to `580.1cr.
Exhibit 13: Crane Volumes & Utilization (%)
Exhibit 14: Crane Realization & Sales (` cr)
5,000
58
70
1,800,000
700
580
434
580
4,500
57
360
389
53
60
1,600,000
392
600
47
4,000
1,400,000
487
3,500
50
500
1,200,000
295
37
38
3,000
35
33
40
1,000,000
400
2,500
30
800,000
300
2,000
600,000
1,500
20
200
1,000
400,000
10
100
500
200,000
0
0
0
0
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
Crane Vol.
Utilization (%)
Blended Real.
Sales (` cr)
Source: Company, Angel Research
Source: Company, Angel Research
Road CE growth rate to outpace that of MH
At its peak, ACE sold ~850 Forklift units (reflecting 106.3% capacity utilization) in
FY2012. Recent reform announcements, expectations of GDP revival and
government’s increased thrust towards Warehouse and Logistics sector, strengthen
our view that long-term demand for Forklifts would catch-up from here on. Being a
top 3 player, and with industry expected to report strong growth, we expect ACE to
benefit. With demand revival, we expect ACE to increase Forklift prices.
We expect segment volumes to report 9.7% CAGR during FY2015-17E to 687
units. Of the total 637 units sold in FY2014, 530 were Forklifts (66.3% utilization)
and the remaining 107 were Road Construction & Other Construction Equipments
(21.4% utilization). We expect the rate of growth of Road CE to outpace Forklift
growth rate, going forward.
ACE currently reports sales of Forklifts, Backhoe Loaders, Wheeled Loaders, Road
Compactors and Motor Graders under the MH and CE segment. On the whole,
uptick in Forklift prices and shift in product mix (with higher contribution from Road
CEs, which have high realization), lead us to assume the segment to report a
20.1% CAGR in sales during FY2015-17E to `78.7cr.
March 18, 2015
11
Initiating coverage | Action Construction Equipment
Exhibit 15: MH&CE Volumes & Utilization (%)
Exhibit 16: MH&CE Blended Realization & Sales (` cr)
1,400
89
100
1,400,000
129
140
108
90
1,200
1,200,000
79
120
80
84
69
63
67
54
55
1,000
62
70
1,000,000
100
53
49
60
800
47
800,000
80
44
41
50
600
600,000
60
40
400
30
400,000
40
20
200
200,000
20
10
0
0
0
0
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
MH & CE Vol.
Utilization (%)
Blended Real.
Sales (` cr)
Source: Company, Angel Research
Source: Company, Angel Research
Entry into new geographies to drive Agri-Equipment volumes
Since its entry in the domestic tractors market 4-5 years back, ACE has tasted
success with the launch of 35hp, 45hp and 50hp tractors. The states of Punjab,
Haryana and Uttar Pradesh account for a majority of ACE’s tractor sales. ACE, in
FY2015, embarked upon a geographical expansion strategy, wherein it entered
Gujarat, Jharkhand, Bihar, Maharashtra and Tamil Nadu. The full benefits of entry
into the new geographies are to be accrued in the mid-to-long run. Tractor sales
currently account for ~70% of Agri-Equipment division’s sales, while harvesters
account for the balance ~30%.
Exhibit 17: Agri Volumes & Utilization (%)
Exhibit 18: Agri Blended Realization & Sales (` cr)
4,500
69
80
500,000
180
180
200
70
174
168
4,000
61
64
64
450,000
180
62
70
160
60
57
400,000
139
160
3,500
60
116
350,000
140
3,000
50
300,000
120
2,500
40
250,000
79
100
2,000
30
200,000
80
1,500
150,000
60
20
1,000
100,000
40
500
10
50,000
20
0
0
0
0
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
Agri. Equip. Vol.
Utilization (%)
Blended Real.
Sales (` cr)
Source: Company, Angel Research
Source: Company, Angel Research
Given that tractor and harvester sales in India are highly dependent on rainfall
and rural spending power, we have modeled a 9.0% top-line CAGR for this
segment over FY2015-17E to `179.7cr.
