Elecon Engineering
A Trusted Industrial Gearbox & Material Handling Equipment Manufacturer
Elecon Engineering Company Limited is a renowned industrial engineering firm, specializing in the manufacture and supply of a broad range of material handling equipment, industrial gears, and power transmission products.
Asia's Largest Industrial Gearbox Manufacturer
With over six decades of experience, Elecon has established itself as Asia's largest industrial gearbox manufacturer, with a global footprint spanning across all continents.
Innovation Through Advanced Manufacturing
Elecon designs and manufactures an extensive range of worm, parallel shaft, right-angle shaft, helical, and spiral bevel helical gears with horizontal and vertical output shafts. These products come in various sizes, ranging from single to quadruple stage reductions, ensuring versatility in industrial applications.
Financial Performance
·        Net Sales: ₹2104 crore (2021) →₹1915 crore (TTM)
·        Operating Profit: ₹186 crore (2021) →₹467 crore (TTM)
·        Operating Profit Margin: 18% (2021) → 24% (TTM)
·        Net Profit: ₹58 crore (2021) →₹356 crore (TTM)
·        Earnings Per Share (EPS): ₹2.57 (2021) →₹15.87 (TTM)
·        Return on Equity (ROE): 24.50%
·        Return on Capital Employed (ROCE): 31.30%
·        Price-to-Earnings (P/E) Ratio: 43.80, compared to the industry
average of 46.10
Consolidated net free cash surplus stood at ₹500 crore as of June 30, 2024.
Order Book
As of Q1 FY '25, Elecon secured order inflows amounting to ₹545 crore, with total open orders valued at ₹947 crore as of June 30, 2024.
Credit Rating
Elecon Engineering's long-term credit rating has been upgraded to [ICRA]AA (Stable), and its short-term rating has been reaffirmed.
Diverse Client Base
Elecon caters to a wide range of industries with its expansive product portfolio, serving clients in sectors such as:
Power: Supplying material handling equipment to thermal and hydro-electric power plants.
Cement: Providing industrial gears and conveyors for processing and transporting raw materials.
Steel and Metal: Offering material handling solutions for heavy operations.
Mining: Supplying heavy-duty equipment and gears for excavation and transport.
Ports and Shipping: Delivering ship loaders, unloaders, and conveyors for cargo handling.
Fertilizers and Chemicals: Supporting bulk material handling for the fertilizer and chemical industries.
Sugar: Supplying equipment for conveying and processing in sugar factories.
Automotive: Providing gears and transmission products to automotive manufacturers and suppliers.
The company regularly collaborates with both public and private sector entities within these industries.
Future Outlook
Elecon’s prospects appear robust, fueled by multiple growth drivers and strategic initiatives:
Growing Demand in Core Sectors: Elecon’s strong presence in the industrial gears and material handling equipment market positions it to benefit from growth in sectors such as cement, power, steel, and mining. The government's focus on infrastructure development, especially in India, is expected to further drive demand for Elecon's products.
Global Expansion: Elecon is actively seeking to expand its international footprint, particularly in Europe, and expects substantial contributions from overseas markets by FY25.
Technological Investments: The company continues to invest in research and development to enhance product quality, reduce lead times, and develop innovative solutions, helping it maintain a competitive edge both domestically and internationally.
Improving Profit Margins: Elecon has demonstrated impressive financial growth, with improving EBITDA and PAT margins driven by operational efficiencies and increased order intake. The company has set a revenue target of ₹2000 crore for FY24, signaling continued profitability.
Diversification and After-Sales Services: Elecon is focusing on diversifying its product offerings and expanding its after-sales services, particularly in the material handling equipment division.
Overall, Elecon's strategy of global expansion, operational efficiency, and focus on high-growth sectors positions the company well for future success, supported by favorable economic trends and government policies.
Recent Red Flags
Recently, Elecon experienced a significant drop in its stock price, with shares declining over 15% due to lackluster Q1 financial results. The company reported a 29.22% decrease in quarterly net profits compared to the previous period, raising concerns about potential profitability challenges after a strong period of growth. Contributing factors may include rising costs, slower-than-expected order inflows, or short-term operational inefficiencies.
Chart
Technical Analysis
From a technical standpoint, Elecon’s stock has shown considerable momentum, with significant upward movement supported by positive market sentiment.
Price Action: The stock has consistently traded above key resistance levels, nearing Rs 695, while standing at the crossover of the 20-day over the 50-day SMA. It is entering a zone with no major resistance.
Chart Patterns: The weekly chart suggests Elecon is forming a rounding bottom pattern, a bullish reversal signal indicating the potential end of a downtrend and the start of a new uptrend.
Moving Averages: The stock is trading above its 20-day, 50-day, and 200-day moving averages, a positive indicator suggesting strong buying pressure.
Volume Analysis: Rising volumes during upward price movement indicate strong buying interest, further confirming the bullish trend.
Momentum Indicators: The Relative Strength Index (RSI) suggests Elecon has not yet entered the overbought zone, leaving room for further price growth.
In conclusion, technical indicators signal continued bullishness for Elecon’s stock, though it is advisable to monitor for potential pullbacks as the stock approaches overbought levels.
Disclaimer: This document is for informational purposes only and does not constitute investment advice. All opinions expressed are personal and may contain errors.