Action construction equipment ltd

Earnings Call highlights
• Revenue guidance: Total 15-20% growth for FY24 with a possible upward revision in coming quarters. Crane, material handling and agri equipment segment growth is expected at 15-20% while construction equipment segment growth is expected at 30-35%
• EBITDA margins for FY24 are expected to be up 100-150 bps YoY considering the company’s focus on cost efficiencies, higher operating leverage and better product mix
• Demand has been healthy in the cranes and construction equipment segments led by higher capex allocation for roads, railways and urban infra
• Capacity utilisation has reached peak levels in the cranes and construction equipment segments
• The company is growing better than the industry in cranes and construction equipment as its volume growth was at ~24% YoY and ~38% YoY in cranes and construction equipment segments, respectively
• Volumes in agriculture equipment segment declined in FY23 as the industry is migrating from BS-III norms to BS-IV norms. There was an inventory level of only three to five weeks in agriculture equipment. However, volumes are expected to improve in FY24 led by better crop prices and expected normal monsoon
• Exports revenue share was at 6.7% of sales in FY23 and is expected to increase to 9-10% in FY24. The medium term target of the company in exports is to reach 15-20% of sales
• Capex for new capacity for manufacturing large cranes is | 80-90 crore. The capacity is expected to commence production from Q2FY24
• Potential turnover post commissioning of new capacity is | 3800-4000 crore
• Though there was a rise in imports of larger cranes from China, the company is setting up new capacity as demand has been robust
• The company’s focus is on increasing its market share in larger cranes like crawler & truck cranes. Moreover, the focus remains on maintaining its leadership position in pick & carry cranes
• Material handling equipment segment is growing at 10-15% but is expected to increase in the coming period led by industrial capex
• Regarding inorganic growth, the acquisitions that the company was looking for, have been kept on hold due to valuation concerns. However, there are three to four more opportunities, which the company is exploring
• The defence segment is contributing 2.5-3% to total sales at present. The company is aiming to increase this share to 8-10% in the coming period