ACE - Action Construction Equipments Ltd. Share Price

The management of Action Construction Equipment Limited provided an outlook during the Q1 FY'26 earnings call, noting a subdued start to the financial year primarily due to the implementation of CEV Stage V emission norms and increased safety certification requirements. These regulatory changes led to a price increase of 7% to 12% across various product categories and contributed to a weakened customer sentiment, further exacerbated by geopolitical tensions and pre-buying in prior quarters. The company's total income for the quarter was reported at Rs.703 crores, a decline of 7.63% year-over-year. However, the EBITDA grew 13.6% to Rs.142.55 crores, achieving an EBITDA margin of 20.28%.

Management highlighted that the first half of the financial year typically contributes 40%-45% to annual revenues, expecting market conditions to stabilize and demand to normalize from Q2 onwards. For Q1, the PAT rose 15.67% to Rs.96.83 crores, while margins expanded due to cost efficiencies and the previous price adjustments. The cranes and construction equipment segment generated revenues of Rs.605.43 crores, down from Rs.690 crores year-on-year, but margins in this division improved.

Looking ahead, management expressed optimism for improved demand in the upcoming quarters backed by early festive seasons, better liquidity, and government infrastructure spending. The macroeconomic environment remains resilient despite global uncertainties. They indicated a sustained growth agenda, with expectations of medium to long-term performance improvements, although they plan to provide detailed guidance post-monsoon. Additionally, they aim to leverage their newly built capacity and enhanced operational efficiencies to capitalize on market recovery.

Earnings Call Q&A Summary

Q1: Puneet Javeri: What is the current demand outlook given the emission norms and the dampening effects in Q1?

A1: We saw subdued demand in Q1 due to price increases and technological shifts to BS V. However, recently, inquiry levels have started to normalize, especially in the last 15-20 days. Post-August 15, as rains recede, we expect conditions to stabilize, with normal activity resuming by mid-September.

Q2: Puneet Javeri: Can you provide insight into export revenues and expectations?

A2: Our export revenue for the quarter was around Rs.27 crores. We expect this to rise to 6%-7% of total revenue, aiming for a combined contribution of about 10% from exports and defense.

Q3: Puneet Javeri: What are the margins on exports compared to domestic sales?

A3: Export margins are slightly better than domestic margins. Our overall EBITDA has improved due to various factors, leading to expected stabilization around 16%-17%.

Q4: Puneet Javeri: Update on defense orders and the Ghana project?

A4: The Ghana project remains stalled due to funding issues, while our defense order execution starts in Q3, contributing approximately Rs.50-70 crores this fiscal year.

Q5: Ritesh Chordia: How did participation in the Bauma Munich exhibition affect future orders?

A5: We received a positive response and are working to establish new dealerships, particularly in Europe. We plan to participate in Agritechnica for agriculture-focused exposure.

Q6: Aman: Has ACE lost market share compared to peers like Escorts?

A6: No significant loss. We maintain a strong market share in pick-and-carry cranes, around 70%-75% in hydra types, despite temporary fluctuations due to recent norms.

Q7: Deepak Ajmera: Are there expectations for volume growth beyond this fiscal year?

A7: We anticipate a strong second half as market issues resolve, leading to no expected volume degrowth for the year.

Q8: Aditya: On gross margins, are current figures sustainable?

A8: Yes, current gross margins of 33%-35% are sustainable, primarily due to price increases and controlled commodity prices.

Q9: Rajeev Maheshwari: Any updates on the Kato JV finalization?

A9: It's progressing well; we aim to finalize the agreement this quarter or next, with work to commence in Q3.

Q10: Vinay Maheshwari: What is the current CAPEX situation and expansion outlook?

A10: We've completed most CAPEX for current capacity, targeting over Rs.100 crores this year for modernization. Further expansion is planned for next year, aiming for Rs.250-300 crores.

Note: This summary provides insights based on the questions and respective answers given during the Q&A session and includes significant figures and projections discussed during the call.