ACENSENovember 15, 2022

Action Construction Equipment Limited

6,388words
127turns
12analyst exchanges
4executives
Management on call
Amar Kedia
AMBIT CAPITAL
Sorab Agarwal
EXECUTIVE DIRECTOR – ACTION CONSTRUCTION EQUIPMENT LIMITED
Vyom Agarwal
SENIOR VICE PRESIDENT – ACTION CONSTRUCTION EQUIPMENT LIMITED
Rajan Luthra
CHIEF FINANCIAL OFFICER – ACTION CONSTRUCTION EQUIPMENT LIMITED
Key numbers — 40 extracted
36%
ou on the standalone and financial performance of the Q2-FY2023, the operational revenues grew by 36% on a year-on-year basis to approximately Rs.491 Crores with an EBITDA margin of 10.7%. The EBIT
Rs.491 Crore
e of the Q2-FY2023, the operational revenues grew by 36% on a year-on-year basis to approximately Rs.491 Crores with an EBITDA margin of 10.7%. The EBITDA during the quarter increased to Rs.52.56 Crores at th
10.7%
enues grew by 36% on a year-on-year basis to approximately Rs.491 Crores with an EBITDA margin of 10.7%. The EBITDA during the quarter increased to Rs.52.56 Crores at the rate of 10.7% in comparison to
Rs.52.56 Crore
ximately Rs.491 Crores with an EBITDA margin of 10.7%. The EBITDA during the quarter increased to Rs.52.56 Crores at the rate of 10.7% in comparison to Rs.36.33 Crores at 10.1% on a yearly basis, which is a gro
Rs.36.33 Crore
he EBITDA during the quarter increased to Rs.52.56 Crores at the rate of 10.7% in comparison to Rs.36.33 Crores at 10.1% on a yearly basis, which is a growth of around 45%. The PBT grew by 56% and PAT grew by
10.1%
the quarter increased to Rs.52.56 Crores at the rate of 10.7% in comparison to Rs.36.33 Crores at 10.1% on a yearly basis, which is a growth of around 45%. The PBT grew by 56% and PAT grew by 55% year-
45%
of 10.7% in comparison to Rs.36.33 Crores at 10.1% on a yearly basis, which is a growth of around 45%. The PBT grew by 56% and PAT grew by 55% year-on-year to Rs.46.55 Crores and Rs.35.66 Crores resp
56%
to Rs.36.33 Crores at 10.1% on a yearly basis, which is a growth of around 45%. The PBT grew by 56% and PAT grew by 55% year-on-year to Rs.46.55 Crores and Rs.35.66 Crores respectively. While the P
55%
at 10.1% on a yearly basis, which is a growth of around 45%. The PBT grew by 56% and PAT grew by 55% year-on-year to Rs.46.55 Crores and Rs.35.66 Crores respectively. While the PBT and PAT margins s
Rs.46.55 Crore
y basis, which is a growth of around 45%. The PBT grew by 56% and PAT grew by 55% year-on-year to Rs.46.55 Crores and Rs.35.66 Crores respectively. While the PBT and PAT margins stood at 9.5% and 7.3%. On a seq
Rs.35.66 Crore
growth of around 45%. The PBT grew by 56% and PAT grew by 55% year-on-year to Rs.46.55 Crores and Rs.35.66 Crores respectively. While the PBT and PAT margins stood at 9.5% and 7.3%. On a sequential basis, the o
9.5%
-year to Rs.46.55 Crores and Rs.35.66 Crores respectively. While the PBT and PAT margins stood at 9.5% and 7.3%. On a sequential basis, the operational revenue was more or less slack however EBITDA gr
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Guidance — 18 items
Sorab Agarwal
opening
“We believe that going forward the demand scenario should remain strong aided by government unwavering focus on urban infra and rural development.”
Sorab Agarwal
opening
“Further if the commodities were to remain where they are today we expect the prices versus cost cap to narrow further leading to a sequential improvement in gross margins in the December quarter.”
Sorab Agarwal
opening
“As we aspire to grow in the bigger cranes market with infrastructure growth in the country.”
