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Action Construction Equipment held a conference call on August 3, 2010. In the conference call the company was represented by Sorabh Agarwal, Wholetime Director and Rajan Luthra, Financial Advisor for the company.
Key takeaways of the conference call
The company has clocked a sales of Rs 129.18 crore, which translate into a growth of 61% and its PAT more than doubled (up 134%) to Rs 7.46 crore.
In Q1FY11, the company lost about 13-14 operating days on account of Oracle implementation and on account of this the company has lost sales of at least about Rs 15 crore. Easily the company would have done a sale of Rs 145-150 crore for the first quarter of current fiscal.
In June 2010 the company has launched a new product i.e. Motor Graders thereby expanding its road construction equipment portfolio. The company is also expected to launch another new product (i.e. Tele handler) to its material handling portfolio before Dec 2010.
Sales volumes in Q1FY11 are:
Product wise sales volume & realization in Q1FY11
| Product |
Sales (in nos) |
Average unit realization (in lakhs) |
| Pick 'n' Carry/mobile crane |
858 |
8.65 |
| Mobile Tower crane |
46 |
13.92 |
| Fixed Tower crane |
14 |
51 |
| Backhoe loaders * |
74 |
12.9 |
| Fork Lifts $ |
103 |
6.15 |
| Crawler Cranes |
4 |
146 |
| Tractors |
728 |
3.1 |
| Road Rollers |
18 |
15.6 |
| Motor Graders |
2 |
38 |
| Pilling Rigs |
0 |
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* The volume of backhoe loader include 11 units of wheeled loaders and its average realization is about Rs 18 lakhs.
$ the volume of 1.5 tonne forklifts is more in Q1FY11 than 2.5 & 3 tonne |
Currently the company is expanding the capacity for mobile cranes at Faridabad. The expanded capacity will be commissioned by August end or Sep 2010. In addition the company is also setting up a new unit at Bazpur in Uttaranchal. The Uttaranchal unit will commence operation by Feb-March 2011. With this expansion the capacity for mobile cranes will get doubled from current 400 units.
| Product wise expected sales volume in FY11 |
| Product |
Expected volume for FY11 (in nos.) |
| Pick 'n' Carry/mobile crane |
3800-4000 |
| Mobile Tower crane |
230-240 |
| Fixed Tower crane |
75 |
| Backhoe loaders |
500 |
| Fork Lifts |
550 |
| Crawler Cranes |
18-20 |
| Tractors |
4000+ |
| Rollers |
100 |
| Motor Graders |
15-20 |
Of the total demand about 65-70% from Infra construction and about 30-35% is from industrial and Heavy Engineering/projects. Both the categories are witnessing better project and funding flow, even small clients are undergoing capex and this enhances sales visibility. So, overall scenario is bullish. There is free flow of financing of infrastructure equipment on the part of banks and NBFCs compared to 2008-2009 period.
Capex for the current fiscal is Rs 25-30 crore.
The company has no long term debt in its books and the working capital borrowings is Rs 16-17 crore. Cash on hand is Rs 15-20 crore.
As far as M&A activity is concerned it is still underway. And there are two contenders including the company and the status will be known in another one month. If the acquisition goes through the company may require about Rs 80 crore and the company will fund through internal accruals to the extent of Rs 15-20 crore and balance will be funded through borrowings.
Some product issue has occurred as far as pilling rigs from what the company is sourcing.
The market share of the company in mobile cranes is 52-53% and the other near competitor has about 42-43%. Put together the two players' controls 95% of the market. JCB has also entered this product range two and half years ago and they have a market share of about 2%.
The market size for Tele handlers in the country is about 70-80 units. The company is getting into this segment as ministry of defence has a huge requirement of 1000 units and that may go up to 5000 units in couple of years. So in current quarter couple of the company's tele handlers will be under trial in ministry of defence. The unit price for telehandlers will be about Rs 15-16 lakh basic to Rs 23 lakh depending on the variant. Currently the telehandlers deployed in the country is about 200-250 crore.
On sequential basis, the tractor volumes for the quarter have gone down as the financing by nationalized banks or cooperating banks were squeezed/tight. This is largely on account of cutting down of exposure to farm on account of delinquency issue on the part of farmers. Hence the company has tied up with some NBFCs and the volume is expected to be back in balance period of current fiscal.
The company expects a turnover of Rs 625-650 crore in current fiscal and a EBITDA margin of 10.5-11%. The company expects Q2 to bring in 23-25% of the revenue, Q3 about 27-28% and Q4 about 30-35%.
The tax rate for current year will be around 25-26%. The existing Uttaranchal plant though in the last year of tax holiday it will continue to have some benefits and the new Uttaranchal plant will come into existence in Feb 2011, hence the same tax rate will continue for FY12 as well.
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