A Gujarat-based manufacturer of industrial gears and material handling equipment has been buzzing on Dalal Street due to three reasons.
Firstly, shares of the company have delivered over 96 per cent since October 19, 2021 when the benchmark BSE Sensex scaled its all-time high of 62,245.43. Since then, the index cracked 13.6 per cent till July 15. Secondly, Mumbai-based investor Vijay Kedia upped his stake in the company to 1.85 per cent in the June quarter from 1.9 per cent in the preceding quarter ended March 31. Thirdly, foreign portfolio investors also raised their holdings to 2.14 per cent from 1.71 per cent earlier. The rise in stake by FPI came at the time when they offloaded shares worth Rs 1.07 lakh crore from the equity market during the quarter. This is Elecon Engineering.
Edelweiss Wealth Research is also bullish on the company, citing strong growth visibility and improving balance sheet. The brokerage has set a target price of Rs 374 for Elecon Engineering, indicating an upside of more than 20 per cent from the market price of Rs 309.80 on July 15.
“We expect a CAGR of 22 per cent and 26 per cent in revenue and earnings per share (EPS), respectively, over FY22-25E, driven by robust demand, operating leverage and low-interest expense. This will be accompanied by return on capital employed (ROCE) improvement from 15 per cent at present to 21 per cent by FY25E,” Edelweiss Wealth Research said in a report on July 8.
Of late, the company reported a standalone net profit of Rs 95.5 crore for FY22 as compared to Rs 36.3 crore in FY21, reflecting an increase of 163.4 per cent. Total debt reduced to Rs 100.02 crore compared to Rs 225.29 crore during the same period. In contrast, consolidated net profit jumped 143.80 per cent YoY to Rs 140.5 crore in FY22.
“Consolidated debt in the overseas entity is paid off during the year,” Elecon Engineering said in a release in May.
Commenting on the financial performance, Prayasvin Patel, CMD, Elecon Engineering had earlier said, “The gears segment continues to perform well on the back of strong demand environment leading to healthy order inflow from our end-user industries which bodes well for the gears division. In the MHE division, performance is substantially improved post- change in the business strategy. The company has made good progress on recovery and also the closure of a few legacy projects. As such we expect a significant turnaround in the MHE division going forward due to our strategic business approach and focusing on profitability and liquidity.” The company is set to announce its first quarter result for FY23 on July 21.
Also read: Dolly Khanna cut stake in this small-cap firm in Q1, Vijay Kedia continues to hold 2.80 lakh shares