Action Construction Concall_Q4_Fy19

Action Construction Concall_Q4_Fy19 (Notes)

1. For the year revenues were at Rs1343 vs Rs1087cr

2. EBITDA Margins 8% for FY19 vs 9.2% for FY18

3. Profit Margins 4.2% for FY19 vs 4.8% for FY18

4. In Fy19 company took a price increase of 7-9%.

5. 3% price hike as was taken on Jan 19 and On 1st April as well took a price hike of 1.5%.

6. As a policy as steel prices increase of 2-3% company takes a price hike of 2-3% in next month.

7. Steel Prices are currently 40-45 per Kg as compared to 49-50 per kg. Steel prices can correct another 2-3% going forward.

Segment-wise sales -

              Segment            FY19 FY18

• Crane          965cr 750cr

• Construction Equipment  80cr 72cr

• Material Handling           95cr 81cr

• Agri Equipment    204cr 185cr

o Tractor sales of 30cr were impacted due to the RTO issue.

o Buyback of 34.25cr share via the open market. The rationale is to deploying surplus cash and cheap valuation & long term prospect for the company are good.

o No significant capex for next 1-2years.

Equipment sales for quarter-

• Pick & carry cranes - 1440

• Tower Crane 11

• fixed Tower crane 26

• crawler 4

• tractor 523

• forklift 234

• Backward Loaders 115

• truck mounted 3

• Harvesters 24

• Rotators 126

Company will be launching in house developed a new series of truck cranes in June month.

Guidance for FY20 -

• Revenue growth of 10%

• EBITDA 9%

• PTM 5%

Rental Business accounted for 13cr in FY19 vs 20cr in FY18

Most of the rental business comes from building construction. As policy has taken the decision to go slow in this segment as it's facing payment issues.

o Company has a 60% market share in pick & carry cranes.

o Company has a 60% market share in Tower Cranes. Main competitors are Chinese players. Used in civil construction activity.

o Company has 65%market share in Crawler cranes up to the capacity of 75tonne. The market size of the crawler crane has declined post-2011. These cranes are used in petrochemical, refinery, power plant, metro projects.  This segment is witnessing a shift to bigger tonnage of 100-150tonne. market size is 40-50units. Per the cost of the crane is 2.5-5crores.

o Company has a 10-15% market share in Truck Cranes. Offering 25-80tonne models. Competitors: Chinese players.

o Truck crane business has a market size of 150units. This segment was earlier witness by cheap imports from the USA, Europe & Japan. Due to the safety & customs norms, these imports are slowing.

Reading the economy -
Construction equipment and cranes give an insight into the construction activity going in an economy. ACE is the market leader in the segment tells us before the elections as cliche it sounds the economy comes to a halt due to uncertainty about the nex government. Companies and government tendering to take a back seat.

Adding to the current state of economy ACE management also gave a minor comment on real estate construction activity. Management commented, "real estate construction segment is facing big payment issues". The real estate which is facing headwinds and sensing from the commentary it continues as well in the near term.