Elecon Engineering Limited

Management is walking the talk.
Substantial reduction in interest cost…from 12 cr of interest cost in Q2 to 4.82cr in Q3.

Waiting for Q3 earnings call to hear from the management.

4 Likes

Results seems to be fine. Gear divison business seems to be doing well. Capacity utilisation can go up and that can aid in margin expansion.
Can do a 20% growth in gear divison as per management on topline in gear division provided Navy order also materialized which they are hopeful will flow in.
Debt reducing which will be beneficial which will lower interest cost .
With boost to infrastructure and industry they cater to power, steel and others looks like next 2 years will be good for business.

Insider buying 35000 shares purchased by aakash mechatronics group company of elecon

  • Standalone manufacturing segment in 3y, from 650-700 now to 1500 crores
  • To scale up exports, from 100-150 now to 300-400 crores
1 Like

Once they get debt free we can see some P/E re-rating happening.
Management is confident to be debt free before timeline.
Also interest cost will be saved and be added to bottom line.
As company has only 60% capacity utilized with growth ticking in next 1-2 years will be good driver.

Have been seeing this company since some 15 years .

Since steel cement and other industries doing well this is a good proxy play for the same.

5 Likes

Good results and company on track to become debt free.

3 Likes

Imp points from Q4FY 22 Con call

• All overseas entity profitable & same to increase
• To invest in marketing activities to scale brand
• 410 Gear orders 5 months+127 MHE is 8-10 months order book- If things show traction can ramp up
• On April 30- 490 cr order book Gear division
• Exploration of new growth avenues to strengthen utilization levels
• 1500 cr fy24 revenue target - standalone
• 100cr capex over 2 years from internal accruals only
• Export to be 50% by fy 2030
• MHE Business retention money – No overrun costs pending for legacy projects, 2 projects money to be received, all 3 executed, near 100 cr, Majority to be received this year or max by Sep 2023
• EBITDA margin 15-20% for MHE business
• Growth of 30% expected be in gear business & margin to further improve
• Have 5 months order based on current year targets with healthy margins
• Debt reduction savings to add in bottom-line
• 12 cr interest cost for FY23
• Raw material price increase will not affect much as 5-10 days is the quotation validity
• New orders in MHE division is for products & payment terms & margins are very good. No retention money
• After sales service margin at 25%
• Passing of price is not being that difficult
• CAPEX – Large amt will be for alternative energy solar & wind
• Few machine tools which have aged will be replaced with new tech
• Some buffer for capacity expansion
• Gear capacity utilization at 65%
• Standalone 1500cr guidance
• Gear division 10-12% exports likely 15-17% this year end & ultimately 50% level is strategy
• Have got some opportunities in USA to start & our execution & references will act in our favor as its just entry point. Similar situation is starting to play out in South America
• Majority orders from Steel then cement & then sugar
• Recession will be a risk & avoiding debt will be key
• Capacity utilization for standard products 4-6 weeks. Right now, not utilizing sub-contractors, that provides a further opportunity to expand
• Steel orders expected in both Gear & MHE division
• With minimal CAPEX company can cater to maximum opportunity
• Gears export share q4 – 14%
• Market on overall basis is expanding
• Gears after sales revenue on sustainable basis -20 to 25%
• For Benzler Radicon Sustainable EBIT margins to be 18-22%
• No shortage expected at foreign entity level due to capacity – only labor can be issue. Demand is growing there in range of 10-15%
• For strategic acquisitions it will either be through internal accruals or through a strategic investment
• Steel plants will go ahead and put capacity, irrespective of inflation as they feel capacity will required for nation to expand. So demand does not hamper.
• Competitors include Shanti gears, premium gears, Flendor.

5 Likes

Can some one share latest conference call link
Can’t locate the same