Market penetration efforts, new launches, to scale up business
ACE, over the years, has added new products and variants, with different
capacities and power, to its product portfolio. Also, since 2010, the company has
been investing in building a strong distribution network. The sales network of ACE
has increased from ~80 distributors in FY2010 to ~200 distributors by mid-
FY2015. Widened range of product offerings coupled with their wide sales network
should help ACE scale its business from here on. ACE’s Research & Development
March 18, 2015
12
Initiating coverage | Action Construction Equipment
(R&D) team is working on developing (1) Skid-Steer Loader, (2) Truck Mounted Full
Slew cranes with different capacities, (3) Crawler cranes (varied capacities), (4) Self
propelled Truck Mounted cranes, (5) Power Tillers, and (6) new variants of
Harvesters, amongst others. In absence of launch dates for these products, we
have not modeled any growth from these launches.
Exhibit 19: Standalone Revenues (` cr) & yoy change
Exhibit 20: Sales Network
900
60
70
250
800
60
700
50
200
40
600
27
23
30
500
150
11
20
400
10
(3)
300
(8)
100
0
200
-10
(22)
100
-20
50
0
-30
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
0
Revenues (` cr)
y/y change (%)
FY10
FY11
2HFY15
Source: Company, Angel Research
Source: Company, Angel Research
Higher Utilization to drive FY2015-17E sales
Increase in capacity utilization levels across the Cranes (from 33% in FY2014 to
47% in FY2017E) and MH and CE segments (from 49% in FY2014 to 53% in
FY2017E) should help ACE report a decent top-line growth. This coupled with
realization growth across all 3 segments should help ACE report an 18.8% top-line
CAGR over FY2015-17E to `838.5cr.
Cost rationalization, weak RM prices to aid Margin expansion
Hit by infra capex cycle slowdown, ACE in the last few quarters initiated cost cutting
measures. Till a few quarters back, ~90% of Forklift manufacturing was done
using imported inputs, which has now been brought down to ~40%, thus
indicating that ~60% of Forklift manufacture is now localized. The Management
highlighted on attaining scale; it would allow further localization, which in turn
could further lower import costs. This strategy lowers dependency on import,
thereby alleviating ACE from any forex risk. Imported raw materials in FY2014
accounted for 21% of the reported raw material costs. We expect this ratio to
decline to 19.3% by FY2017E.
Exhibit 21: Raw Material Exp. & RM as % of sales
Exhibit 22: Raw Mat. Exp. split - Domestic & Imports (%)
800
84.0
120
81.8
700
78.5
82.0
100
80.3
80.0
80.0
600
79.5
80.0
80
500
76.9
78.0
400
60
75.3
75.0
76.0
300
40
74.0
200
20
100
72.0
0
70.0
0
FY09
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
FY09
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
Raw Material Exp.
Raw Material as % of Sales
Domestic Raw Material Exp.
Imported Raw Material Exp.
Source: Company, Angel Research
Source: Company, Angel Research
March 18, 2015
13
Initiating coverage | Action Construction Equipment
Till now, ACE has been procuring engines for all of its business segments from
companies like Simpson, Mahindra Navstar, and Kirloskar, among others. In order
to further cut down costs, ACE backed by its 80-90-member R&D team, has started
making in-house engines for its tractors. By January 2015-end, ACE got in place a
Central Pollution Control Board (CPCB) clearance for manufacturing tractor
engines. The Management expects to save ~`15,000 per tractor by using in-house
developed engines. ACE is also working on engines for its other products, ie Motor
Grader, Wheel Loader, Mini Compactor, Cranes, and other CEs. The Management
highlighted that if the company tastes success with the in-house engines currently
used in tractors, then it could extrapolate the use of in-house engines across other
products as well. We have not modeled the same into our estimates.
Exhibit 23: Engines cost (` cr) & as % of Raw Mat. Exp.
Exhibit 24: Engine cost & As % of Raw Material Exp.
80.0
14.0
100,000
16
12.1
12.3
14.2
11.9
5.6
3.5
11.2
10.7
90,000
9.1
70.0
12.0
14
80,000
9.5
60.0
12
10.0
70,000
50.0
7.3
10
60,000
8.0
40.0
50,000
8
6.0
30.0
40,000
6
4.0
30,000
20.0
4
20,000
10.0
2.0
2
10,000
0.0
0.0
0
0
FY09
FY10
FY11
FY12
FY13
FY14
FY09
FY10
FY11
FY12
FY13
FY14
Engine Cost
As % of Raw Material Exp.
