Elgi Equipments soars 34% in 4 days on strong earnings hope

In the past three months, the stock price of the company has zoomed 110 per cent as compared to 1 per cent decline in the S&P BSE Sensex

Shares of Elgi Equipments hit a new high of Rs 419.35 after they surged 10 per cent on the BSE in Thursday's intra-day trade on expectation of strong earnings. The stock has soared 34 per cent in the past four trading days.

At 01:38 pm, the stock was trading 7 per cent higher at Rs 409 on the back of heavy volumes. A combined 5.53 million equity shares, representing 1.74 per cent of total equity of Elgi Equipments, had changed hands on the NSE and BSE till the time of writing of this report, data shows. In comparison, the S&P BSE Sensex was down 0.91 per cent or 543 points at 59,015.

Elgi Equipments is engaged in manufacturing of air compressors and providing after sales services. In the past three months, the stock price of the company has more-than-doubled or is up 110 per cent, after it reported 55 per cent year-on-year (YoY) jump in its consolidated profit after tax (PAT) at Rs 51.6 crore in September quarter (Q2FY22), aided by strong revenue. The benchmark index has slipped 1 per cent in the past three months.

Consolidated sales during the quarter jumped 36 per cent YoY at 652 crore as against Rs 480 crore in the corresponding quarter in 2020-21 (Q2FY21). Sales of the company's automotive business bounced back to pre-Covid stage and increased by 45 per cent when compared to Q2FY21. Earnings before interest tax and depreciation and amortization (EBITDA) margin remained steady at 16 per cent during the quarter.

The company said with commitments made to government related orders, for supplying compressors for oxygen generators as well as longer gestation for price corrections in the markets, margins shrunk significantly. However, the management expects that price correction and cost management would result in gradual recovery of the margins. The management expects the performance in the second quarter is expected to continue in the third quarter as well.

"We expect the profitability of the third quarter to be far better so the improved profitability margin levels should more than compensate for this marginal loss in topline that we are anticipating this is an anticipation we are not sure we are just looking at signals and providing a certain guidance," Jairam Varadaraj, Managing Director of Elgi Equipments said in Q2FY22 earnings conference call.

The board of directors of the Company is scheduled to meet on February 10, 2022, to consider and approve the financial results for the quarter and nine months ended December 31, 2021.