Sorab Agarwal
opening
“Further, we would like to revise our earlier guidance and expect a growth of 25% plus in crane segment for the current year and 30% to 35% in construction equipment segment.”
Chinmay Kabra
qa
“Okay, so on this bigger model you said this facility that we are putting for the bigger cranes how much capex will be required for this?”
Sorab Agarwal
qa
“and we are increasing our capacity by around four times so instead of 40 to 50 cranes we will be capable of making 180 to 200 cranes once this facility becomes functional and capex envisage is about Rs.30 Crores to Rs.35 Crores for this activity leaving out cost of land because we already have land available with us and this can eventually create at least Rs.300 Crores to Rs.400 Crores revenue size, which can easily be expanded to Rs.500 Crores to Rs.600 Crores eventually from this facility.”
Himanshu Upadhyay
qa
“The growth what we are expecting do we expect it to cross the last years volume?”
Sorab Agarwal
qa
“The breakup of 60% in-house and out outside will be slightly typical, but I would say approximately 50:50 and what is the second part of your question?”
Suhrid Deorah
qa
“The guidance that you gave just clarify you said it is 25% growth on cranes, 30% plus on construction equipment and 15% each on the last two segments?”
Sorab Agarwal
qa
“I would say that on account of pricing it will be 8% to 10% and the balance would be more with respect to numbers and may be a slight change in product mix here and there.”
Risks & concerns — 5 flagged
On the operational side, while there has been an easing of commodity prices and supply chain pressures, inflation still continues to be a significant challenge for the industry.
— Sorab Agarwal
Except for mild steel, which has seen some meaningful corrections from its see, most of the other commodities remain volatile and elevated so in summary while the operating environment has improved, it has remained challenging.
— Sorab Agarwal
Yes on the margin front, there is a slight pressure because when it was quoted and conceived between then and now definitely commodity inflation pressure has played out, so the margins are a little squeezed this quarter, but on the whole we do not see any commercial problems with this particular order.
— Sorab Agarwal
Yes there has been pricing pressure because of commodity but now things have started cooling off so hopefully in Q3 as well as in Q4, which are generally are bigger quarters so the pricing pressure will also be let off a little of operating leverage will also come into play and here again we are looking at least 15% growth in our topline coupled with normalizing our EBITDA margin to earlier levels.
— Sorab Agarwal
You have answered my question earlier as well, but just wanted to know on the inorganic provision which we were planning, as you mentioned last time we were looking to close this by year end, but as you told that it may take some time so are you looking to get raise additional funds for that or is valuation challenge in this and secondly on the African expansion, can you just give color on the same?
— Kushal Churi
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Q&A — 12 exchanges
Q
Good evening. I have only two questions. First being the missile system or the multipurpose tractor for defense or the army, which you have recently started developing does the economics work over there? Why that question came because most of us do not like when we supply directly to the government as there has always been an issue for the payment clearance, so can you give some picture on the B2C contract what you have been getting recently?
Sorab Agarwal
I do not think we have any issues on the payment front. It is directly from the ministry and things as of now going smooth. We already started executing that order. Yes on the margin front, there is a slight pressure because when it was quoted and conceived between then and now definitely commodity inflation pressure has played out, so the margins are a little squeezed this quarter, but on the whole we do not see any commercial problems with this particular order. Okay great. The other one is as we are supplying the defense equipments through one of the companies like may be Tata or L&T, so in
Q
What has been the crane market? How has it grown over the Y-o-Y basis this quarter?
Sorab Agarwal
You are talking about the crane market. Yes? It is evident in our results. We have been able to on a quarterly basis and year-on-year we have grown by about 47% to 48%. On quarter-on-quarter, it has been flattish because generally Q2 is pretty subdued because of monsoons and this time the monsoons were a little extended again, so quarter-on-quarter it was flattish otherwise more or less we have been able to grow around 47% to 48% year-on-year and I can give you an idea how we have grown 47% to 48%. About 28% to 30% is because of volumes. Approximately about 10% odd due to price increase and an
Q
Congrats on a good set of numbers. I have a question on this material handling. The volume has degrown quite significantly. We have been able to raise prices and maintain the revenue and the profitability, but what is the outlook from here on? The commodity prices have gone down what we understand? Can the focus will again move back to getting volumes for both material handling and agriculture equipment or you think you will like to keep the prices as what they are for these two segments?