Blended Engine Cost
yoy change
Source: Company, Angel Research
Source: Company, Angel Research
Mild Steel is a major raw material (accounting for 25-35% of the total raw material
cost) item used for manufacturing all types of equipments. Our Metals sector
analyst is of the view that domestic steel prices are likely to be under pressure over
FY2016-17E. This could result in cost savings for the company and in turn
contribute to our margin expansion assumption.
Already, results of some of the floor level cost cutting initiatives are evident, as
operating expenses in the last 12 months declined 10.9% yoy in comparison to just
2.0% yoy decline in sales. We are of the view that demand recovery should support
our margin expansion assumption.
Exhibit 25: Standalone EBITDA & EBITDA Margin
Exhibit 26: Standalone PAT & PAT Margin
80
9.4
10.0
45
7.0
8.6
5.9
8.2
9.0
4.6
70
40
5.5
6.0
6.0
8.0
35
60
7.0
5.0
30
3.2
50
6.0
4.7
25
4.0
4.3
40
3.9
5.0
20
3.0
3.0
4.0
30
15
1.5
3.0
2.0
20
10
1.0
0.9
2.0
0.7
1.0
10
5
1.0
0
0.0
0
0.0
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
EBITDA (` cr)
EBITDA Margin (%)
PAT (` cr)
PAT Margin (%)
Source: Company, Angel Research
Source: Company, Angel Research
March 18, 2015
14
Initiating coverage | Action Construction Equipment
Operating leverage to trickle down to PAT level
Considering (1) benefits of cost cutting measures initiated earlier, (2) higher
emphasis on localization of Forklift manufacture, (3) lower Mild Steel prices
assumption; when coupled with demand recovery suggest that ACE is poised for a
sharp 522bp EBITDA margin expansion over FY2015-17E to 8.2%. We expect the
operating leverage to result in a strong 97.2% EBITDA CAGR over FY2015-17 to
`68.7cr. Notably, we have not modeled any savings resulting from ACE pursuing
in-house engines manufacturing.
With no capex lined-up (except maintenance capex), and ACE expected to
generate `87cr of cash flow from operations during FY2015-17E, we expect ACE
to reduce its debt partially. Accordingly, we expect debt and interest expenses to
decline from FY2014 levels. For 9MFY2015 ACE reported a 36.3% yoy decline in
depreciation expenses to `7.2cr, as (1) the depreciation policy was changed to
meet amended Companies Act requirements and (2) the company sold one of its
major assets. However, we have assumed aggressive depreciation numbers for
FY2016 and FY2017 at `13cr and `14cr, respectively. Sale of the major asset led
ACE report `6.5cr of profit from sale of asset in 3QFY2015 (of the reported other
income of `7.5cr). As a result, Other Income numbers for FY2015 will look higher
at ~`11cr. We have assumed `5cr and `4cr of other income for FY2016E and
FY2017E. ACE is expected to be subjected to an effective tax rate of 22-23% for
FY2015-17E, on account of 200% deduction on their approved R&D centre. We
have assumed a 23% effective tax rate for FY2015-17E.
On the whole, strong EBITDA growth coupled with (1) decline in interest expenses,
and (2) lower effective tax rate assumption of 23%, translate to an 170.0% PAT
CAGR over FY2015-17 to `38.3cr.
Well positioned to move to the next growth level
ACE last pursued capacity expansion in FY2011-12. With slowdown in the infra
capex cycle; Cranes, CE and MH division plants have been running at sub-50%
capacity utilization levels. Given the smaller base, and presence only in lower
engine capacity tractors, the Agri-division (mainly led by tractors) has been
operating at 70% capacity levels. The Management highlighted that it does not
need to pursue any major capex until their revenues cross `1,200cr. With a revival
on the cards, expected improvement in utilization levels, and with minimal
requirement for incremental capital investments, we see ACE well positioned to
scale its business quickly.
