Action Construction Equipment vs. Sanghvi Movers: Analyzing Two Giants in India's Booming Infrastructure Sector"

Action Construction vs Sanghvi Movers: Which Stock is Better?

In Union Budget 2023-2024, capital investment outlay for infrastructure was increased by 33% to US$ 120 billion, marking 3.3% of the GDP. As India moves towards becoming a 5 trillion economy, infrastructure remains the key driver of economic growth, boosting the demand for construction equipment. Post-Covid, the Indian construction equipment industry has experienced remarkable growth, driven by government initiatives. Globally, the Indian construction equipment industry ranks third, following the US and China.

Industry Growth and Future Expectations

The Construction Equipment Industry (CE) Vision Plan 2030 by the Indian Construction Equipment Manufacturers Association (ICEMA) aims for the Indian CE industry to become the world’s second largest and fastest-growing, with threefold export growth and a market size of US$ 25 billion by 2030. In FY24, the industry saw a 26% rise in sales to 135,650 units due to the government’s infrastructure agenda, surpassing all projections. The handling equipment segment, especially cranes, saw a sharp spike. Material handling equipment recorded a 61% growth in sales volume, driven by rising investments in infrastructure development and the manufacturing sector.

Company Overview

Action Construction Equipment (ACE)

ACE is India’s leading material handling and construction equipment manufacturing company, holding a majority market share in mobile cranes and tower cranes. The company offers a wide range of products, including mobile/fixed tower cranes, crawler cranes, truck-mounted cranes, and more. ACE exports to over 37 countries and has recently secured contracts to set up an assembly plant for manufacturing tractors and agricultural implements. The company plans further capacity expansion and aims to reach a revenue target of Rs 44 billion by FY26.

Sanghvi Movers

Sanghvi Movers Limited (SML) provides hydraulic and crawler cranes to various infrastructure sectors. The company offers medium to large-size cranes on a rental basis and engages in heavy lift and plant maintenance jobs. SML serves industries like power, steel, cement, and windmill sectors. The company received a work order worth Rs 1.7 billion in December 2023, with its order book standing at Rs 4.3 billion as of April 2024. In FY24, SML sold 32 cranes, generating a profit of Rs 156.3 million.

Market Share and Positioning

ACE is the world’s largest pick & carry cranes manufacturer with over 63% market share in the mobile cranes segment in India and over 60% in the tower cranes segment domestically. Sanghvi Movers, on the other hand, is the largest crane rental company in India and Asia, and the sixth largest globally, with a 40-45% market share in the domestic crane rental market.

Capacity Utilization

For the quarter ended September 2023, Sanghvi Movers had an average capacity utilization of 82%, compared to ACE’s 60%. The monsoon season slightly disrupted Sanghvi’s operations, but it still maintains an upper hand in capacity utilization.

Future Plans

ACE aims to increase export contributions to its revenues and tap opportunities in the defense sector. It is betting on new products like India’s first electric mobile crane and other advanced cranes. Sanghvi Movers is diversifying to offer engineering solutions, including manpower and project planning for EPC heavy lifts and renewable wind energy.

Stock Performance (ACE vs. Sanghvi Movers)

In terms of stock market performance, ACE has outperformed SML, giving a 238% return compared to SML’s 172% return in the last year. Over the past five years, ACE has a CAGR of 74.5%, while SML has a CAGR of 57.4%.

Financials

ACE’s operational revenue increased by 32.5% in FY23, achieving its highest yearly revenue and profit. The company saw growth across all segments, with cranes growing by 38.4%, construction equipment by 41.5%, material handling equipment by 11.2%, and agri equipment by 6.8%. SML’s operational revenue increased by 35.9% in FY23, driven by higher capacity utilization.

As infrastructure projects gain momentum post-elections, the demand for cranes is set to soar. ACE expects at least 20% growth in metal handling and agri-segments and is investing in a new manufacturing facility. Sanghvi Movers has diversified beyond the wind sector and is set to benefit from new product developments and capacity ramp-ups.

In Conclusion, Both Action Construction Equipment and Sanghvi Movers are poised for growth in the booming infrastructure and construction sector. While ACE leads in stock performance and market share in mobile cranes, SML excels in capacity utilization and crane rentals. Investors should consider their long-term potential and strategic plans for diversification and innovation.