Elecon Engg hits new high on positive outlook; zooms over 2900% in 3 years

Shares of Elecon Engineering Company (EECL) hit a new high of Rs 594.25, as they rallied 6 per cent on the BSE in Thursday’s intra-day trade in an otherwise weak market on positive industry outlook. In comparison, the S&P BSE Sensex was down 0.38 per cent at 61,541 at 01:56 PM.

In past one month, the stock has surged 40 per cent, as compared to 2.4 per cent rise in the benchmark index. Further, in past one year, the market price of the company has more-than-doubled or up 206 per cent, as against 14.5 per cent gain in the Sensex. In past three years, the stock has skyrocketed a whopping 2,953 per cent from level of Rs 19.30 as on May 26, 2020.

EECL is engaged in manufacturing of industrial gear box and Material Handling Equipment (MHE). The company is largest manufacturer with seven decades of experience and expertise in Asia.

The company said growth outlook for gears and MHE segments remains positive on the back of strong demand from end user industries. The government’s growing attention towards infrastructure is expected to stimulate the capex cycle in cement and steel sectors, thus benefiting the company.

“The capacity creation in sectors like power, steel, mining, infrastructure, oil & gas, etc., is likely to drive growth in the engineering industry.

Technological improvement in manufacturing processes, cost advantage, diversification by global players away from China and supportive regulatory policies bodes well for the outlook of the industry”, the company said.

Looking specifically at India, the management is optimistic about the country’s economic growth prospects for FY24. The company retains its consolidated revenue target of Rs 2,000 crore with Ebitda at 22 per cent for FY24.

For January-March quarter (Q4FY23), EECL had reported 47 per cent year-on-year (YoY) jump in its consolidated profit after tax at Rs 68 crore. Revenue grew 28 per cent YoY at Rs 425 crore. Reported earnings before interest, tax, depreciation and amortisation (ebitda) increased 36 per cent YoY at Rs 93 crore, margin improved 120 bps at 21.9 per cent. The order book is also strong at Rs 714 crore on a consolidated basis as on March 31, 2023, provides revenue visibility over the near term.

Analyst’s opine that EECL’s revenues and accruals will be supported by its comfortable order book along with expectations of a healthy order inflow in the near to medium term. Also, the company will continue to benefit from its established track record in the transmission and the MHE segments.