Exhibit 27: Cash flow from Operations (` cr)
Exhibit 28: RoE & RoCE
45
25
40
20
35
30
15
25
10
20
15
5
10
5
0
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
0
FY12
FY13
FY14
FY15E
FY16E
FY17E
RoE (%)
RoCE (%)
Source: Company, Angel Research
Source: Company, Angel Research
March 18, 2015
15
Initiating coverage | Action Construction Equipment
We expect ACE to generate `87cr of cash flow from operations during FY2015-
17E, which could be used to partly repay debt and partly re-invest back into the
business. In-line with the strong growth in profitability and improved cash flow
generating potential, the RoEs should improve from 1.7% in FY2015E to 11.3% in
FY2017E.
D/E ratio to decline
Despite the severe slowdown in CE cycle, after ACE having pursued its last round
of capex in FY2011-12, ACE has been able to maintain its D/E ratio within comfort
levels.
ACE’s D/E ratio stands at 0.4x and its business model has the potential to generate
over `87cr of cash flow from operations over FY2015-17E. Hence, we are
comforted about the company’s future growth prospects, which would come with
minimal capital requirement.
Exhibit 29: Debt (` cr) and D/E ratio (x)
Exhibit 30: CFO & CFI (` cr)
160
0.5x
0.6x
60
0.5x
0.5x
140
40
0.5x
0.4x
120
0.3x
0.3x
20
0.4x
100
0.3x
0
80
0.3x
FY12
FY13
FY14
FY15E
FY16E
FY17E
0.2x
(20)
60
(5)
(13)
0.2x
(20)
(6)
40
(40)
0.1x
(45)
20
(60)
0
0.0x
(80)
(73)
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
Debt (` cr)
D/E ratio (x)
Cash flow from Operations (` cr)
Cash flow from Investing (` cr)
Source: Company, Angel Research
Source: Company, Angel Research
With uptick in the infra-capex cycle, we expect the working capital cycle days to
decline from 69 days in FY2014 to 51 days in FY2017E. This could be on
expectation of lower debtor as well as inventory days. A squeeze in working capital
days and strong profitability growth should help ACE report `87cr of cash flow
from operations during FY2015-17E. We expect ACE to deploy cash flow
generated from operations towards (1) maintenance capex of `20cr in FY2016
and `21cr in FY2017, and (2) towards debt repayment of `17cr during FY2015-
17E. Accordingly, we expect the D/E ratio to slightly decline to 0.3x by FY2017E.
Risks to Our Estimates
Any further delays in infra capex cycle recovery from here on could be a big
risk to our estimates.
Loss of market share vs. our assumption of holding market share could be a
risk to our assumptions.
Any sharp appreciation in the Rupee (INR) could make CE imports lucrative,
thereby increasing competition, which again could be a threat to our
estimates.
Any increase in raw material prices from here on would be a risk to our
margin expansion assumption and our estimates.
March 18, 2015
16
Initiating coverage | Action Construction Equipment
Valuation
At the current market price of `42/share, ACE is trading at FY2016E and FY2017E
P/E multiple of 41.1x and 10.9x, respectively. Historically, since the time of listing
(January-2007), ACE’s stock has traded at a 1-year forward P/E multiple of 24.3x.
The earnings growth of the company has been volatile and the street has always
built higher earnings growth expectation from ACE. This has led ACE’s stock to
trade at higher valuations.
Exhibit 31: 1-year forward P/E band
Exhibit 32: 1-year forward P/E (x)
250
60
50
200
40
150
30
100
20
50
10
0
0
Price
10.0x
20.0x
30.0x
40.0x
1-yr Fwd PE (x)
Avg. PE
Source: Company, Angel Research
Source: Company, Angel Research
Given that ACE is more of a turnaround story, we did a check to assess whether
the assigned target P/E multiple justifies the target price. ACE’s stock is alternatively
trading at FY2016E and FY2017E EV/sales multiple of 0.8x and 0.6x, respectively. We
assign a multiple of 0.75x to our target FY2017E EV/sales to arrive at a FY2017E based
price target of `54/share. This translates into FY2017E based implied P/E multiple of 14.0x.
