Elecon Engineering Company hosted
a conference call on Nov 4, 2022. In the conference call the company was
represented by Prayasvin Patel – CMD;
Kamlesh Shah – Group CFO; and
Narasimhan Raghunathan – CFO.
Key takeaways of the call
Consolidated order inflow in
Q2FY22 was Rs 838 crore [Gears RS 744 crore; MHE Rs 94 crore] and the
consolidated order book as end of Sep 2022 was Rs 714 crore [ Gears Rs 602
crore; MHE Rs 112 crore].
Standalone gears order intake in Q2FY22 was Rs 307 crore and
the order backlog as end of Sep 2022 was Rs 452 crore.
Gears witnesses strong demand and
orders bookings are largely from industries Steel, cement, power and
sugar. MHE Consistent improvement and
sustain positive momentum.
Retains FY24 revenue guidance of
Rs 1500 crore for Standalone and Rs 2000 crore for consolidated basis. The company is expected to sustain current
level of margins.
The company is focused on
profitability growth and will not compromise profitability for revenue
growth.
MHE – Margin was expected to
improve to 15-17% going forward as the company expect a sales turnover to Rs
400 crore.
Currently exports account for
10-12% and the company looks to increase to 50% and it will be gradual and not
like to put a timeline right now.
Export entities are doing well compared to what they done in the past.
Believe that they are poised for growth as the company has invested in manpower
as well as marketing initiatives especially in Europe and USA which lead to
further improvement in sales.
Outstanding retention money as
end of Sep 30, 2022 stood at Rs 68 crore.
In terms of volume wise 60% is
from small/medium gears and 40% is from large gear boxes but interms of value
about 70% of revenue come from large gear boxes and 30% from small/medium.
Current defence order book is
about Rs 80 crore. Some programmes are
called by Indian Navy and for which the company will be bidding for.
Leader in customized gears
manufacturer for Indian defence sector.
It has successfully supplied CODOG
(Combined Diesel or Gas Turbine) type gearboxes for stealth frigates of Indian
navy.
New product development: Planetary
gear boxes are gears used in practically in all kind of industries. Specializes
in large sizes gears that are extremely competitive and light weight. It is an import substitution product. The company
develops these gears for cement, wind
mill, coal handling plants, sugar and
various many applications. The market size is about Rs 200-300 crore for
the company. Vertical roller mill drives for leading cement mills.
Freight cost has rationalized,
but longer lead times in transportation continue.
Committed to Rs 100 crore of
capex of which substantial into renewable energy generation.
After diwali the economy normally
pickup. Expecting whatever the projects running bit slow will pick up
steam. The impact of interest rate rise
has to be seen on demand.
Steel and power are the dominant
key client industries for MHE and fertilizer once in three year capex cycles
will show for MHE.
Exploring possibility of getting
into manufacture of EV gear boxes and speaking to Indian auto EV manufacturers.
Elecon is the largest
manufacturer of gears in Asia with 36% market share of organized gear market in
India.
|