Key highlights from Action Construction Equipment Limited (ACE) Q4 FY24 Earnings Concall
- Financial Performance
- 4Q standalone operational revenue was INR836 crores, up 11% sequentially and up 36.4% YoY.
- EBITDA at INR150 crore, while PBT and PAT were at INR132 crore and INR98 crores respectively.
- EBITDA margin expended to 17.53%, up 131 bp sequentially.
- PAT increased 103% to INR328 crores.
- ROC and ROE upwards of 42% and 30% respectively.
- Segment Performance
- Crane segment grew 76%, revenue INR343 crores, margin 16.3%.
- Truck segment grew 55%, revenue INR387 crores, margin 12.84%.
- Material Handling grew 8.6%, revenue INR184 crores, margin 13.2%.
- IT division grew 12%, revenue INR237 crores.
- Export sales increased 72%, contributing 8.5% of revenue.
- Growth Strategies
- Strategic positioning in infrastructure, manufacturing, logistics, and agri sectors.
- Diversified revenue mix across sectors for counter-cyclical growth.
- Expanded into defense sector, orders for specialized equipment.
- Focus on product improvement, upgrading to meet revised emission norms.
- Capacity Expansion
- Crane division capacity increased 45% to 13,200 units annually.
- Material Handling capacity grew 50% to 27,00 units annually.
- Plans for further modernization and automation to boost capabilities.
- Future Outlook
- Expect 15-20% growth in FY25 for Crane, Truck, and Agri portfolios.
- Construction Equipment segment growth of 30-40%.
- Overall topline growth of 15-20% in FY25, with margin expansion.
- Optimistic about medium to long-term prospects and sustainable growth.
- Targeting to double revenue over next 3 years.
- Aiming for 3x revenue growth over 5-year horizon from current levels.
- Growth Guidance
- Guidance of 15-20% growth for FY25 is conservative.
- Expecting higher demand in H2 due to positive industry factors.
- Pre-buying expected in Q3 ahead of BS5 emission norms from Jan 2025.
- Guidance likely to be revised upwards after Q2, based on election results and monsoon.
- New Product Launches
- Electric crane launch delayed due to pending regulations, now expected in July.
- Aerial work platforms to start deliveries in June after supply chain issues.
- New next-gen crane model expected in current financial year.
- Launching reach stacker (40-45T capacity) for container handling.
- Special all-wheel steering backhoe loader for export markets in Jul-Aug.
- Competitive Positioning
- Expanding capacity for larger cranes (up to 80T) to 400 units/month.
- Expects to double or triple larger crane sales this year, up from 40-50 units.
- Targets 100 plus unit sales for larger cranes to counter Chinese competition.
- Material Handling Business
- Focusing on improving efficiencies in manufacturing, application, and quality.
- Introducing new range of 6-4 ton forklifts from Jan 2025 with upgraded styling and performance.
- Expects faster growth rate, targeting around 20% growth this year.
- Forklift Market Position
- Currently serves up to 14T capacity forklifts in India.
- Premium 20-25% market served by imports like Toyota, Hyundai.
- Plans to target premium segment with upgraded models in addition to regular segment.
- Defense Business Prospects
- Defense contributed 2.5% revenue (Rs 68 cr) in last year.
- Current pending defense orders worth Rs 65 cr.
- Expecting major defense orders of Rs 400-700 cr over next 2-3 months.
- Overall defense revenue expected to exceed 5% target for FY25.
- Acquisition Targets
- Open to organic and inorganic growth in India and overseas.
- Evaluating few targets within India for acquisitions.
- Looking at smaller overseas companies with good products for exports and contract manufacturing.
- Interest Expenditure
- Interest cost increased due to higher borrowing rates by RBI.
- Leveraging the arbitrage between cost of borrowing and vendor discounts.
- Interest expenditure expected to remain in the range of INR8-10 crores going forward.
- Revenue Milestones and Emission Norms
- Q3 appears realistic for achieving INR1000 crore quarterly revenue.
- Q2 also possible if pent-up demand from Q1 gets unleashed.
- Typically 40-45% revenue in H1 and 60-65% in H2.
- Plans to alert customers about 12-15% cost impact from Jan 2025 for BS5 transition.
- Expects pre-buying in Q3 before price hikes, supporting demand.
- Successfully managed such transitions in the past.
- Margin Expansion Drivers
- Better pricing environment due to strong demand.
- Favorable product mix shift towards higher tonnage cranes.
- Some benefit from easing commodity prices.
- Pricing power has improved, ~2-3% price hike in January.
- Capacity Utilization Levels
- Crane capacity at 75% utilization.
- Plans to increase truck capacity from 13,200 to 18,000 units by Q3.
- Material Handling at 1800 units capacity, did 1500-1600 units last year.
- Construction equipment at 60% utilization, can expand 50% quickly.
- Export Strategy
- Current white-labeling for US and Turkish companies.
- Inorganic route considered for better pricing/perception in export markets.
- Evaluating targets for about Rs 100 cr acquisition to boost export presence.
- Leverage Indian costs with international branding for margins.
- Focused on adding new export geographies within current year.
- Backhoe Loader Market Share
- Market share estimated at around 2.6-2.7% currently.
- No intention to narrow price gap with market leader.
- Pricing strategy focused on expanding numbers in hiring/rental segment.
- Comfortable at current pricing, able to expand market share beyond 12%.
- Agri Equipment Outlook
- Targeting 15-20% revenue growth in FY25, same as last year’s plan.
- Tractor volumes at 2,460 units, harvester volumes at 137 units last year.
- Exited rotavator business due to low margins, focusing on larger tractors.
- Introducing ultra-lightweight combines to tap growing paddy segment.