Elecon
Engineering Company hosted a conference call on April 27, 2023. 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 Has
most comprehensive range of Industrial Gears under one roof in the world and
commands about 34% share in organized market in India. Consolidated
order inflow in Q4FY23 and FY23 was Rs 419 crore [Gears Rs 373 crore; MHE Rs 46
crore] and Rs 1619 crore [Gears Rs 1396
crore; MHE Rs 223 crore]. Consolidated order book as end of Mar 2023 was Rs 714
crore [ Gears Rs 569 crore; MHE Rs 145 crore]. Of
the FY23 revenue about 71% is domestic; 7% is from exports out of India and 22%
from sales from overseas. Expect
consolidated revenue of Rs 2000 crore [Rs 1700 crore for gears and Rs 300 crore for MHE] for FY24. Introduce
few more products in FY23 for industries that is not catered to right now.
Introduced 6 new products in FY23 and in last 3 years it has introduced 8 new
products. High speed gearbox, vertical roll mill gearbox, roller press gearbox,
dual tandem gearbox, central drive planetary gearbox and sugar planetary
gearbox. Approval
from overseas new customers is a continuous process. It’s easy to get approvals
given the vast experience of the company in India. Recently the company got
significant approval from paper and pulp machinery manufacturers based out of
Europe. The
company has accounted one off expenses (net of income) of about Rs 6 crore in
Q4FY23. Made provision of Rs 7.28 crore towards Raw
Material GST input credit from other states that takes time. Further it has
made provision of Rs 2.5 crore towards inventory held for after service
requirements for contracts of more than 2 years. Provision
of Rs 2.6 crore related to earlier period not required were written back. Capacity
utilizations is at 70% as of now.
Optimum capacity utilization is 85% and it can get another Rs 300-400
crore incremental revenue. MHE capacity utilization
is at about 30-40% currently. Planned
capex is Rs 50-60 crore. The
company is net Cash Surplus as on March 31, 2023. Arbitration
Awards: About Rs 12 crore settled out of court, of which Rs 5 crore realized in
Q4FY23 & balance to be realized in EMIs by Q2FY24. About Rs 18 crore is
allowed by the court to withdraw against submission of BG, of which Rs. 10 Cr.
recovered in Q4FY23 & balance to be recovered by Q2FY24. About Rs 33 crore under negotiation. Competency
wise the company is not less for any one and can sell technology to any
overseas countries including European players. Replacement
business constitute about 20-30% of the company. EV
side trying to make inroads but the size seems to be smaller for the
company. Power
sector expected to give good orders. Exports also expected to give some boost
for this year. Elecon
expects around 3 more thermal power plants to come up in the coming financial
year. Elecon is the leading supplier in India for Coal Pulverizer, VRM
gearboxes and also has major share in the FGD business in Power sector. Steel
& Mineral Industry has been consistently doing well for the past 3 years.
Elecon is the leading and only supplier of 900 TPD sponge iron plant in India.
Both Iron-ore and finished steel segment are growing at a faster pace and is
expected to grow ~9% in the coming year and Government also focusing on infra
development and as a result expansion of production capacity. In Overseas
market there are also some opportunities in Steel Industry like in Africa. Cement
consumption in India is expected to grow by ~6 to 7% in the coming year. Elecon
has increased its market share with some of the major OEM’s in this segment.
The trend in the Cement Industry is shift towards Roller Press Gearboxes for
Raw mill & Cement mill application and Elecon is the only Indian
manufacturers for Roller press gearboxes. The
government has helped in reviving the Sugar industry by supporting Ethanol
production and the industry has been doing well for the past 2 years. The
growth momentum of the industry is likely to continue for another 3 to 4 years.
Elecon is the leading Planetary Sugar mill gearboxes manufacturer with a market
share of about 60% and also trying to capture overseas market like in South
East Asia.
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