[stock_ticker symbols=”ELECON” show=”name” static=”0″ nolink=”” duplicate=”1″ class=””]

12-Jun-2016 : Elecon Engineering is one of the largest Asian manufacturer of material handling equipment, industrial gear systems and mining equipment.

For 2015-16 Q4, the company has reported a muted result. The company has posted a de-growth of 10% YoY for the consolidated net total income from operations,. The net total income came down from 464.03 crore to 414.69 crore. The operating profit also came down from 64 crores to 57.94 crore, a decline of 9.5% YoY. Subsequently, the consolidated net profit decreased by 10% to 28.38 crores.

For the entire year, the consolidated net total income declined by 2.8% to 1285.34 crores. Operating profit declined from 98.18 crore to 83.86 crore. However, the net profit increased by 134% to 38.21 crores courtesy to other income and lower finance cost.

The muted performance of the company is mainly because of the material handling division, where the income has de-grown from 517 crores to 480 crores for the entire year.

However, the performance of the European operation, which has turned profitable, is one of the bright spots. Providing the European performance is stable, we may see good traction in domestic operation as there are some green shoots visible within the capex cycle. Elecon being one of the key players in transmission and material handling segment, is definitely having the competitive advantage.

Recently, the company has bagged an order of Rs 300 crore contract from Mazagon Dock Shipbuilders for an order to supply marine gear boxes. From the government as well, the company has received an order of Rs 225 crores. With this order, from Garden Reach Shipbuliders and Engineers, a warship building company, the total order book of Elecon from the gearboxes business stands at around Rs 750 crore. The gear box business is expected to have a margin of 20-22%. Overall, we see good visibility of the order book.

Currently, the stock is trading at around Rs 61, with a consolidated trailing EPS of 3.51. The stock achieved a high of Rs 96.9 in the last one year. We expect the stock price will increase to at least to the level 76 in the next one year, which is around 25% up from the current level.

NSE Code : ELECON

BSE Code : 505700

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