Elecon Engineering Q2 FY25 Quarterly Results Analysis

Introduction

Elecon Engineering Company Ltd., a leading Indian manufacturer of material handling equipment and industrial gears, announced its Q2 FY25 (July–September 2024) financial results on October 18, 2024. This blog analyzes the company’s performance, key financial metrics, and future outlook based on the latest earnings report.

Financial Performance

Revenue

Elecon reported consolidated revenue of ₹508 crore for Q2 FY25, reflecting a 4.8% year-on-year (YoY) growth from ₹485 crore in Q2 FY24. Despite a softer quarter due to delayed order executions, the company maintained steady growth, driven by its Gear Division and Material Handling Equipment (MHE) segment.

• Gear Division: Contributed ₹398 crore, down 5.9% YoY due to slower order inflows impacted by general elections.
• MHE Segment: Showed resilience with improving profitability and a significant overseas order worth USD 1.65 million.

Profitability

Profit after Tax (PAT) for Q2 FY25 was ₹88 crore, with a PAT margin of 17.3%, down slightly from ₹92 crore in Q2 FY24 (PAT margin 19.0%). EBITDA stood at ₹112 crore, a 5.4% YoY decline, with an EBITDA margin of 22.1% compared to 24.5% in Q2 FY24. The margin contraction was attributed to delays in order execution and a less favorable product mix.

• Earnings Per Share (EPS): Not explicitly reported for Q2, but FY25 EPS was ₹18.50, reflecting strong annual profitability.
• Operating Profit Margin (OPM): Contracted to 22.1% from 24.5% YoY, impacted by higher input costs and operational delays.

Balance Sheet

Elecon remains net debt-free as of June 30, 2022, showcasing a strong financial position. The company’s debt-to-equity ratio was 0.00, reinforcing its robust capital structure. Cash flow from operations was ₹433 crore for FY25, up from ₹364 crore in FY24, reflecting improved operational efficiency.

• Investment Activities: The company utilized ₹315.77 crore for investing activities, a 13.19% YoY increase, indicating continued focus on expansion.
• Dividend: Declared an interim dividend of ₹0.50 per equity share (50%) for Q2 FY25, reinforcing shareholder value.

Key Highlights

• Market Leadership: Elecon continues to dominate the Indian market for Industrial Gear Solutions and MHE, leveraging advanced technology and customized solutions.
• International Expansion: Overseas revenue contributed 34% to Q2 FY25, with a goal to reach 50% by FY30. A new USD 1.65 million MHE order marks a breakthrough in global markets.
• Credit Rating Improvement: Upgraded to LT-[ICRA] AA (Stable) and ST-[ICRA] A1 in July 2024, reflecting financial stability.
• Operational Efficiency: Cost rationalization and reduced receivables have improved return ratios, particularly in the MHE division.

Challenges

• Order Delays: The Gear Division faced a 5.9% YoY revenue drop due to slower order inflows during the general elections, impacting project execution.
• Margin Pressure: Rising raw material costs and a less favorable product mix led to a contraction in EBITDA and PAT margins.
• Competition and Pricing: Increased competition and pricing pressures remain risks to profitability, as noted by analysts.

Future Outlook

Elecon projects a strong FY26 with revenue guidance of ₹2,650 crore (up from ₹2,227 crore in FY25) and EBITDA of ₹636 crore with a 24% margin. The company anticipates a 20% top-line growth in FY26, driven by robust order inflows from the steel, power, and cement sectors. Post-election stability and government infrastructure initiatives are expected to boost demand.

• Strategic Goals: Elecon aims to enhance asset turnover by FY27 and maintain leadership in domestic markets while expanding internationally.
• Analyst Sentiment: Analysts maintain a “Strong Buy” rating with a median target price of ₹682, suggesting a 4.09% upside from the current price of ₹679.80 as of May 15, 2025.

Conclusion

Elecon Engineering’s Q2 FY25 results reflect a steady performance despite challenges from order delays and margin pressures. The company’s debt-free status, strong cash flows, and strategic focus on innovation and international expansion position it well for future growth. With a robust order pipeline and favorable market conditions, Elecon is poised to achieve its ambitious FY26 targets, making it a compelling prospect for investors.

Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

Sources: Web references from screener.in, moneycontrol.com, livemint.com, icicidirect.com, tickertape.in; X posts from @nid_rockz and @varinder_bansal.