Release Date: November 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Action Construction Equipment Ltd (BOM:532762, Financial) reported a 12.2% year-on-year increase in operational revenue for Q2 FY25, reaching INR 754.34 crores.
- The company achieved its highest ever EBITA, PBT, and margin profiles for the quarter, with EBITA growing by 34.47% year-on-year.
- The company has improved its working capital efficiency and fortified its balance sheet, providing flexibility for future growth opportunities.
- Action Construction Equipment Ltd (BOM:532762) secured significant orders in the defense sector, including a potential order valued at over INR 400 crores from the Ministry of Defense.
- The company is optimistic about achieving a 15% plus growth in the cranes, material handling, and construction equipment segments for the current year.
Negative Points
- The agricultural segment saw a year-on-year decline in volume numbers due to deferred export orders and discontinuation of certain products.
- The company's guidance for growth has been adjusted to 15% plus, down from the previous range of 15-20%, due to slower-than-expected momentum post-monsoon and election outcomes.
- Short-term borrowings increased due to preponed payments to MSME vendors and land advance payments, impacting cash flow.
- The construction equipment segment experienced flat growth due to excessive rainfall affecting infrastructure activities.
- The company faces challenges in maintaining competitive pricing amidst rising engine costs due to stricter emission norms effective from January 2025.
Q & A Highlights
Q: Why did the Agri segment see a year-on-year volume decrease despite a quarter-on-quarter revenue increase?
A: (Unidentified_5) The year-on-year decrease is due to a large export order from an African country last year, which was deferred this year due to global headwinds. We expect to catch up in the second half of the financial year and project a 10-15% growth for the segment.
Q: Why has the growth guidance been adjusted to 15% plus from the previous 15-20% range?
A: (Unidentified_3) The guidance remains similar, but we are being conservative due to extended rains and less favorable election outcomes. We are hopeful for 15% plus growth, with a possibility of reaching 20%.
Q: What is the reason for the decrease in CFO to EBITDA ratio in the first half?
A: (Unidentified_6) This is due to preponing payments to MSME vendors, reducing current liabilities. We expect the numbers to normalize by the year-end.
Q: What is Action Construction Equipment's competitive edge in the construction equipment segment?
A: (Unidentified_3) Our strengths are offering the right product specifications, reliability, cost-effective pricing, and excellent service support. We aim to increase our market share in cranes to 70%.
Q: Can you provide an update on the joint venture with Kato Works?
A: (Unidentified_3) We are setting up a joint venture to manufacture larger capacity cranes. Definitive agreements are being negotiated, and we expect to start production within 6-8 months of finalizing the JV.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
