Elecon Engineering Limited

rahil_sayta · March 4, 2025, 5:41pm

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

Moonrise · March 5, 2025, 5:30am

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.

Aazeb_Parbatani · March 20, 2025, 7:24am

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

k3311 · March 20, 2025, 7:44am

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

raviinvestor · April 24, 2025, 11:36am

Decent Quarterly Result from Elecon

basumallick · April 25, 2025, 6:28am

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.

ranvir · May 5, 2025, 1:39pm

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 -

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%
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
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
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

sharadh_bhat · June 8, 2025, 7:23pm

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)

ranvir · July 13, 2025, 10:52am

Elecon Engineering -

Q1 FY 26 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

Q1 outcomes -

Revenues - 491 vs 392 cr, up 25 pc
EBITDA - 130 vs 92 cr, up 41 pc ( margins @ 27 vs 24 pc )
PAT - 175 vs 73 cr ( includes an exceptional pre tax item of 108 cr )

Exceptional items include - one time arbitration settlement claims of 25 cr in MHE division ( included in segmental revenues ) + another one time arbitration claim of 10 cr + MTM gain in their investments in one of their associate companies - Eimco Elecon to the tune of 80 cr

Order book intake in Q1 @ 614 cr, up 13 pc YoY

Total order book now stands @ 1110 vs 947 cr YoY

Segmental performance in Q1 -

Industrial gears -

Revenues - 357 vs 337 cr, up 6 pc
EBIT - 66 vs 80 cr, down 17 pc ( margins @ 18.4 vs 23.7 pc )

Margins were impacted due to accelerated depreciation because of new capacities that went live in Q1, increased employee costs, increased brand building activities related spends for International mkts. As the capacity utilisation of newly commissioned capacities improve, margins should start to see an uptick

Order intake @ 480 vs 396 cr, up 21 pc
Total order book @ 710 vs 598 cr, up 19 pc

Seeing steady demand coming from domestic power, steel and cement industries. Enquiry levels remain encouraging across domestic and international markets

MHE -

Revenues - 133 vs 56 cr, up 139 pc ( includes 25 cr of additional revenue recognition due favourable award of arbitration proceedings )
EBIT - 61 vs 14 pc, up 335 pc ( margins @ 46 vs 25 pc )

Order intake @ 134 vs 149 cr, down 10 pc
Open orders @ 400 vs 349 cr, up 15 pc

Even without considering the 25 cr of arbitration revenues in the MHE segment, the division’s revenues have almost doubled !!!

Geography wise revenue split for Q1 FY 26 -

Domestic - 357 vs 259 cr, up 41 pc ( domestic business did have a favourable base in Q1 )
International - 124 vs 133 cr, down 7 pc ( international business did have a high base in Q1 )

Segment wise revenue split for Q1 FY 26 -

Industrial gears - 357 vs 337 cr, up 6 pc
MHE - 133 vs 56 cr, up 139 pc

Adjusted for the 25 cr additional revenues recognised in the MHE division, consolidated revenue growth in Q1 would have been 18 pc instead of reported 25 pc growth. EBITDA growth would have been 14 pc instead of reported 41 pc with margins @ 22.6 instead of reported 27 pc margins. For full FY 26, company aspires to clock 24 pc EBITDA margins

Strong order book and continued enquiry levels make the company feel confident for better performance for the rest of the FY

MHE segment’s strong growth in Q1 led by Power, Steel and Cement sectors

Cash on books @ 550 cr. Capex planned for next 3 yrs @ 435 cr. 400 cr for the gears division and 35 cr for the MHA division

Company lost aprox 14 cr of sales in international sales due Iran - Israel tensions. Should be able to make up for these lost sales in Q2. This aside, company expects their exports business to pick up wef Q2 ( specially wrt supply to ME )

In the gears division, order inflows from International geographies in Q1 were @ 119 cr, up 10 pc YoY

Company expects to realise another 20 cr of gains from arbitration awards in next 12-15 months

They believe, they r on track to achieve 2650 cr of revenues for FY 26 ( assuming 24 pc margins, yearly EBITDA should be around 630 cr vs 543 cr that they clocked in FY 25 )

Over and above the Steel, Cement and Power sectors, company expects to start getting orders form defence sector wef FY 26 ( 200 cr this year and even bigger orders wef next FY - wrt Defence sector )

Expect to start clocking 24 pc EBITDA margins wef Q2

MHE division is expected to clock 650 cr in revenues with 23 pc EBITDA margins for FY 26

For FY 26, annual depreciation should be around 100 cr vs 61 cr in last FY

Seeing good order uptake in MHA business wef July ( in Q2 ). Order inflow for MHA division in Q1 was on the weaker side

No of OEM customers that company has now stands @ 18 ( for gears business ). Company expects to start accruing good revenues from this revenues wef Jan 26 ( to the tune of 70- 100 cr / yr )

32 pc of gear division revenues came from service + refurbishment + spares !!!

The bigger defence sector order that the company expects to win in next FY should be around 1000 cr - to be executed over 3 yrs

The service component in MHE division in Q1 stood @ 41 pc - very healthy levels

In gears division in Q1, company clocked 43 pc revenues from engineered products vs 57 pc revenues from standard products. Engineered products have a higher margin and generally the revenue contribution from these 2 segments is @ 50:50. Lower contribution from engineered products in Q1 led to margin pressures in Gears division in Q1 ( + the effect of added depreciation - as brought out earlier ). Expecting a pickup in sales of engineered products wef Q2

Disc: holding, biased, not SEBI registered, posted for educational purposes only, not a buy/sell recommendation

rujuta_tamhankar · July 15, 2025, 10:23am

On What basis have you considered the growth rate? order book is only Rs1110 cr vs Revenue of 2227cr

sharadh_bhat · July 17, 2025, 4:32am

My projections are based on management guidance with bull/bear scenarios. I’ve been tracking the company for about a year now, and they’ve been reliable from what I’ve seen. As far as revenue is concerned, the order book has been growing YoY for several quarters, and if you add after-sales service and fresh order intakes from upcoming quarters, it’s bound to rise further.