Action Construction Equipment Ltd (ACE) Q2 FY27 Earnings Call: Guides 18-20% Revenue Growth, Defense Order Book At Rs. 500 Cr

Best-Ever Q2, With a Rs.50 Cr Exceptional Boosting Reported PAT

• Consolidated revenue of Rs.932 crores, up 20.5% YoY — management described this as the best-ever Q2 FY 2026-2027 performance, with normalized EBITDA margin at 19.31%.
• EBITDA rose 30.2% YoY to Rs.180 crores — up from Rs.138.3 crores, expanding 143 basis points; profit before exceptional item and tax grew 35% to Rs.167 crores (normalized PBT margin 17.9%).
• Reported PAT of Rs.164.3 crores (17.62% margin) — includes an exceptional gain of Rs.50 crores from a slump sale to ACE Cato Private Limited in Q2 FY 2026-2027.
• H1 FY 2026-2027 total income of Rs.1,772 crores, up 20% YoY — normalized EBITDA of Rs.352.5 crores (up 25%, margin 19.89%) and profit before exceptional item and tax of Rs.325.3 crores (up 29.4%).
• 2,812 units sold across cranes, metal handling and construction equipment — up 20% YoY in Q2 FY 2026-2027.
• Other expenses rose sharply QoQ — CFO Rajan Luthra attributed this to variable costs scaling with the 20% top-line increase and a 100% expected credit loss provision on government receivables overdue beyond 180 days, which he described as a notional, non-cash provision.

Roughly Rs.800-1,000 Cr Order Book, Defense at Rs.500 Cr

• Total order book of roughly Rs.800-1,000 crores — per Saurabh Agarwal, comprising Rs.500 crores of defense, Rs.250-300 crores of non-defense, and Rs.50-100 crores of exports (current order book, Q2 FY 2026-2027); he declined to give a single overall figure, noting bookings roll with an average of about one month.
• Defense order book of close to Rs.500 crores — to be executed over the next one and a half to two years from FY 2026-2027.
• Defense guided to 5-6% of revenue in FY 2026-2027 — with exports close to 6%, for a combined 11-12% share in FY 2026-2027; analyst Siddhi Soni had put defense at around 6-7%.
• A large order of 74 backhoe loaders, worth about Rs.20-25 crores — from the Border Road Organization, scheduled for delivery in Q4 FY 2026-2027; the recently received Army backhoe order will mostly be executed in Q3 FY 2026-2027.
• Defense pricing is fixed once an order is frozen — Saurabh Agarwal said the January (FY 2026-2027) price hike does not apply to existing defense orders; inflation is built into defense quotes because the company has suffered from this in the past. On margins he said, "not much of a pressure, but yes, pressure."
• Defense-related crane supply in Q2 FY 2026-2027 of roughly 80-90 units — combined across two or three crane types, plus some construction equipment.

7-8% Price Hikes vs 10-12% Steel Inflation; More Action Likely in January 2027

• Price realizations up about 7-8% across product categories by end of Q2 FY 2026-2027 — a little over 3% was realized in H1 FY 2026-2027, with the 7-8% increase followed from October 2026 (Q3 FY 2026-2027).
• Raw material costs rose over 10-12% earlier in the year — the company took price hikes of up to 10% in Q2 FY 2026-2027 but realized about 8%, as steel prices eased in the second half of the quarter.
• Steel moved from about Rs.48-50/kg earlier this year to Rs.66-67/kg in October — prices rose again from end-September/early October by about 10-12% on levels already up about 20%; management said the rally may necessitate calibrated price actions in Q3 FY 2026-2027 and especially early Q4 FY 2026-2027.
• A further price increase is likely shifted to January 2027 (Q4 FY 2026-2027) — Saurabh Agarwal does not expect a margin impact from the increase, citing a 2-3 month inventory pipeline lag giving headroom until December 2026; he noted repeated price actions are "very painful" for repeat customers.
• Agri realizations very strong at almost 23% for H1 FY 2026-2027 — Vyom Agarwal attributed this to product mix and a certain export order, but described the domestic agri equipment outlook as subdued with industry demand moderating in FY 2026-2027; passing on pricing is becoming a little difficult in agri equipment.
• Management guided to 18-20% revenue growth for FY 2026-2027 — and expects to sustain EBITDA margins through cost efficiencies, product mix and operating leverage.
• Management is "very hopeful" that at least 55%, if not 60%, of revenue comes in Q3 FY 2026-2027 — noting about 55-60% of revenue is typically generated in the second half of the year; demand was robust in September and very good in October, with December expected strong ahead of the January price increase.

