Action Construction Equipment: PAT growth of 90% & revenue growth of 36% for FY24 at a PE of 53
Triple FY24 revenue by FY29 at revenue CAGR of 29%. Revenue CAGR of 23% for FY24-27. Every Rs 500 cr revenue growth to deliver EBITDA margin expansion of 125-150 basis points
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. FY21-24: PAT CAGR of 60% & Revenue CAGR of 34%
3. FY23: PAT up 65% & Revenue up 34%
4. Strong 9M-24: PAT up 83% & Revenue up 35% YoY
5. Strong Q4-24: PAT up 109% & Revenue up 39% YoY
PAT up 12% & Revenue up 10% QoQ
6. Strong FY24: PAT up 90% & Revenue up 36% YoY
7. Business metrics: Strong & improving return ratios
8. Strong outlook: Revenue CAGR of 23% for FY24-27
i. FY24: 32% revenue growth with 15.5%+ EBITDA
On the whole, we are looking at a 15% to 20% growth in our top line for FY '25 with further possibility of margin expansion. We hope we are in a position to revise these projections at the end of second quarter, which will predominantly depend on the results of the General Elections, policy continuity and the onset and intensity of the monsoons.
ii. FY25: EBITDA margins at 16%+
I think the 16% plus scenario is hopefully here to stay. And with our revenue further increasing in this year there is only scope of further improving our margins.
iii. FY24-FY27: Revenue CAGR of 23%
FY27 revenue of Rs 5,500 cr from Rs 2990.9 cr in FY24 implies a FY24-27 CAGR of 23%.
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.
iv. FY24-FY29: Triple FY24 revenue by FY29. Revenue CAGR of 25%
9. PAT growth of 90% & Revenue growth of 36% in FY24 at a PE of 53
10. So Wait and Watch
If I hold the stock then one may continue holding on to ACE
Coverage of ACE was initiated after Q3-24 results. The investment thesis has not changed after a strong FY24 even though the management the guidance of FY25 is conservative while the outlook till FY27 & FY29 looks unchanged.
Going forward, in the first few months of FY '25, we expect muted growth due to ongoing General Election in the country, followed by monsoon season.
Management is indicating for a slower Q1-25. However, growth is expecting to pick up from Q3-25. ACE is guiding for Rs 1,000 cr quarterly revenue from Q3-25 up from the Rs 857 cr quarterly revenue in Q4-24
Demand for the April and May maybe postponed to the second quarter.
But hopefully everything going well, Q3 we'll be able to touch the INR1,000 crores?
ACE is in the middle of a strong run and has delivered sequential QoQ growth in top-line & bottom line for the last 6 quarters starting Q3-23.
The roadmap of 23% revenue CAGR for FY24-27 provides a reason to continue with ACE. With bottom-line growth to be higher than the top-line growth one can see opportunity over the longer term.
11. Join the ride
If I am looking to enter ACE then
ACE has delivered PAT growth of 90% and revenue growth of 36% in FY24 at a PE of 53 which makes the valuations fully valued in the short term.
With an outlook of revenue CAGR of 23% for FY24-27 the valuations of ACE at PE of 53 looks reasonable from a long term perspective.
With an outlook of revenue CAGR of 25% for FY24-29 the valuations of ACE at PE of 53 looks reasonable from a longer term perspective.
As ACE grows to a Rs 5,500 cr business the PAT growth will be higher than the revenue growth of 23% as margin expansion is expected with every Rs 500 cr of incremental revenue. With bottom line growing faster than the top-line growth of 23% for FY24-27 the valuations of ACE at PE of 53 provide an opportunity from a long term perspective.
we have been saying that with the increased capacity utilization, every INR500-odd crores of revenue at around 75 basis points to our bottom line 75 to 100. Owing to that, we can see incremental EBITDA levels of around 125 to 150 basis points because of increased capacity utilizations.
One may not see opportunities in ACE in the short-term at a PE of 53. Additionally one can see a reaction in case of a weak quarter given that the PE is 53. One may look at ACE as a longer term opportunity.
Previous Coverage of ACE
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