Action Construction Equipment posted a really strong set of numbers for Q1 FY12 and the management has also given a very strong guidance for full year FY12. ACE posted a net sales growth of 65% to 215 crores as against 130 crores last year. The net profits also surged 40% to 11.16 crores as against 7.96 last year. If we take a look at last year’s performance then in FY11, their sales grew 61% YoY and net profits surged 66% YoY. Action Construction Equipment is clearly on a growth track and management has also guided for a strong growth in full year FY12. The company is in talks with two companies in the same field for a possible buy out and the management is expecting to complete these deals within the next two months. They will also take debt of just 20 crores and will fund the rest from cash lying with the company. Management has guided for atleast 60-70% kind of profit growth by the end of the year.

Before the guidance of management, we were expecting close to about 40% kind of growth for FY12, so with the confident management’s words, Im sure they’ll do better than expectations. ACE posted an EPS of close to 4.4 for FY11 and with a 40-50% kind of growth, the EPS expected is between 6.2 – 6.6 for FY12. The stock today is trading close to 45, which is around 7 times one year forward EPS. With a company that is likely to post a 40-70% kind of growth in a year and trading at 7 kind of P/E multiple, I would give a strong buy call for that.

Investors can look to accumulate this stock at current levels or in further dips but I feel this is one such scrip that is totally worth keeping in one’s portfolio. I feel this stock can easily go up to 60-65 from one year perspective.

Invest in Action Construction Equipment with target price of 65 from one year view.

Related posts:

1. DCB Stock Action
2. Yes Bank Has Targets of 405
3. Sintex Industries Results
4. Invest In IDFC Stock
5. Indiabulls Financial Services Has A Target Of 240