Action Construction Equipment Limited — Q1 FY26 earnings call

Call held 11 Aug 2025

Management summary

Action Construction Equipment Limited reported a resilient performance in Q1 FY26 amidst a challenging operating environment marked by new emission norms, pre-buying in previous quarters, and early monsoon. Despite a 7.63% decline in total income to ₹703 crores, the company achieved significant margin expansion, with EBITDA growing 13.6% to ₹142.55 crores and PAT increasing 15.67% to ₹96.83 crores, driven by cost efficiencies, soft commodity prices, and price increases. Management anticipates market activity to normalize from Q2 onwards, with a positive outlook for the construction equipment and road machinery segments due to government infrastructure focus.

Highlights

  • Total income stood at ₹703 crores, a decrease of 7.63% year-over-year.

  • EBITDA increased by 13.6% to ₹142.55 crores, with EBITDA margin expanding by approximately 300 basis points to 20.28%.

  • Profit Before Tax (PBT) grew by 13.66% to ₹126.64 crores, and Profit After Tax (PAT) grew by 15.67% to ₹96.83 crores.

  • PBT and PAT margins expanded by 338 basis points to 18.02% and 277 basis points to 13.77% respectively.

  • Cranes, construction equipment, and material handling segment revenue was ₹605.43 crores, with margins expanding by 279 basis points to ₹107.83 crores.

  • Agri-revenue increased by 8.26% year-on-year to ₹46.51 crores.

  • The company implemented price increases of 7-12% across most product categories due to CEV Stage V emission norms and enhanced safety certifications.

  • Export revenue for the quarter was approximately ₹27 crores, targeting 6-7% of total revenue for FY26.

Concerns

  • Chinese competition and subsidized pricing

Key financials

  1. Total Income ₹703 Cr -7.6%YoY
  2. EBITDA ₹142.55 Cr +13.6%YoY
  3. EBITDA Margin 20.3%
  4. PBT ₹126.64 Cr +13.7%YoY
  5. PBT Margin 18%
  6. PAT ₹96.83 Cr +15.7%YoY
  7. PAT Margin 13.8%

What they filed

Q1 FY27: revenue up 20.6%, net profit up 21.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue757 875 961 652 744 −2%855 −2%1,029 +7%786 +21%
EBITDA109 135 164 93 109 +0%130 −4%172 +5%118 +27%
Net profit95 112 119 98 90 −5%116 +4%111 −7%119 +21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹651.94 Cr Total
  • Cranes, Construction Equipment & Material Handling ₹605.43 Cr 92.9%
  • Agri-revenue ₹46.51 Cr 7.1%

Order book

medium confidence

Composition

  • Defence (client type) 3%
  • Exports (geography) ₹27 Cr

Pipeline

L1 awaiting loa

L1 bids for defence orders, inorganic growth proposals, white labeling

Cancellations & deferrals

  • deferred: Ghana project in limbo due to funding issues
  • deferred: Big white-labeling proposal stalled due to Trump tariffs
The company is actively pursuing defence and export orders, with several new projects in the pipeline, while also exploring inorganic growth opportunities. However, a significant white-labeling proposal was impacted by Trump tariffs, and the Ghana project remains in limbo due to funding issues.

Source: Q&A

Capital allocation

medium confidence
  • Capex ₹100 Cr
    • Modernization, upgradation, robotics for global competitiveness and product quality ₹100 Cr
    • Balance payments for land ₹130 Cr
    See, for our capacity expansion which we had planned, most of the CAPEX has happened and is in place and our capacity is now the revenue capacity is about a little over Rs. 5,000 crores but apart from that in the current year, we have envisaged the CAPEX of over Rs. 100 crores with respect to further modernization and upgradation and introducing more robotics etc. into our setup, so that we are able to compete in the global stage with respect to our export markets and also bettering our products and quality for the Indian market. So, that's about a little over Rs. 100 crores. And apart from that, the lines which I mentioned we have to make some balance payments for those lands, so that will be close to about Rs. 130 crores plus minus outflow that will happen in this year.
  • Liquidity Liquidity disclosed The company has surplus cash from its business operations, which is invested and not pumped into working capital, to be saved for future expansion.
    Yes, sir. You are right, this is the income generated on the investments what we have made. We have surplus cash what we generate from a business, we do investments and all those and do not pump into a working capital and just save it for a future expansion.