Exhibit 33: 1-year forward EV/Sales band
Exhibit 34: 1-year forward EV/Sales (x)
140
3.0
120
2.5
100
2.0
80
1.5
60
1.0
40
20
0.5
0
0.0
1-yr Fwd EV/Sales
Avg. EV/Sales
Price
0.5x
0.7x
0.9x
1.1x
Source: Angel Research
Source: Angel Research
We are optimistic that ACE would be able to maintain its numero uno position in
the domestic Pick and Carry cranes business. This, when coupled with a wide
range of product offerings, wide pan-India distribution network, along with their
recent cost cutting initiatives, comforts us. We estimate ACE to report an 18.8%
and 170.0% top-line and bottom-line CAGR, respectively, during FY2015-17E.
Accordingly, we expect the RoE to improve from 1.3% in FY2014 to 11.3% in
FY2017E. At the backdrop of sharp growth in profitability and RoE expansion, we
assign 14.0x P/E multiple to our FY2017E EPS estimate of `3.9/share to arrive at a
price target of `54. Given the 28.4% upside in the stock from the current levels, we
initiate coverage on the stock with a BUY rating.
March 18, 2015
17
Initiating coverage | Action Construction Equipment
Profit and Loss Statement
Y/E March (` cr)
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
Net Sales
694
856
668
615
594
660
839
% Chg
59.8
23.4
(21.9)
(7.9)
(3.3)
11.0
27.1
Total Expenditure
634
804
639
591
577
629
770
Cost of Raw Mat. Consumed
476
667
530
491
475
522
656
Purchase of Stock-in-trade
47
33
5
1
2
2
3
Employee benefits Expense
33
45
49
46
48
52
58
Other Expenses
79
59
56
52
52
53
53
EBITDA
59
52
29
24
18
31
69
% Chg
46.2
(13.1)
(43.9)
(16.6)
(26.8)
74.7
122.6
EBIDTA %
8.6
6.0
4.3
3.9
3.0
4.7
8.2
Depreciation
7
11
14
15
10
13
14
EBIT
52
40
15
9
8
18
54
% Chg
65.9
(23.2)
(61.9)
(42.2)
(12.2)
129.7
204.2
Interest and Fin. Charges
4
7
10
10
12
10
8
Other Income
5
5
5
7
11
5
4
PBT
54
37
10
5
7
13
50
Tax
14
10
4
1
2
3
11
% of PBT
25.3
26.4
37.3
21.4
23.0
23.0
23.0
PAT before Exceptional item
41
28
6
4
5
10
38
Exceptional item
0
0
0
0
0
0
0
PAT
41
28
6
4
5
10
38
% Chg
69.5
(32.1)
(76.6)
(37.6)
30.4
93.5
276.8
PAT %
5.9
3.2
1.0
0.7
0.9
1.5
4.6
Basic EPS
4.4
2.8
0.7
0.4
0.5
1.0
3.9
Diluted EPS
4.4
2.8
0.7
0.4
0.5
1.0
3.9
% Chg
69.5
(32.1)
(76.6)
(37.6)
30.4
93.5
276.8
March 18, 2015
18
Initiating coverage | Action Construction Equipment
Balance Sheet
Y/E March (` cr)
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
Sources of Funds
Equity Capital
19
20
20
20
20
20
20
Reserves Total
249
278
284
288
292
300
335
Networth
267
298
303
308
312
319
355
Total Debt
72
141
149
141
121
107
104
Other Long-term Liabilities
3
3
4
4
5
5
5
Deferred Tax Liability
1
3
5
5
5
5
5
Total Liabilities
343
445
461
458
443
436
469
Application of Funds
Gross Block
174
260
297
333
338
358
379
Accumulated Depreciation
22
33
46
65
75
88
102
Net Block
152
227
251
268
263
270
277
Capital WIP
3
5
10
2
0
0
0
Investments
8
10
16
15
19
7
1
Current Assets
Inventories
121
136
143
161
148
161
200
Sundry Debtors
83
86
83
68
65
69
84
Cash and Bank Balance
24
20
17
14
13
4
3
Loans, Advances & Deposits
46
41
29
29
32
36
46
Current Liabilities
153
147
160
163
164
178
209
Net Current Assets
121
135
112
108
93
92
124
Other Assets
58
67
72
65
68
68
68
Total Assets
343
445
461
458
443
436
469
March 18, 2015
19
Initiating coverage | Action Construction Equipment
Cash Flow Statement
Y/E March (` cr)
FY11
FY12
FY13
FY14
FY15E
FY16E FY17E
Profit before tax
54
38
11
5
7
13
50
Depreciation
7
11
14
15
10
13
14
Change in Working Capital
(52)
(25)
12
7
11
(10)
(34)
Interest & Financial Charges
4
7
10
10
12
10
8
Direct taxes paid
(12)
(15)
(5)
(1)
(2)
(3)
(11)
Cash Flow from Operations
(0)
16
42
37
38
23
26
(Inc)/ Dec in Fixed Assets
(30)
(73)
(42)
(25)
(6)
(20)
(22)
(Inc)/ Dec in Inv. & Int. reced.
