Eimco Elecon (India) Ltd
Leading Manufacturer of Mining Equipment
Overview: Eimco Elecon (India) is a well-established leader in the manufacture and supply of mining and construction equipment in India. Supported by a nationwide network of sales and service centers, the company offers a diverse product portfolio that caters to the needs of the mining industry.
Product Portfolio: Company specializes in underground coal mining machinery and components, offering products such as wheel loaders, dump trucks, haulers, and drilling machines.
Exports: In FY22, export revenue constituted less than 1% of total sales. However, Eimco Elecon is exploring export opportunities, particularly for its construction equipment, in emerging markets across Southeast Asia and Africa.
Research and Development (R&D): In FY22, the company's R&D expenditure increased to 2% of total revenue, up from 1% in FY21. Key partnerships include a consultancy agreement with Bormex Engineering (Brazil) in 2017 for a Continuous Miner Package and a collaboration with CZM USA Corp. in 2018 for piling rigs.
Financials and Future Outlook:
1. Financial Performance:
Revenue (TTM): ₹2.53 billion
Net Profit: ₹471.08 million
Gross Profit: ₹1.18 billion
EBITDA: ₹527.09 million
Operating Income: ₹458.89 million
Valuation Metrics:
PE Ratio (TTM): 36.51
Enterprise Value: ₹17.06 billion
Market Cap: ₹17.20 billion
2. Revenue Growth and Order Book: Eimco Elecon has maintained profitability, reporting revenue of ₹2.53 billion and a net income of ₹471.08 million over the past 12 months. The company secured new orders worth over ₹100 Crore in 2024 from clients such as JMS Mining and Inderdeep Construction, promising significant revenue growth in the upcoming years.
3. Profit Margins and Efficiency: With a gross profit margin of 46.75% and a net profit margin of 18.59%, the company has solid profitability. However, rising operational costs could present challenges in maintaining these margins. The Return on Capital Employed (ROCE) has improved to 12%, reflecting efficient capital use. Strong operating and free cash flows indicate the company’s ability to sustain operations and fund future growth.
4. Debt and Financial Health: Eimco Elecon's financial stability is noteworthy, with a debt-to-equity ratio of 0.00, signaling no long-term debt obligations. Additionally, the company holds a net cash balance of ₹141.18 million, providing ample liquidity to weather economic downturns or capitalize on growth opportunities.
5. Risks and Challenges: Despite strong financial health, the company faces risks, including a potential reduction in client demand as seen with the recent decrease in orders from JMS Mining. This unpredictability could impact future revenue. Additionally, Eimco Elecon’s high valuation raises concerns about a stock price correction if earnings growth falls short of expectations.
Future Outlook:
The long-term outlook for Eimco Elecon (India) Ltd. remains positive, bolstered by key factors such as:
New Orders and Market Expansion: Recent contracts, including a ₹39 Crore order from JMS Mining and a ₹61 Crore order from Inderdeep Construction, are expected to fuel revenue growth. The company aims to capitalize on the rising demand for coal production, supported by clients like Coal India and Singareni Collieries.
Rising Demand for Mining Equipment: As the Indian government intensifies efforts to boost domestic coal production, demand for mining equipment is expected to rise. Eimco Elecon is poised to benefit from this trend by expanding its product range and services.
Strong Financial Position: Despite recent revenue and profit declines, Eimco Elecon remains financially robust with more cash than debt and consistently positive cash flow generation.
Improved Return on Capital: With a ROCE of 12%, Eimco Elecon demonstrates efficient capital use and increasing reinvestment potential, reflecting strong long-term growth prospects.
Global Expansion: The company continues to diversify by entering international markets, especially in Africa and Southeast Asia. This reduces reliance on the domestic market and opens new revenue streams.
In conclusion, while there are some short-term profitability challenges, Eimco Elecon’s financial stability, strategic positioning, and expanding order book indicate a favorable long-term growth trajectory.
Weekly Chart:
Technical Analysis:
The technical analysis for Eimco Elecon presents a mixed but overall positive outlook:
Moving Averages: Long-term indicators (50, 100, and 200-day moving averages) remain strong, with the stock trading significantly above its 200-day moving average of ₹2127, indicating bullish momentum.
Relative Strength Index (RSI): The current RSI of 48.34 suggests neutral territory, indicating that the stock is neither overbought nor oversold.
Volatility: With an ATR (Average True Range) of 63.64, the stock is experiencing high volatility, which may result in unpredictable price movements.
Conclusion:
Short-Term Outlook: Weak, with indicators showing selling pressure and high volatility.
Long-Term Outlook: Positive, with the stock exhibiting strength over an extended period despite short-term corrections.
In the past 52 weeks, Eimco Elecon's stock price has surged by over 207%. Despite the short-term volatility, its long-term prospects remain favorable due to strong fundamentals and growing demand in the mining sector.
Disclaimer: This document is for informational purposes only and does not constitute investment advice. All opinions expressed are personal and may contain errors.
a perfect study about the company.