Elecon Engineering Limited

Stock Opportunities
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I am not saying it not well priced. When i looked at elecon in 2021 it was running at 50% capacity and 18% margins and lot of sectors they focus on were doing very well. This led to sales growth margins expansion and PE expansion . There were all the required levers ( in highsight ) though it paid off .

Markets discount the expected growth rate . Question that needs to be asked is can PAT grow at 30-40% if yes how ? We cant forget its a business which depends on business which are cyclical sugar steel cement so expectation of PE needs to be accordingly.

Also track orderbook if orderbook doesnt grow at rapid speed it will not translate to topline and will impact margins if it slows.

One way to think about such business which i have started is ( if you didnt hold the stock ) in your portfolio considering curre t juncture would you buy it ? If answer is yes it makes all the sense to stay put otherwise its a sell .

I may be negatively biased as i dont hold.stock anymore. Its personal view. Dyod

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Thanks for sharing your thoughts. I can understand where you’re coming from, as it is also an old holding and you have experienced the growth & booked the gains. Certainly isn’t as cheap as when you added it.

Not sure if PAT can grow at 30-40% - not sure if anyone can reclaim the post-covid growth rates, anywhere.

I’m holding since 23 months, and haven’t sold a single unit as yet. Have been adding more during the recent fall.

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I have recently started looking into this company after recent price slump. What are your current views on Elecon Engineering?

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ELECON.pdf (637.8 KB)
My own research, I could be wrong, DYOR.
Disc: Invested. Position with highest draw down.

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Decent Quarterly Result from Elecon

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Good nos. Two opposing issues will come up in the next 2-3 years. One one hand, the global growth will be challenged if there is a slowdown in US and China. On the other hand, if Europe starts a large capex program for defence and power, then it could be benefecial.

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Elecon Engineering -

Q4 and FY 25 results and concall highlights -

Company’s product profile -

Gears -

Company is a supplier of widest range of Industrial gears

Serve mainly to Industries like - Power, Cement, Sugar, Steel, Plastic, Defence, Mining, Rubber

Company is already a mkt leader in domestic mkt and is strategically expanding in overseas mkts

Products in this segment include - Helical gearboxes, Series gearboxes, Worm gearboxes, Couplings, Planetary gearboxes, Marine gearboxes, Custom made gearboxes, Central drive mill gearboxes, Double helical gear wheel, Loose gears etc

MHE ( material handling equipment ) -

Products include - Feeders, Pulleys, Automatic Weighing, Stackers, Mobile stackers, Truck Loaders etc

End user industries include - Steel, Cement, mining, Fertilisers, Power, Ports, Oil and Gas

FY 25 outcomes -

Revenues - 2227 vs 1937 cr, up 15 pc
EBITDA - 543 vs 474 cr, up 15 pc ( margins @ 24.4 vs 24.5 pc )
PAT - 415 vs 356 cr, up 16 pc

Segmental revenue breakup -

Gears - 1763 vs 1669 cr, up 5.6 pc
MHE - 464 vs 269 cr, up 73 pc

Working capital days @ 77 vs 72
RoCE @ 27 vs 29 pc

Q4 outcomes -

Revenues - 798 vs 565 cr, up 41 pc
EBITDA - 195 vs 135 cr, up 44 pc ( margins @ 24.5 vs 24 pc )
PAT - 146 vs 104 cr, up 41 pc

Segmental revenues -

Gears - 597 vs 464 cr
MHE - 200 vs 101 cr, up 98 pc

Open orders as on 31 Mar 25 vs 31 Mar 24 -

Gears - 583 vs 536 cr
MHE - 365 vs 260 cr

Fresh order intake in Q4 FY 25 vs Q4 FY 24 -

Gears - 497 vs 412 cr, up 20 pc
MHE - 148 vs 144 cr, up 3 pc

Geography wise breakup of sales -

Domestic - 1710 vs 1479 cr, up 15.6 pc
International - 517 vs 458 cr, up 12.8 pc
Domestic : International sales @ 76:24

Some excerpts from management commentary -

  1. In Q4FY25, our Material Handling Equipment (MHE) division saw a remarkable 98.2% year-on-year revenue growth. EBIT margin stood at 29.6% with an improvement of ~820 bps Y-o-Y. We expect good momentum in this segment in the coming years. Our Gear division, in Q4FY25, also experienced a considerable rebound with growth of 28.9% in revenue and EBIT margin at 24.5%
  2. This resurgence has been driven by strong demand in both domestic and international markets. Domestically, demand has picked up meaningfully, particularly from the steel, power, and cement sectors. Overseas business remains healthy, with solid traction seen across international markets. The enquiry levels remain robust, and we are seeing healthy demand internationally
  3. We are steadily advancing towards our strategic objective of generating 50% of our consolidated revenue from international markets by FY30. Strengthening relationships with global OEMs and sustained brand-building initiatives continue to reinforce our confidence in achieving this milestone
  4. Our growth strategy is supported by strategic alliances with international partners, ongoing investments in R&D and product innovation, and a focused push within the high-growth MHE division. These efforts collectively position us to outperform broader industry trends and accelerate our domestic & global footprint. Our priority is to attain sustainable profitable growth creating long-term value for all our stakeholders

Company is looking to expand its presence in Canada and LatAm in order to compliment their presence in EU and US

Cash on books @ 550 cr

FY 26 guidance - Revenues of 2650 cr with EBITDA margins @ 24 pc. This represents an expected topline growth of 18 pc and EBITDA growth 16 pc for next FY

Order inflow in Q1 FY 25 was very slow. It started to pickup wef Q2

Order inflow from the steel sector was slow in FY 25 but the same is reversing meaningfully in Q1 FY 26. Gear sales from steel de-grew by 6 pc in FY 25

Power and Steel sector should be major growth drivers in FY 26. Demand from sugar sector continues to remain weak. Hoping for a turnaround going forward

Major contributors of sales in the gear division for the company are as follows -

Steel - 11 pc
Sugar - 4 pc
Cement - 9 pc
Power ( mainly thermal ) - 12 pc
Rest - others ( like marine, plastics, Off the Shelf sales, engineering, rubber, mining etc )

Expect to do a sales of 2000 cr from gears sector and 650 cr from MHA division in FY 26. Expect the export sales contribution to rise vs FY 25 ( should rise to around 27-28 pc in FY 26 vs 24 pc in FY 25 )

Company’s results are likely to be on the lumpier side as order flows and executions are never linear

Of the total gears business, 34 pc comes from replacement demand + after sales service

Sales to OEM this year were at 58 cr vs their guidance of 50 cr. This OEM business is primarily coming from Europe

MHA division is likely to be operating @ 23 pc margins. Gear division may be operating @ 25 pc kind of margins

Company is continuously expanding their global reach at a fast place. Order flow from global mkts may be slow to begin. However, once it picks up pace, the ramp up may be rapid. However the global geo-politics and tariff wars are a genuine concern

Wrt further expansion, company is focussing on ME, Canada, South America and SE Asia

For FY 26, expect Depreciation cost of around 75 cr and Finance cost of around 15 cr

Company is looking to win more business from OEMs in the western world. Once this is achieved, the order flows may become more predictable and their repeat business may also go up as a share of their total business

Disc: added recently, tracking position, not a buy/sell recommendation, not SEBI registered

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I have created an Excel sheet to track Elecon’s performance for FY25-26. Feel free to suggest any edits.
Elecon.xlsx (16.9 KB)

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