Japanese-Technology Heavy Cranes: Multi-Year Revenue Build

• Cato JV medium-term revenue possibility of Rs.300-400 crore over a 2.5-3 year period — with upgraded machines carrying Japanese inputs expected to be delivered from early FY 2027-2028; the JV with Cato Works Limited commenced operations in the prior quarter, aimed at the higher value-added heavy crane segment.
• JV crane segment (currently about Rs.50-60 crore revenue) expected to reach at least Rs.150 crore in FY 2027-2028 — growing in FY 2028-2029 and FY 2029-2030.
• Domestic sales of ACE Cato products expected to start in FY 2027-2028 — export-specific models to be developed in FY 2028-2029, with export revenue expected mainly from FY 2029-2030 onwards.
• Potential JV export revenue of Rs.200 crores to Rs.500-600 crores from FY 2028-2029, mainly from FY 2029-2030 onwards — as a 50-50 partnership, ACE can consolidate only 50%: about Rs.150 crores of consolidation if exports reach Rs.200-300 crores around FY 2028-2029, and about Rs.250 crores if exports reach Rs.500 crores around FY 2030-2031 to FY 2031-2032.
• JV target EBITDA margin of about 15% at operating level on the domestic market — Saurabh Agarwal said margins would be "a little less than 15, it can be 10, 12%" in FY 2027-2028, normalizing to 15% in the second year, excluding any anti-dumping duty or DLI benefit.
• New product lines: container reach stackers and piling rigs to start over the next 1 to 2 years — each new line estimated to have potential of at least Rs.150 to 200 crore of revenue within 2 to 3 years of starting operations (period unspecified); the aerial work platform and access platform business has recently started.

Utilization at 70-75% in Q3; Rs.80-100 Cr Capex Plus a Rs.400 Cr Tower Crane Option

• Capacity utilization of 55% at end of Q2 FY 2026-2027, close to 70-75% at current levels (Q3 FY 2026-2027) — about 50% of capacity is fungible across mobile products (back-end fabrication and painting are "very much fungible"), while tower cranes are not fungible with any other product; existing capacity can support about Rs.5,500-6,000 crore in revenue.
• FY 2026-2027 capex of about Rs.80-100 crore — a new plant of Rs.40-50 crore (defense machines and new products), Rs.30-40 crore for robotics/automation, and about Rs.20 crore maintenance; a land registry payment of about Rs.130 crore plus or minus may also fall in FY 2026-2027, subject to regulatory processes.
• A larger tower crane capacity expansion of at least about Rs.400 crore is planned — about Rs.50 crore of land already procured; go/no-go decision expected by end November or December, with execution in Q4 FY 2026-2027 or Q1 FY 2027-2028 depending on the geopolitical situation.
• Inventory rose from Rs.605 crore to Rs.832 crore in the quarter — attributed to the seasonal H2-weighted pattern (55-60% of revenue) and large government orders for RTFLT and HRV products; about Rs.100 crore of inventory is defense-related and expected to normalize by December 2026, with most normalizing by December 2026 or March 2027.
• Customer advances of roughly Rs.150 to 200 crores — CFO Rajan Luthra said margin money is taken from most retail customers and on defense and export orders; net borrowing rose about Rs.144 crores in H1 FY 2026-2027 against cash and investments of about Rs.1,570 crores as of September 2026.
• Average cost of borrowing at about 7%, with an alpha of about 3 to 4% earned on investments — attributed to the company's AA rating; short-term borrowings to normalize by end of December 2026 (Q3 FY 2026-2027) and definitely by end of March 2027 (FY 2026-2027); about 70 to 80% of the investment portfolio is totally liquid.
• As revenue approaches Rs.5,000-5,500 crore in the next one or two years, margin expansion of about 2-3% is possible — though some benefit may be passed to customers, as about 50% of the market is rental.

Chinese Competition, Anti-Dumping and Inorganic Ambitions

• Chinese players have taken 25% market share in the excavator industry over the last 5-6 years — through predatory pricing and credit terms, per Saurabh Agarwal; ACE is not present in excavators or heavier mining trucks.
• ACE Cato cranes with Japanese technology expected to command at least a 15% premium over Chinese products (period unspecified) — the company may also export some of these cranes from India; a Chinese tie-up could be considered only if it is an Indian-majority structure.
• High courts in India have directed the ministry to apply provisional duties on DGTR orders in 7-8 cases over the last 6-7 months — per Saurabh Agarwal; the company's own anti-dumping case is still pending, with an outcome expected in the next one or two months (around Q3 FY 2026-2027). He said the finance ministry's position is no, but the judicial system of India could still decide the matter.
• Rupee moved from 86-87 to 96-97 per USD over the last year, easing to about 93 — Saurabh Agarwal said a 2-3% move in recent months does not matter much, while an 8-10% move would add a barrier to Chinese imports.
• Inorganic growth is now a focus, with several opportunities being worked on — key criteria are right valuation, a moat or competitive advantage, and a bright future; a target could be a smaller company "up to a Rs.4,500 crore," and the company "will never go overboard."
• H1 FY 2026-2027 required the company to "remain agile and prudent" — management remains constructive on the medium to long-term industry outlook, citing sustained infrastructure investment, improving demand conditions, and greater mechanization; building capacity ahead of demand was flagged as important to sustaining market position.