Ace Q4: Profit Doubles To ₹98 Cr YoY | NDTV Profit
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00:00 Good afternoon and welcome to Earning Edge right here at NAD Profit.
00:11 We are now discussing action construction equipment on the back of strong quarter 4
00:15 results by the company.
00:16 We are now joined by Mr. Saurabh Agarwal, Executive Director at Action Construction
00:21 Equipment.
00:22 Good afternoon sir and thank you so much for joining us today.
00:26 Yeah, good afternoon.
00:28 So the results I should not start discussing because really strong numbers by the company
00:33 and I cannot go ahead without talking about the margins at 17% for the fourth quarter,
00:40 now 16% for the full year.
00:43 Are you sure you are not a FMCG company because the margins have been really really strong.
00:48 Could you just talk us through what has led to these strong margins and do you think this
00:53 range around 15-16% is the new normal?
00:58 I think this 15-16% should be the new normal, maybe even higher than this, definitely after
01:05 16% plus and see for so many years we have been doing work all across our cost efficiencies,
01:12 our cost takes and our commodity has supported us and operating debit and our utilization
01:18 level is increasing in the last year.
01:21 As you know even this 4-5% for a 500 basis points increase in other margins on a yearly
01:28 basis.
01:29 So I think our overall hard work has paid off.
01:36 Right sir, now we have seen some slowdown in the infrastructure just in general due
01:42 to elections and most segments are expecting recovery in the second half but we have not
01:47 seen any kind of slowdown for you.
01:50 Could you just let us know what is happening in the industry in general, buyers of your
01:55 vehicles and how are you seeing the start of the financial year of 2025.
02:00 If not numbers, just if you can let us know what is happening.
02:06 By end of 4-4 the momentum was still continuing.
02:09 It is definitely a little muted ever since the general election has started, so I would
02:13 say mid April onwards and this was very well anticipated by us also.
02:18 So we can expect a slightly muted June quarter for our company.
02:23 But going forward I think quarter 2 onwards but especially quarter 3 onwards things will
02:27 revive and I say go back to the same momentum, that is what our belief is.
02:33 So there are 2-3 factors that add to it.
02:36 Primarily one we are out of monsoon so infrastructure activity further picks up and the festival
02:42 season starts, the buying season starts even with respect to capital goods and our construction
02:45 equipment.
02:46 But most importantly this year we feel that quarter 3 could be a really bigger bumper
02:52 and maybe even the second half of quarter 2 because from 1st of January the construction
02:58 equipment is going from BS4 to CEV5.
03:04 So about 60% of the equipment that we make the cost is going to increase by 12-15% in
03:10 that bracket.
03:11 So we expect a lot of pre-buying of the type of thing which are under 50 horse power to
03:17 happen I would say till something September onwards.
03:21 So on the whole things look good, yes quarter 1 will be a little muted.
03:26 Well that's great to hear sir.
03:28 I want to talk about the agri segment right now.
03:32 I think we have seen it's one of the slower divisions on revenue growth of 12% but volumes
03:38 have fallen here for this particular year.
03:40 We have seen really strong growth in construction equipment which has been one of the leading
03:44 segments for you now.
03:45 It has finally turned around over the last 2-3 quarters.
03:49 Could you let us know what's happening on agri?
03:53 How are you focusing on the turnaround of these divisions and what are the company's
03:57 efforts on this segment?
03:58 There are two main things we are doing.
04:01 First we are focusing more on exports because we feel there is more potential for us to
04:07 do better than exports.
04:09 And primarily led by a smaller tractor which is basically a 20-25 horse power tractor.
04:15 So we especially want a larger tractor or a smaller tractor for export market.
04:20 And also similarly 80-90 bigger models.
04:23 I think 85-95 horse power models.
04:28 So I think that is where we are going to be able to increase our revenue going forward
04:34 faster than domestic because domestic market is I think already too over crowded and with
04:39 big players, you know, they start to play out pricing as soon as they decide to get
04:45 in the market.
04:46 So we have chopped out our strategy.
04:48 Last year even though the market was depressed overall we were still able to grow about 12%
04:52 in revenue.
04:53 So I think we will continue to grow about 15-20% here in agri going forward.
04:59 And one other segment that you do talk about in your previous conference call as well as
05:03 the material handling.
05:04 So along with material handling and agri, those are the two divisions which you wanted
05:09 to have a turn around now.
05:10 I feel material handling has seen good growth, 15% of growth this year.
05:14 Do you think this segment is now at the starting line to run its course and show good growth
05:21 in this particular financial year as you expect?
05:24 Yes, I think you know our material handling division had its own share of inefficiencies
05:30 within the company.
05:31 So they have been sorted out and hopefully it will start to perform better than what
05:35 we have been doing in the past years with respect to material handling.
05:38 And in saying this I would also like to mention construction equipment.
05:43 There on a yearly basis we have been able to grow more than 50%.
