Q3: Why do you like Action Construction?....

This company went public in September 2006 and is mainly into material handling equipment. They have a plant at Faridabad. They make mobile cranes, construction equipment and now are increasing their capacity by 200%. For this, they went public and collected money. Expansion is to be completed in two phases, of which the first phase got completed in January 2007; the second one will be completed in July or August.For FY07, before the expansion completes, the company is likely to post an EPS of close to Rs 10. Obviously some of the expanded capacity performance will get reflected into the last quarter, but otherwise also, if you take the overall performance that has come from the old plant, the EPS is likely to be Rs 10 on an equity base of Rs 10 crore. For FY08, the company may post a topline of around Rs 400 crore with bottomline of Rs 30 crore translated into an EPS of about Rs 16-17 and these are the conservative figures. Material handling equipment companies generally carry high P/E multiple, have a strong order book, strong demand and also have strong presence of exports in the Middle East and African markets. Taking all these into consideration, the share at Rs 195-200 appears to be an excellent buy and a return of 50% can be expected by the investor over the next one-year.