Action Const.Eq.

Action Construction Equipment Limited reported a flat total income of ₹782.18 crores in Q2 FY26 compared to the previous year, though it saw an 11.27% sequential increase. EBITDA grew 6.72% YoY to ₹151.75 crores, with margins expanding by 137 basis points to 19.40%. PAT increased to ₹103.87 crores, with a 131 basis point margin expansion to 13.28%. For the first half of FY26, total income was ₹1,485 crores, a 4% YoY decline, but EBITDA grew 10% to ₹294.30 crores and PAT grew 12.7% to ₹200.70 crores, demonstrating sustained profit growth despite headwinds.

The company acknowledged a soft start to FY26 due to new emission norms and temporary moderation in infrastructure development from extended monsoons. However, Q2 showed a stabilizing performance, indicating that the most challenging phase is now behind them. Management expects recovery driven by a resilient domestic macro environment, strong policy continuity, government emphasis on infrastructure, and softening interest rates. They anticipate flattish to single-digit revenue growth for FY26 and modest EBITDA margin expansion.

The cranes, material handling, and construction equipment segment contributed 94% of total revenue, generating ₹694 crores, which was flat YoY. Sales units in this segment declined by 18% YoY to 2,348 units. The Agri segment contributed 7% of revenue, totaling ₹47.13 crores. In the backhoe loader segment, Q2 sales were 168 units, and the company aims to increase its market share from the current 2.5% to 5-6% and eventually to double digits.

Government policies promoting fair trade and manufacturing self-reliance are seen as highly positive. A significant structural tailwind is the recommendation to impose anti-dumping duties on certain crawler and truck cranes from China. These duties, ranging from 26% to 52%, are expected to be implemented by December 2025, which will protect domestic players from aggressive pricing and enable ACE to significantly increase its market share in the heavy crane segment from the current 3-4% to 50% in 3-4 years.

ACE is pursuing an expansion strategy, planning to acquire approximately 86 acres of land this year for about ₹200 crores to support future growth. The company's current production capacity can support revenues of over ₹5,000 crores. Management also indicated a commitment to increasing dividend rates and investing in robotics, mechanization, and quality improvement projects to enhance technological capabilities and competitiveness in export markets.

The transition to new emission norms significantly impacted pricing. For engines below 50 horsepower migrating from BS-III to CEV 5, price increases were 12-14%. For CEV 4 to CEV 5 migration, the price difference was less. On a blended basis, the price differential due to technology changes was approximately 8-9%. The real impact of these price increases was felt in Q2, as previous quarters saw players clearing old inventory, contributing to sustained margin profiles.

Export revenue currently accounts for 4-5% of total revenue, with a medium to long-term target of 8-9%. Defense revenue is targeted at 7-8%. A significant rough terrain forklift order worth ₹420 crores for defense is delayed to Q4 FY26 due to a pending NOC regarding emission norms. The Ghana project remains on hold due to geo-political issues, with ACE awaiting advance payments or confirmed Letters of Credit before proceeding.