Action Construction Equipment: PAT growth of 38% & revenue growth of 27% for 9M-24 at a PE of 60
ACE guided for revenue CAGR of 26% for FY23-27. PAT growth expected to be higher than the revenue growth. Operating leverage at every incremental Rs 500 cr revenue to deliver margin expansion
1. World’s largest Pick & Carry Crane Manufacturer
ace-cranes.com | NSE: ACE
The company is the world’s largest Pick & Carry cranes manufacturer with over 63% market share in the Mobile cranes segment in the country and a majority market share of more than 60% in Tower Cranes segment domestically.
2. FY21-23: PAT CAGR of 47% & Revenue CAGR of 33%
3. FY23: PAT up 65% & Revenue up 34%
4. Strong H1-24: PAT up 79% & Revenue up 33% YoY
5. Strong Q3-24: PAT up 90% & Revenue up 38% YoY
PAT up 19% & Revenue up 12% QoQ
6. Strong 9M-24: PAT up 83% & Revenue up 35% YoY
7. Business metrics: Strong & improving return ratios
8. Strong outlook: Revenue CAGR of 26% for FY23-27
i. FY24: 32% revenue growth with 15.5%+ EBITDA
We are expecting at least a 32% revenue growth in the current year with around a 15.5%-plus EBITDA margin on a whole-year basis.
See, overall basis, we should be growing maybe slightly more than 32% in this year, but let's say 32%. Crane would be 30%, construction equipment would be 50% and both metal handling and agri would be 15% to 20%
ii. FY23-FY27: Revenue CAGR of 26%
FY27 revenue of Rs 5,500 cr from Rs 2,200.8 cr in FY23 implies a FY23-27 CAGR of 26%
Keeping FY23 as base from INR 2,200 crores, we really expect to double ourselves by FY26 to INR 4,400 crores and going forward to up to INR 5,500 crores in FY27.
9. PAT growth of 83% & Revenue growth of 35% in 9M-24 at a PE of 60
10. So Wait and Watch
If I hold the stock then one may continue holding on to ACE
Based on 9M-24 performance, ACE looks on track to deliver the strongest revenue & PAT in FY24
ACE is in the middle of a strong run and has delivered sequential QoQ growth in top-line & bottom line for the last 5 quarters starting Q3-23.
The roadmap of 26% revenue growth till FY27 provides a reason to continue with ACE
11. Join the ride
If I am looking to enter ACE then
ACE has delivered PAT growth of 83% and revenue growth of 35% in 9M-24 at a PE of 60 which makes the valuations fairly valued in the short term.
With a growth outlook of 26% till F27 the valuations of ACE at PE of 60 looks reasonable from a long term perspective.
As ACE grows to a Rs 5,500 cr business the PAT growth will be higher than the revenue growth of 26% as margin expansion is expected with every Rs 500 cr of incremental revenue.
So, I feel that with every INR 500 crores-odd of additional revenue our margins still have a scope to expand further.
One may not see opportunities in ACE in the short-term at a PE of 60. Additionally one can see a reaction in case of a weak quarter given that the PE is 60. One may look at ACE as a longer term opportunity.
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