Guidance & targets

Revenue

  • Overall Revenue Growth Revenue · FY26 · Medium confidence Not degrowth, some volume growth + price increase contribution
    I don't think so because the second half is definitely much better for us and all the rains and everything most of the issues would have been settled including the BS V. So, I don't think we would be looking at volume degrowth or anything, as a matter of fact there should be contribution with respect to price increase which has happened, coupled with some volume growth. But yes the exact quantum of what growth we should be looking at for this year let's say a reasonably precise number I think the best time would be end of second quarter to come out with that.

    — Sorab Agarwal

  • Q2 Revenue Growth Revenue · Q2 FY26 · Medium confidence Flattish, maybe slightly more
    Yes, I think so. You know it has always been like that generally and looking at the current scenario coupled with global uncertainties and a general sentiment. So, it should be flattish, maybe slightly more but the best time to comment would be with respect to Quarter 2 would be I think another one month down the line. Action would have started to happen.

    — Sorab Agarwal

  • Export Revenue Contribution Revenue · FY26 · High confidence 6-7%

    From 4% today

    So, in terms of what our expectation for the whole year for export, last year we had gone down to 4% of to our total revenue contribution and this year it appears that it can easily go up to 6%-7% and so that is for exports...

    — Sorab Agarwal

  • Defence Revenue Contribution Revenue · yearly basis · High confidence 3-4%
    So, let's say about a 10% contribution can come from both of these put together and like generally in the past our median term target was about 10%-15% from these two segments put together. So, hopefully we should be hitting a 10% mark this year.

    — Sorab Agarwal

  • Construction Equipment & Road Machinery Growth Revenue · this year · Medium confidence 30-40%
    Yes, quite a lot. See construction equipment and road machinery side of our business we are hopeful that that should be able to grow at least 30%-40% this year...

    — Sorab Agarwal

  • Revenue Tripling from FY23 Revenue · FY28 · High confidence FY28

    Previously FY26 → FY28

    So, we wanted to triple ourselves between FY'23 and '26 and unfortunately we have a little slowness we had in the last year on account of elections and this year because of the emission norms or whatever but I am sure one year here and there, so as conveyed even last time, so maybe it will not happen in three years tripling of our revenue, it will happen in 4 years FY'23 to FY'26 and then we had also thought, sorry doubling, and then we had also talked of tripling from FY'23 tripling by FY'28.

    — Sorab Agarwal

  • Revenue Target Revenue · FY27 · High confidence 4,400 crores

    Previously FY26 → 4,400 crores

    For the first part of your question, so hopefully this 4,400 crores instead of FY'26 should happen by FY'27 which I clarified even in the last call, tripling from our FY'23 revenue and taking it to Rs. 6,600 crores should happen by FY'29.

    — Sorab Agarwal

  • Revenue Target Revenue · FY29 · High confidence 6,600 crores

    — Sorab Agarwal

Margin

  • Overall Margins Margin · stabilize · Medium confidence 16-17%
    Yes, definitely the export margins are slightly better than the domestic margins and this 20% there has been a reasonable contribution in this quarter from the other income. So, I think, I believe that they should stabilize for overall margins somewhere around 16%-17%.

    — Sorab Agarwal

  • Gross Margins Margin · High confidence 33-35%
    I think this is totally sustainable and as we have communicated earlier. So, I think around gross margins of anywhere between 33% to 35%, lets say, 34%, what you mentioned is actually the ballpoint plus minus a percentage from there are sustainable.

    — Sorab Agarwal

Other

  • Kato JV Finalization Other · this quarter or early next quarter · Medium confidence Concluded
    Yes. It is very much under progress and we are hopeful that within this quarter or early next quarter, the agreement would be concluded in totality and work can start. So, we are targeting to start work in Quarter 3.

    — Sorab Agarwal

What to watch in Q2 FY26

Market activity normalization

From Q2 onwards
Current Subdued in Q1, inquiry levels normalizing in late July/early August.
Target Normalized market activity and demand.

Why it matters

Crucial for overall revenue growth and overcoming Q1 challenges.

Looking ahead, we expect market activity to normalize from Q2 onwards.

Risks & concerns

  • Chinese competition and subsidized pricing

    high

    The Indian government has understood that certain categories of machines and construction equipment are facing very stiff challenge from Chinese pricing, subsidized pricing... The government is looking at in all directions one is, tariff and non-tariff, how it is possible that the indigenous industry can grow faster and bigger.

