Action Construction share price may appreciate by 30% in nine months

Action Construction share price may appreciate by 30% in nine months

By Rajiv Kapoor | 25 February, 2017
Action Construction Equipment Ltd is a material handling and construction equipment manufacturing company headquartered in Haryana.

Action Construction Equipment Ltd is a material handling and construction equipment manufacturing company headquartered in Haryana. The company is engaged in the manufacturing of general purpose and special purpose machinery and operating through different segments, including cranes, material handling/construction equipment and agri equipment. Action Construction also offers mobile and fixed tower cranes, crawler cranes, truck mounted cranes, lorry loaders, backhoe loaders and loaders, vibratory rollers, forklifts, tractors and harvesters, and other construction equipment across the country. The company’s production facilities are located at industrial townships of Faridabad in Haryana and Kashipur in Uttarakhand. Their products are widely applicable in power projects, ports and shipyards, dams, metro rail, roads, mining, steel industry, engineering industry, railways, cement, petroleum, defence, warehousing, logistics and building construction.

The Indian construction industry forms an integral part of the economy and is a conduit for a substantial part of development. It is poised for rapid growth on account of industrialisation, urbanisation, economic development and rising expectation for improved quality of living. Construction constitutes 40%-50% of India’s capital expenditure on projects in various sectors such as highways, roads, railways, energy, airports, irrigation, etc., and is the second largest industry in India after agriculture. It accounts for nearly 10% to 11% of the GDP. The need for boosting infrastructure investment is core for the economic development of the country and hence there have been many new initiatives by the present government to boost sectors like roads, railways, power distribution and rural and urban development. No wonder that the Union Budget has allocated a record Rs 3.96 lakh crore for infrastructure investment during the current financial year. The country needs rapid demand and stronger construction activity, which has not yet happened. However, the long term prospects of the industry are huge and a fantastic opportunity area for economic development. The entire construction industry is going through a phase of consolidation and needs to overcome financial situations and challenges related to debt. There are green shoots in the infrastructure sector like development in highways, waterways, energy distribution, which offers various opportunities for the company. Growth is back and government financed infrastructure, especially in highways, has started, with restrictive regulations being removed. With sentiments improving Action Construction expects to see improvement in the infrastructure development sectors.

The Action Construction Equipment stock, presently trading at Rs 53, is an excellent buy with negligible downside. Analysts expect the share price to appreciate by 30% in nine months on the back of an increase in revenue and better profit margins.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

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