ACTION CONSTRUCTION EQUIPMENT; BEST ENTRY PRICE

                         CMP 38                                                            BSE 16805

It is that time in the Markets when we need to start looking at Capital Goods/ Infra / Construction Stocks in order to get the best entry price for our long term Portfolios. In this Post we will examine ACTION CONSTRUCTION EQUIPMENT.

TECHNICALS:

A close look at the long term Price Charts clearly reveals that the Stock seems to have troughed out at 27 levels that it saw intraday on 16/11/2011. Since then, till date, it has been on a strong uptrend and has given returns of about 41% which is phenomenal. (ie returns of 40% plus in  the last 14 odd trading sessions!!!). The first strong resistance on the upside is indeed the 200 SMA ie 43 levels. If it crosses 43 and trades above it for a reasonable period one could possibly be looking at 51 levels. Of course, lest we let our greed run away with our money, we should ideally expect a period of consolidation as well and the above levels of 43 and 51 may indeed take some time coming. But what is certain is that there is a bottom firmly in place at 27 and the Scrip is in a definite uptrend.

FUNDAMENTALS:

At CMP 38 (52 wk low 27, 52 wk high 64) the Scrip is trading at PE TTM 7.8.  Despite the adverse business and monetary environ,  Results have been reasonably good; better on  topline than on bottom line but that is to be expected since there is a definite squeeze on Margins owing to the Macro headwinds. However, with the Rate Cycle likely to turn and likely monetary easing, the next couple of Quarters should positively outdo the first two. In view of these and also the Management's guidance of about 20-25% topline growth coupled with possible inorganic growth opportunities being whetted , the Company could well do an EPS this FY of about Rs 5-6, which puts it at about 6.5x FY12E at the median of the range. This is not expensive by any stretch; of course it would have been great to have bought in at panic bottom levels of 27 on 16/11/2011 (when it was at 4.5x FY12E) but you know what they say about spilt milk!!

In brief, the Scrip is a BUY at CMP 38 and all dips for better than imagined upsides over the next year or so. It would also be prudent to keep the run-up the scrip has seen in the last 2 weeks in mind and thus to spread out the buys to cover possible dips is definitely advisable.



Q2 FY2012 RESULTS  SEE HERE

Q1 FY2012 RESULTS  SEE HERE

Q2 FY2012 SHAREHOLDING PATTERN  SEE HERE