Sorab Agarwal
In the material handling segment, our revenues on year-on-year as well as on quarter-on-quarter has gone down by around 5% to 6%, and it is just a temporary phase. The market was definitely a little subsided on account of our order booking, but things have again started looking up and this facts was further elevated because of overall our pricing increase and we also did have a little bit of some production issues with related to the quantities we wanted to produce, but on the whole things on track and hopefully by the end of the year we should again see a 15% growth in this segment as well an
Q
Good evening. My question is with respect to the cranes business, so what is the product wise breakup in volume terms?
Sorab Agarwal
Product wise breakup in volume terms, you want it for the quarter or the first half. For the first half and quarter also. You want it on quarter or half yearly basis. Quarter Sir. 9 pick and carry crane, mobile tower crane 25, and fixed tower crane 65 and crawler crane, we have done 20 numbers. Crawler cranes also we have done about 16 numbers. Okay and for H1 also could you give the number? H1 for the current year full this year we have done pick and carry crane 2787, tower cranes 42, fixed tower crane 141, crawler cranes 18 number, and truck mounted cranes 38 numbers. Okay and the second que
Q
Good evening. My understanding from the previous quarter was that a lot of buyers were postponing purchase decisions waiting for the commodity prices to cool off and therefore equipment prices to cool off and that sort of ties in with the fact that volumes have been flat, so now that you said prices have gone up, which has lead to revenue growth but this is not the case that for these buyers to seal their purchase decisions will have to start upping prices?
Sorab Agarwal
Buying generally on the whole has come back to be very frank with you end of September onwards. Could you repeat that. I missed that. What has come back? The buying has come back and the sentiment has definitely come back and it is generally happening around the festive time. Since that phase seem to be in place and more or less people have come to terms with the fact that things have become expensive and so it is not a problem anymore really. These prices should sustain and then margins will sustain or improve as the volumes grow in the subsequent quarters. I would say that 1% to 1.5% for the
Q
Just wanted to know, working capital has been returned to inventories and rather other financials so any specific reason and what was there in other financial assets?
Sorab Agarwal
Definitely our working capital in quantum as well as number of days is a slightly fixed as compared to end of last financial year. The rate was about Rs.109 Crores and about 39 days and currently it is at about Rs.210 Crores with 56 days. Primarily on account of our inventories which had increased by about Rs.70 Crores to Rs.80 Crores in the last fiscal and it was a conscious decision because we were expecting good sales in the month of October because of festive season and festive season came a little early. Generally it is in November so our inventories go up in October and already become re
Q
Can you give the number of dealers segment wise for the last three years?
Sorab Agarwal
Segment wise is very difficult. I do not think we do not have that data as of now but segment wise number of dealers we can definitely provide you. Just drop a small email. Yes. I will provide her monthly data. For the last three years. I will get it done. Okay thank you.
Q
Congratulations on the great set of numbers. You have answered my question earlier as well, but just wanted to know on the inorganic provision which we were planning, as you mentioned last time we were looking to close this by year end, but as you told that it may take some time so are you looking to get raise additional funds for that or is valuation challenge in this and secondly on the African expansion, can you just give color on the same? That is it from my side thank you.
Sorab Agarwal
With respect to our inorganic growth prospects, we are stuck on valuation with respect to one of the opportunities that we have really explored in quite some time and another one we gave up eventually because we did not see value in that business. Apart from that there is one opportunity for that backward integration, so that thing is happening. Unfortunately that company has currently gone into liquidation, so that process will take its own time. We are going to be an active bidder. I cannot disclose any more than this and with respect to our upcoming venture in Ghana, that seems to be on tra
Q
Thank you for the opportunity and congrats on good set of results. Our guidance of growth of 25% for this year; in H1 we have done around 45% growth, so H2 moves like somewhere around 10% growth; is it because of may be high base of last year or it is just a conservative side that we are guiding on 25% growth?
