Themes of India: Construction Equipment Industry - Sudarshan Bhandari (smartkarma.com)
This is behind a paywall, so only for paid subscribers. But guess if articles start showing up, indirectly there is interest in Analyst community, lets hope its positive.
Updates for May Volumes in Vahan Registrations:
- 873 for May month
- Minor changes in VAHAN data for earlier months.
- Seasonal trend + Election related slowdown (MoM) was obvious in Apr & May. YoY the numbers are better.
- June will be crucial to see a pickup in volumes
As Mr Agarwal has previously iterated that Monsoon months are lean period for them however the traction in Infra if continues then numbers would be slightly higher as compared to same months in previous year but don’t expect a big jump. Post monsoon activities will pick up pace so does the numbers for ACE.
Disc: Invested from covid lows.
With the government’s focus back on the agriculture sector and good monsoons, can we expect ACE’s agri division to benefit?
+
Conservative guidance debunked -
Q4FY23
Delivered - 35% growth in revenue and 103% growth in PAT.
Q4FY24
Deja vu? I believe the margins will shoot up by another 200 BPS easily, considering the fact that the capex on cranes and material handling is now complete there is no slowdown in the infra story of India whatsoever, and the CEV V norms.
While promoter selling stakes isn’t necessarily bad, for they can do so for myriad reasons just thought it is worth pointing. Took entry recently more as a technical bet coming out of a decent 3 month consolidation.
Finally it comes, although not finalized, but seems the market rumours on 18th June has triggered this Exchange filing. Seems going the Escorts way, (possibly not confirmed) JV with Japanese player first, then possible equity and then finally takeover. Incase of Escorts this took 5+ years from initial JV.
“Pursuant to Regulations 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that we are currently in discussions with KATO WORKS CO LTD., a Japanese global construction equipment manufacturer of Mobile Cranes, Excavators and other equipment (hereinafter referred to as KATO) to establish a joint venture in India, and the two Companies plan to sign a formal contract as soon as they reach an agreement on the terms.” Detailed Exchange Filing on JV Notification Link
More details on KATO below. Note: 1 INR ~ 1.9 JPY
Business Profile: KATO WORKS CO., LTD.
Company Overview
- Founded: 1895
- Established: 1935
- Headquarters: Shinagawa-ku, Tokyo, Japan
- CEO: Kimiyasu Kato
- Employees: 1,009 (as of March 2023)
- Industry: Manufacturing of mobile cranes, construction, and industrial equipment
Product Range
Kato Works Co., Ltd. specializes in the development, manufacturing, and sales of various heavy machinery and equipment, including:
-
Mobile Cranes
- Rough Terrain Cranes
- City Range Cranes
- All Terrain Cranes
- Truck Cranes
- Crawler Cranes
-
Construction Equipment
- Hydraulic Excavators
- Mini Excavators
- Earth Boring Rigs
- Crawler Carriers
-
Industrial Equipment
- Vacuum Trucks
- High-Speed Street Sweepers
- Snow Sweepers
- Compact Track Loaders
Financial Data (in Million JPY)
Kato Works’ financial performance over the past five years has shown variation in revenue and net income. Refer to (PitchBook) (Investing.com)…
Strategic Initiatives
Kato Works is committed to sustainability and has been focusing on developing and commercializing models aimed at achieving carbon neutrality. This focus aligns with the global emphasis on environmental considerations and positions Kato Works as a forward-thinking leader in the heavy machinery industry (Kato Works)…
For further detailed financial statements and company updates, you can visit Kato Works’ Investor Relations page (Kato Works).
Stock Performance Details
- Stock Symbol: 6390.T (Tokyo Stock Exchange)
- Current Stock Price: ¥1,297.0 (as of the latest trading day)
- Market Capitalization: ¥15.2 billion
- Shares Outstanding: 11,716,844
- 52-Week Range: ¥1,097.0 - ¥1,575.0
- Beta: 1.088 (a measure of stock volatility in relation to the market)
- Dividend Yield: High dividend yield indicating strong returns to shareholders (Financial Times) (Investing.com).
Price-to-Earnings (P/E) Ratio
- Current P/E Ratio: 4.65
Might make sense to buy KATO on Nikkei 
Revenue wise it is similar than ACE for this yr, but ACE might grow much much faster in next 3-5 years. Also ACE profitability is much higher. ACE should reverse merge
The numbers in their presentation are different. Can you please help regarding where these numbers were posted?
I’m trying to understand the rationale of this?
- do they get access to higher product catalogue?
- do they get to utilise Kato’s global distribution network for distributing their own range?
- what’s the strategic rationale for JV?
June End VAHAN Regn Numbers for ACE -
- 904 Regn in June till now, higher than May, Apr.
- 2625 Q1 FY25 versus 2559 in Q1 FY24 YoY, 3079 Q4 FY 24 for QoQ
- If similar number continues, we will see 10K for the year,
I can see the ACE cranes all over here in Hyderabad. This really gives me conviction of staying invested in ACE. I’ve been here since quite a while now and I can only see the construction activities growing like anything. Not just new buildings are erected but the old ones are moving into redevelopment as well. So the future seems bright for ACE.
Hello all. I had a question reg the shareholding at ACE. Clearly, the stock has done exceedingly well post March 2020 along with a solid increase in earnings. The story is pretty straightforward and part of the infra/capex theme that the market clearly loves right now. So the question then is, why is it that MF holding in ACE is only at 0.4%? This was near 2.9% in the Sept 2022 quarter which in itself was quite low. At a market cap of 17000 cr+ with a 34% free float, its a little surprising that MFs have such low exposure to such an obvious infra/capex name. While there is nothing wrong in this and there will always be exceptions, one of my filters for determining any unknown CG/quality issues is to see MF holding % which seems a little odd in this case. Similarly, there doesn’t seem to be much active sell side coverage for this name either considering its size and the sector it operates in (this is probably a function of the earlier mentioned issue itself i.e. lack of enthusiasm from MFs/DIIs towards this name).
Any thoughts?
Disc : Invested for several years
I think numbers aren’t going to remain the same, they will only improve as there was a demand slowdown due to elections.