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Action Construction Equipment hosted a conference call on Aug 6, 2018. In the conference call the company was represented by Saurabh Agarwal, ED and Rajan Lutra, CFO.
Key takeaways of the call
Operating revenue (net of excise duty) was Rs 336.23 crore, a rise of 78%. EBITDA margin at 8.50% for Q1FY19 as against 5.82% in Q1FY18. And the net profit stood higher by 342% to Rs 16.65 crore.
| Products |
Volume Q1FY19 |
Volume Q1FY18 |
Var (%) |
Market Share approx |
| Cranes |
|
|
|
|
| Pick n Carry |
1639 |
950 |
72.5 |
63% |
| Mobile Tower |
19 |
14 |
35.7 |
85-90% |
| Fixed Tower |
43 |
26 |
65.4 |
60% |
| Crawler (upto 75 tonnes ) |
8 |
1 |
700.0 |
50% |
| Tractors |
1008 |
415 |
142.9 |
* |
| Backhoe Loaders |
63 |
38 |
65.8 |
* |
| Fork Lifts |
253 |
188 |
34.6 |
20-22% |
| Soil Compactors |
50 |
20 |
150.0 |
* |
| Motor Graders |
13 |
3 |
333.3 |
* |
| Rotovaters |
342 |
131 |
161.1 |
* |
| Figures Volumes in Nos.; * Not significant or new business |
The company expects a volume growth of 35% for cranes, 70-80% for CE, 30-35% for MH and 20-25% for Agri equipments for FY19.
Drivers Demand for cranes of the company - cranes 60% directly goes for infra and construction activity and balance for industrial and logistics activity.
Pent-up demand for replacement of old machines and strong upturn in activity in all user segments is driving the demand for cranes.
In cranes pick n carry and mobile the company enjoys a market share of 63-64% and balance is accounted by Escorts. The market share of other small player is insignificant. In cranes the company's market share expanded by marginal 0.5% in Q1FY19.
Expect 35% growth in STO and good double digit margin for FY19.
Steel price has rocketed by 30-35% which has resulted in drastic price increase
The company has effected and price increase in Q4FY18 and followed it up with another increase in May-June 2018 period. The company is considering another 2-3% price increase which will be done in next 2-3 weeks.
Last week competition has taken the lead and increased the price contrary to the company taking the lead with completion follow with a 3 week lag. So the company will not face any issue in increasing the price.
Price increase will ease the pressure on the margin. It also expects 8-10% cooling off in steel prices in next few months that along with price increase will further ease pressure on margin.
Capacity utilization for Cranes was 75%; construction equipment 30-35%; Material Handling 50% and Agri Equipment is 50%.
The company has started to expand the capacity for cranes at a capex of about Rs 20-25 crore. Phase I capacity expansion that envisages a capacity increase to the tune of 40-50% over current capacity will be ready/in-place by Oct-Nov 2018. The expanded capacity will result in incremental revenue of about Rs 500 crore.
Typically H1 is a lean season for the company with about 55-60% of revenue come in H2 and this trend will follow in current fiscal as well.
Life time of mobile and PnC cranes is about 10-12 years and that of Forklifts is about 7 years.
Rental division is Rs 4-5 crore. The company is not increasing the fleet size. With recovery in RE segment the company expects strong growth in revenue of this division.
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