Sorab Agarwal
See A it is conservative. I will be very frank and B definitely we have to keep in mind that last year Q1 was pretty subdued on account of COVID, so that is also the reason first half you are seeing 45% growth because in this Q1 of FY2021 was pretty subdued because of COVID with the really severe COVID wave was on. That is also a factor. Growth can definitely be much more than 25% and that only time will tell once it happens because we do not want to commit something, which we might not end up with but it seems evident that we shall be able to grow faster. Sure but the buying outlook from the
Q
I just had a question. There is one-time exceptional item of Rs.20 Crores, which is forming part of other income?
Sorab Agarwal
Which was reported last quarter. Which was reported last quarter, yes. if you could just mention? It was somewhere around Rs.19 Crores. Exactly Sir Rs.19.76 Crores? See that was land and building, which was there with us in one year in our subsidiary, which was disposed off, so that was that one-time exception, which was around close to Rs.19 Crores. Alright and another thing, which you just recently brought up the financial asset which is forming part of your balance sheet just wanted to know if you could elaborate in terms of what is the nature of the asset? Luthra Sir this is at same financ
Q
Good evening. I have two more questions to ask. One is you have increased the growth estimates in crane segment from 20% to 25%, so where are you getting these orders from that is number one. Second is that you said you are receiving export orders as well so are these orders from the defense segment only or from the other segments as well?
Sorab Agarwal
The crane orders are all across because cranes are used everywhere in infrastructure, in construction, in real estate and also in manufacturing as well as logistics so crane orders are spread all across and everything is going good as of now and with respect to export orders, we have more to do with tractors as well as some agri and construction equipment so they are from the African continent and also from the Latin American countries, which are going to be executed. Defense segment or in the other segments like crane? They are all nothing to do with defense segments. They are all from genera
Q
Thank you. We have been doing reasonably well in tough times and hopefully going forward the global recession scare does not take off the scheme form Indian economy, but what I hear and understand is that Indian economy is reasonably insulated to these things and we are on track to withstand our revenue by at least about 25% in this year if not more. We are confident it can be more and our EBITDA margins are further in for expansion on account of cooling of commodity prices and further coupled with increase in our revenues so hopefully there are good and better times ahead of us and like we di
Management
Speaking time
Sorab Agarwal
50
Moderator
14
Astha Sundarka
14
Chinmay Kabra
9
Suhrid Deorah
8
Akshay Kothari
7
Himanshu Upadhyay
6
Aman Shah
5
Abhishek
4
Company Speaker
4
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Opening remarks
Amar Kedia
Thanks Renju. Good afternoon everyone. On behalf of Ambit Capital I welcome you all to the 2QFY2023 results conference call for Action Construction Equipment. Representing the company today, we have Mr. Sorab Agarwal, Executive Director, Mr. Vyom Agarwal, Senior Vice President and Mr. Rajan Luthra, CFO of the company. I now invite the management for the opening remarks, following which we will open the floor for Q&A. Over to you.
Sorab Agarwal
Good afternoon everybody and welcome to this earnings conference call for discussing the results for the last quarter and half year ended September 30, 2022. Along with me on today’s earnings call we have our CFO Mr. Rajan Luthra and our Head of Investor Relations Mr. Vyom Agarwal. I hope that all of you have had an opportunity to look at the company’s financial statements and our earnings presentation, which has been circulated and uploaded at the stock exchanges. In the last quarter, we have appointed KPMG as our statutory auditors of the company in place of Ms Brand & Associates who had successfully completed their tenure of five consecutive years and Q2-FY2023 marks KPMG’s first reviewed quarter for the company. To brief you on the standalone and financial performance of the Q2-FY2023, the operational revenues grew by 36% on a year-on-year basis to approximately Rs.491 Crores with an EBITDA margin of 10.7%. The EBITDA during the quarter increased to Rs.52.56 Crores at the rate of 1
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