(2)
(0)
(3)
5
0
15
8
Cash Flow from Investing
(32)
(73)
(45)
(20)
(6)
(5)
(13)
Issue/ (Buy Back) of Equity
21
0
0
0
0
0
0
Inc./ (Dec.) in Loans
41
72
11
(7)
(20)
(14)
(3)
Dividend Paid (Incl. Tax)
(21)
(11)
(2)
(2)
(2)
(3)
(3)
Interest Expenses
(4)
(7)
(10)
(10)
(12)
(10)
(8)
Cash Flow from Financing
37
54
(2)
(19)
(34)
(26)
(14)
Inc./(Dec.) in Cash
5
(3)
(4)
(2)
(2)
(8)
(1)
Opening Cash balances
19
24
21
17
15
13
4
Closing Cash balances
24
21
17
15
13
4
3
Key Ratios
Y/E March
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
Valuation Ratio (x)
P/E (on FDEPS)
9.6
15.1
64.7
103.7
79.5
41.1
10.9
P/CEPS
8.2
10.7
20.8
21.6
27.6
18.0
7.9
Dividend yield (%)
5.5
0.6
0.6
0.3
0.4
0.6
0.6
EV/Sales
0.6
0.6
0.8
0.9
0.9
0.8
0.6
EV/EBITDA
7.3
10.2
18.4
22.0
28.7
16.6
7.5
EV / Total Assets
1.3
1.2
1.2
1.2
1.1
1.2
1.1
Per Share Data (`)
EPS (Basic)
4.4
2.8
0.7
0.4
0.5
1.0
3.9
EPS (fully diluted)
4.4
2.8
0.7
0.4
0.5
1.0
3.9
Cash EPS
5.1
3.9
2.0
1.9
1.5
2.3
5.3
DPS
2.3
0.2
0.2
0.1
0.2
0.3
0.3
Book Value
29
30
31
31
32
32
36
Returns (%)
RoCE (Pre-tax)
21.4
11.5
4.7
3.4
4.2
5.3
13.1
Angel RoIC (Pre-tax)
17.1
10.2
4.6
3.5
4.3
5.3
12.6
RoE
18.5
9.8
2.1
1.3
1.7
3.2
11.3
Turnover ratios (x)
Asset Turnover (Gross Block) (x)
5.3
3.9
2.4
1.9
1.8
1.9
2.3
Inventory / Sales (days)
47
55
76
90
95
85
79
Receivables (days)
35
36
46
45
41
37
33
Payables (days)
49
42
50
66
71
66
61
WC days
33
49
73
69
65
56
51
Leverage Ratios (x)
D/E ratio (x)
0.3
0.5
0.5
0.5
0.4
0.3
0.3
Interest Coverage Ratio (x)
16.4
6.1
2.0
1.5
1.6
2.4
7.0
March 18, 2015
20
Initiating coverage | Action Construction Equipment
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and MCX Stock Exchange Limited. It is also registered as a Depository Participant with CDSL and
Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel has received in-principal approval
from SEBI for registering as a Research Entity in terms of SEBI (Research Analyst) Regulations, 2014. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its associates
including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by
Analyst. Angel or its associates/analyst has not received any compensation / managed or co-managed public offering of securities of
the company covered by Analyst during the past twelve months. Angel/analyst has not served as an officer, director or employee of
company covered by Analyst and has not been engaged in market making activity of the company covered by Analyst.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from
or in connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also,
please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt.
Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Action Construction Equipment
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15
March 18, 2015
21