Action Construction Equipment aims at double-digit growth in revenue and sustained EBIDTA margin in low double digits in FY22. The BSE-listed company hopes strong macroeconomic factors and prediction of a good monsoon augur well for robust demand amid concerns over the disruptions of second Covid wave this fiscal.

The company says this time the uncertainty would be short-lived or would not be there in more places. Since new cases have dropped significantly as compared to a month ago, things have started to look better in Northern and Western regions. Enquiry levels and the conversion levels started to increase, all of a sudden, in the last couple of weeks.

Action Construction Equipment sees robust demand across products on Govt’s infra push

“Looking at the resilience and the spirit in our country from the experiences after the first wave last year, we feel that business should start to normalise from the second quarter onwards and we are looking forward to at least a 10 per cent growth in business revenue in the current year with sustained EBIDTA margins between 11 and 12 per cent,” said Sorab Agarwal, Executive Director, Action Construction.

Boost from crane segment

The company is expecting a growth of 10-15 per cent in the crane segment, where it is a market leader, for the current year, and a 25 per cent growth across other three business segments — construction equipment, material handling and agri equipment with a hope that economic activity will pick up from the second quarter of this fiscal.

Due to the impact of the second wave, the company is expecting 40-45 per cent lower volumes during the current quarter as compared to the March 2021 quarter.

Action Construction Equipment (₹152.8): Buy

Agarwal also said receivables would start to improve from the second quarter, while supply chain issues and working capital position are also expected to improve from next quarter.

He said the company could have grown at 30-35 per cent instead of 19 per cent quarter on quarter basis in construction equipment had one of its key suppliers not faced constraints in its supply chain. Meanwhile, the company has also tweaked its fabrication processes by adopting plasma cutting and associate processes instead of depending on oxygen heating to keep the supply chain intact for the emerging growth curve.

Action Construction Equipment for stronger thrust on agri, defence and export business

Optimistic outlook

The company sees a huge potential for growth in the construction equipment segment over the next 3-4 years. It is unlikely to incur any major capex this fiscal as it has adequate capacity to achieve revenues of about ₹2500 crore. (Its revenue stood at ₹1,227 crore in FY21).

The company remains optimistic about the medium to long-term growth prospects and believes that its building blocks are firmly in place.

“In the last two years, we have taken concrete actions towards strengthening the business core around processes, controls, and operations. This, along with our strong focus on execution, has enabled us to continue on the path of sustainable growth in all the four segments where we operate, leading to expansion in the topline, bottom line and margins of the company,” said Agarwal.

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