    Management actively pursuing intervention

  • Challenging operating environment

    medium

    Amidst the challenging operating environment as stated above, the company delivered resilient performance during the quarter and we were able to achieve targeted margin profile.

    Management acknowledged

  • Impact of new emission norms and safety certifications

    medium

    This was primarily driven by the implementation of CEV Stage V emission norms and enhanced safety certification requirements, which have aligned our industry with global benchmarks. These regulatory changes have led to a consequential price increase of 7% to 12% across majority categories of products.

    Management acknowledged

  • Global uncertainties and geopolitical tensions

    medium

    Additionally, the Indo-Pak border tensions and prevailing global uncertainties have further weakened customer sentiment towards capital investments.

    Management acknowledged

  • Trump tariffs impacting white-labeling proposal

    medium

    There was a reasonably big proposal on the anvil with respect to white labeling but unfortunately the tariffs have played spoiled sport in the last 10-15 days.

    Management acknowledged

Q&A highlights

8 direct
Impact of new emission norms and demand normalization Direct
Yes, Quarter 1 was a dampener because of the price increase and obviously the technology change especially from BS III to BS V. So, a lot of customers especially for machines having engines smaller than 50 horsepower were very skeptical about the electronic engine going straight from mechanical to electronic and that seems to have settled. Even the price increase seems to have settled in now with a reasonable number of deliveries for BS III to BS V compliant machines which has happened. So, things seem to be stabilizing there and yes, the inquiry level, I would say especially in the last 10-15 days, 20 days started to normalize a little.

Clarifies the reasons for subdued Q1 demand and provides an optimistic outlook for demand normalization from Q2.

Asked by Puneet Javeri

Market share changes in cranes due to BS V transition Direct
See, the pick and carry cranes consist of two types of cranes. One is a hydra type, the old generation and the new generation... And the other type which is about I would say 55%-60% of the market, the hydra type, there our market share is 70% plus... because we have more than 70% market share here and this market shrank the maximum because of CEV BS V effect, so that is the reason you are temporarily seeing maybe a 1% or 2% share here and there. By the end of this quarter everything will normalize.

Explains why a competitor might have gained market share in Q1, attributing it to the temporary impact of BS V price increases on a segment where ACE has high market share, and expects normalization.

Asked by Aman

Outlook for construction equipment and government CAPEX Direct
Yes, quite a lot. See construction equipment and road machinery side of our business we are hopeful that that should be able to grow at least 30%-40% this year and only 3-4 days back our minister Mr. Gadkari, Minister for Road transport and Highway, he's conveyed that the process for releasing orders for roads and all going to be sped out very quickly. So, 2 lakh crores worth of orders have been released but 7 lakh crore would be released very quickly and in the next year he's planning for 10 lakh crores. So, I think with respect to especially construction equipment and road machinery, I think there should be good times ahead.

Provides strong positive outlook for a key segment driven by government infrastructure spending.

Asked by Aman

Sustainability of gross margin expansion Direct
I think this is totally sustainable and as we have communicated earlier. So, I think around gross margins of anywhere between 33% to 35%, lets say, 34%, what you mentioned is actually the ballpoint plus minus a percentage from there are sustainable.

Confirms that the significant gross margin expansion seen in Q1 is sustainable, which is crucial for future profitability.

Asked by Aditya

Status of Kato JV Direct
Yes. It is very much under progress and we are hopeful that within this quarter or early next quarter, the agreement would be concluded in totality and work can start. So, we are targeting to start work in Quarter 3.

Provides a timeline for the long-awaited JV, indicating progress and potential for new business.

Asked by Rajeev Maheshwari

Impact of potential taxes/anti-dumping duties on Chinese imports Direct
Finally, I think the Indian government has understood that certain categories of machines and construction equipment are facing very stiff challenge from Chinese pricing, subsidized pricing... The government is looking at in all directions one is, tariff and non-tariff, how it is possible that the indigenous industry can grow faster and bigger... So, hopefully that should also see the light of day within August or Latest by September.

Highlights a significant potential tailwind for domestic manufacturers like ACE, addressing a key competitive challenge.

