Elecon
Engineering Company hosted a conference call on Oct 23, 2023. In the conference
call the company was represented by Prayasvin B. Patel, CMD; Aayush Shah, Non
Executive Director; MM Nanda, head Gear
Division; PK Bhasin, Head MHE Division; Kamlesh Shah, Group CFO and Narashimhan Raghunathan, CFO.
Key
takeaways of the call
Strong
revenue growth in Q2FY24 (up 25%YoY) is majorly attributable to increase in
order inflows across industries, increasing wallet share among existing
customers & on boarding of new customers.
Consolidated
order intake in Q2FY24 was Rs 416 crore [ Gears Rs 375 crore; MHE Rs 41 crore]
and the orders in hand as end of Sep 2023 was Rs 738 crore [ Gears Rs 615
crore; MHE Rs 123 crore].
Of
the MHE order intake in Q2FY24 about 62% power, 16% fertilizers, 11%
construction & Engineering, 9% cement, 1% steel and 1% others.
Of
the gears order intake in Q2FY24 about 22% steel, 7% sugar, 10% cement, 6% power, 5% MHE, 3% marine, 4% construction & Engineering and 43% others.
The
company remains optimistic about sustaining its growth momentum in the future
with increasing enquiries across various
product categories and industries, coupled with a robust executable order book.
The
company remains optimistic of outperforming the Industry with a robust order
book spanning various segments, a steadfast focus on penetrating overseas
markets, and commitment to maintaining a leadership position in the domestic
market.
Revenue
Guidance for FY24: Expect a revenue of Rs 2000 crore [Gears Rs 1700 crore; MHE Rs 300 crore]. Margins will stay within the guided range gained
by improving operating leverage and better product mix.
Capex
incurred Rs 24.0 crore upto H1FY24 out of the Rs 70.0 crore planned for FY24.
In
gears the company maintains its leadership position offering industry agnostic gears
solutions. Its market share in domestic organized market for gears is about 39%
in FY23.
Signed-off
Six OEM Business in European market, having annual estimated business volume of
Euro 5.5 Million. Prototype is under
development and to be supplied to the OEMs by Q3FY24, commercial production
expected to start from FY25.
Continue
to build brand globally and try to emerge preferred supplier for OEMS globally with
wide range of products.
Introduced
two new products in Q2FY24 i.e. RTC gear box (that find application in rubber
industry) and screw jet gear box (that find application in steel industry). It also upgraded crane gearbox.
Catalogue
Products and Engineered Products mix in standalone gear revenue in H1FY24 was
45% and 55% respectively.
Seeing
notable uptick in demand for gears with substantial influx of promising
enquiries from both established customer base and emerging niche sectors. Over
the quarter the company expects the influx of enquiries will get converted to
orders boosting the order book.
After
discontinuing EPC business, the MHE division turned around and continues to
improve through efficient operations with strategic focus on product supply and
aftermarket services. Order book of MHE
division remains strong gained by ongoing capex growth.
Update
on arbitration awards: Successfully realized Rs. 30.9 crore from the
arbitration award as of September 2023, out of the total award amount of Rs
63.0 crore, with an additional Rs. 1.0 Cr expected to be realized in October
2023. Fresh arbitration proceedings initiated having the value of Rs 31.0 crore during Q1FY24, optimistic of
favorable outcomes.
Continue
to look to offer high-quality, technologically advanced, and globally
competitive product range. Its strategic approach involves exploring new
geographic markets, maximizing opportunities within the existing markets, and
expanding presence across newly added industries by delivering top-notch
services with the lowest possible lead times.
Foreign
subsidiary that market its products sees strong activity they signed lot of
agreements with various OEMS, expanding
distribution network to achieve getting deeper reach and increasing required manpower.
Forming an entire group which will evaluate and
recruit more manpower to enhance the reach and dealer and distribution
network. Expect this will see strong growth going forward. This year will achieve the export target and
going forward see strong growth.
Capacity
utilization for H1FY24 is about 76%.
Export
of standalone entity is Rs 20 crore in Q2FY24 and Rs 42 crore in H2FY24.
Share
of overseas revenue declined to 20% in Q2FY24 (from 30% in Q2FY23). The company
is focused on improving the revenue share from overseas market. Current decline
in overseas revenue is attributed to rollover of order execution to H2FY24 and
the impact of export revenue recognition under IND AS.
Other
income includes one offs of about Rs 5.7 crore due to profit on sale of assets amounting
Rs 3 crore and insurance claims against fires of last year.
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