05:47 And I have always said that this is one segment of ours where we can grow 30-50% every year.
05:53 So again in this particular year we are very hopeful that we will be able to do at least
05:57 30-40% in the construction equipment segment.
06:01 Now last quarter you did highlight that there is some but slow progress on your orders from
06:05 the Republic of Ghana.
06:07 Now they had defaulted on their payment obligations.
06:11 Any kind of update that you can give us on this front?
06:15 For us unfortunately Ghana project has not been able to take off because let's say the
06:21 payments or let's say the liability was to be funded by Ex-Im Bank of India and there
06:28 is some default between Ghana government and Ex-Im Bank of India because of which this
06:32 payment line is not going through.
06:34 And you know obviously we have been in contact with the government of Ghana, the respective
06:39 department and so they are again assuring us that it might take some more time.
06:43 So but it's uncertain whether it will be one quarter or two quarters.
06:47 But I do believe that whenever it happens it is only going to be a slight booster for
06:52 us in an additional sense because the margins at which we had planned to earlier establish
06:58 planned there.
06:59 So they will become better because the commodity prices inflation is a bit in control.
07:02 So our margin profile improves on the project of setting up the plant there.
07:06 And then obviously consequently we expect 300 to 500 crores of revenue on a yearly basis.
07:12 But as of now it is definitely you know we are not aware whether it will happen in one
07:16 quarter or two quarters because it is between the government and the Ex-Im Bank and even
07:21 IMF is involved in some sort of a bailout right now with Ghana.
07:25 That's what I understood.
07:28 Thanks for the update sir.
07:29 Now another one thing that was on capacity expansion now.
07:34 What is the current capacity utilization for the company on an overall basis?
07:39 And also I think you had purchased land also at your existing manufacturing facility.
07:44 Have you already started you know expanding the same and what's the timeline according
07:48 to you for this particular expansion?
07:52 Capacity utilization for us is well described if I go segment wise.
07:57 So because cranes being about 72 percent.
07:59 So in cranes we have about 75 percent we are doing as of now.
08:06 And construction equipment is close to 55-60 percent.
08:09 Metal handling is about 65 percent.
08:12 And agri is about 35-40 percent utilization.
08:16 We did have make a commence to purchase land which will go through in Q1 and Q2 of this
08:22 year.
08:23 So put together that's about close to 82 acres of land.
08:26 But this is for our future expansion plans because as of now with our capex and expansion
08:32 whatever we have done till FY24 we are now capable of doing a turnover of close to about
08:38 4500 crores with about 2900-3000 crores what we have done last year.
08:43 So we have this 50 percent extra turnover buffer available with us as of now.
08:48 And within the current year on our existing land we will be doing more capex for 1800
08:53 crores and our capacity by end of December or let's say quarter 4 should our ability
08:59 to increase to 5500 crores.
09:03 So maybe in the second half of this year or Q4 we will start to plan to develop this land
09:09 further or maybe FY26 or FY27.
09:17 It's interesting you mentioned about your revenue like current capacity will easily
09:21 give you revenue of roughly 4400 crores.
09:23 Now if I remember you said that guidance for FY26 is also the same number for revenue.
09:32 Is the company so basically you don't need any kind of capacity expansion to reach that
09:37 revenue number.
09:38 Firstly does that still stand as of now and secondly how much of a contribution in this
09:46 total 4400 crores are you anticipating from the material handling as well as the agri
09:51 segments if not just the percentage rough range also sir it's fine.
09:56 See it is 4500 what I mentioned as of date.
10:00 So hopefully this year on a conservative basis we are getting a 15-20 percent growth but
10:06 it could have been much faster than that.
10:09 So I would say that FY25 is totally secured with respect to revenue and maybe some part
10:13 of FY26 also.
10:16 There is a possibility that we might exhaust it within FY26 or we might need to expand
10:21 but in any case within by the end of this year we will be creating capacity up to 5500
10:27 crores because you know for our business we have calculated that about 125 crores of capex
10:35 can generate about 8x, 9x revenue 8-900 crores.
10:39 So we will be going into the capex you know just in case the market goes faster than what
10:44 we are anticipating.
10:46 And I think that over the next one or two years, three years, yes grains are growing,
10:52 construction equipment is growing the fastest.
10:54 So I believe that the metal handling and agri both of them combined together their contribution
11:01 to our overall revenue will remain in the range of 15-20 percent because grains will
11:07 be growing further and in any case construction equipment is faster than grains.
11:14 Understood sir.
11:16 Well thank you so much sir for joining us today and updating us on across your segments
11:21 and what the growth has been.
11:23 Best of luck for your financial year of 25 and we look forward to our next chat but thank
11:26 you so much for joining us today sir.
11:28 Okay thank you.
11:30 Well time for a short break.
11:32 More news and updates on the other side.
11:34 Stay tuned.
11:34 Thank you.
11:36 Thank you.
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