Asked by Rajeev Maheshwari

Discrepancy between Vahan data and actual sales Direct
I think there is a lag of one-to-two months at least. Minimum would be one month, average put out you can easily say 45 days to 60 days because they are delivered to the dealerships then to the customer and then the registration application so the Vahan data is representative but not of the current factual, it is with a lag of 1.5-2 months.

Clarifies that Vahan data is not a perfect real-time proxy for the company's sales due to lag and exclusion of certain product categories, guiding analysts on how to interpret external data.

Asked by Kartik

Revision of long-term revenue targets Direct
For the first part of your question, so hopefully this 4,400 crores instead of FY'26 should happen by FY'27 which I clarified even in the last call, tripling from our FY'23 revenue and taking it to Rs. 6,600 crores should happen by FY'29.

Provides an update on the company's long-term revenue growth trajectory, indicating a slight deferral of targets due to current market conditions.

Asked by Puneet Javeri

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Detailed narrative

Q1 FY26 Performance Amidst Headwinds

Action Construction Equipment Limited reported a total income of ₹703 crores in Q1 FY26, a 7.63% year-over-year decline. This subdued performance was attributed to the implementation of CEV Stage V emission norms, enhanced safety certifications leading to 7-12% price increases, pre-buying in Q3 and Q4 of the previous fiscal year, and the early onset of monsoon. Despite these challenges, the company achieved significant margin expansion, with EBITDA growing 13.6% to ₹142.55 crores and PAT increasing 15.67% to ₹96.83 crores.

Robust Margin Expansion Driven by Cost Efficiencies and Pricing

The company's EBITDA margin expanded by approximately 300 basis points to 20.28%, while PBT and PAT margins grew by 338 bps to 18.02% and 277 bps to 13.77% respectively. This margin expansion was primarily driven by cost efficiencies, soft commodity prices, and the price increases implemented in the last quarter due to general inflation and revised emission/safety norms. Management stated that these gross margins, in the range of 33-35%, are sustainable.

Segmental Performance and Outlook

The cranes, construction equipment, and material handling segment registered a consolidated revenue of ₹605.43 crores, down from ₹690 crores in Q1 FY25, but saw its margins expand by 279 basis points to ₹107.83 crores. The agri-revenue segment showed positive growth, increasing by 8.26% year-on-year to ₹46.51 crores. Management is hopeful for 30-40% growth in the construction equipment and road machinery segments this year, buoyed by government focus on infrastructure projects.

Strategic Focus on Defence and Exports

The company's export revenue for the quarter was approximately ₹27 crores, with a target to increase its contribution to 6-7% of total revenue for FY26, up from 4% last year. In the defence sector, ACE received its single largest order, with execution slated to begin in Q3 FY26 and pick up in Q4, contributing ₹50-70 crores this year and ₹200 crores next year. New defence orders, including those tied with Ashok Leyland and for BRO, are expected to create a continuous pipeline of 3-4% of yearly revenue.

Capacity Expansion and Future CAPEX Plans

ACE has largely completed its planned capacity expansion, now capable of supporting over ₹5,000 crores in revenue, with 30-40% extra capacity available without significant additional CAPEX. For the current fiscal year, the company has earmarked over ₹100 crores for modernization, upgradation, and robotics to enhance global competitiveness and product quality. Additionally, about ₹130 crores will be spent on balance payments for land acquisitions. A future expansion for a particular product type, estimated at ₹250-300 crores, has been put on hold for 3-4 months and is now expected to take shape in FY27 and FY28.

Regulatory Environment and Competitive Landscape

The Indian government is actively considering measures, including tariffs and non-tariff barriers, to address the stiff challenge posed by subsidized Chinese imports in the construction equipment sector. ACE has also initiated DGTR proceedings for anti-dumping duties on heavier cranes, with a resolution expected by August or September. These measures, if implemented, are anticipated to significantly boost the domestic industry and improve realization from revenues, particularly for products where Chinese competition is strong.

Long-Term Vision and Revised Revenue Targets

The company's long-term goal of tripling revenue from FY23 has been revised, now targeting FY28 instead of the initial FY26. Consequently, the FY26 revenue target of ₹4,400 crores is now expected to be achieved by FY27, with a further target of ₹6,600 crores by FY29. Management remains optimistic about the medium to long-term growth momentum, driven by resilient macroeconomic fundamentals, government focus on infrastructure, and internal strategic initiatives.

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