Elecon Engineering stock spurts 12%, hits new high on optimistic outlook

Elecon's revenue could likely grow by 20-24% CAGR over the next 3 years, driven by robust domestic demand and export opportunities arising for the company amid ongoing geopolitical events.

Shares of Elecon Engineering hit a record high of Rs 1,323.20, as they spurted 12 per cent on the BSE in Wednesday’s intra-day trade on heavy volumes amid an optimistic outlook.

The share price of one of the largest Industrial Gear solution providers in Asia along with material handling equipment (MHE) provider surpassed its previous high of Rs 1,244.95 touched on April 22. The stock has rebounded 38 per cent from its previous week's low of Rs 957.40 hit on June 6.

At 12:33 pm; Elecon was trading 11 per cent higher at Rs 1,309.05, as compared to 0.6 per cent rise in the BSE Sensex. The average trading volumes at the counter jumped nearly seven-fold. A combined 3.35 million equity shares representing 3 per cent of total equity of Elecon changed hands on the NSE and BSE.

Elecon had delivered its highest-ever revenue of Rs 1,937 crore up 27 per cent year-on-year (YoY) and highest-ever profit after tax of Rs 356 crore, up 50 per cent YoY for the previous financial year 2023-24 (FY24).

With government capital expenditure and emphasis on infrastructure development fueling growth prospects, the company’s tactical focus on exports coupled with rising order inquiries across various products and sectors positions the company favourably to grow faster than the industry, the management said.

Within the gears segment, robust performance was observed domestically. Strong order inflows came from end user industries such as steel, power, cement, and paper. This growth was fueled by government emphasis on infrastructure development.

In the international market, Elecon has successfully onboarded 11 new OEMs (original equipment manufacturers). Their estimated annual business volume amounts to approximately €6.0 million. Commercial production is slated to commence in FY25. Elecon has capitalized on robust replacement demand in key overseas regions, further bolstering its business prospects, the company said in its FY24 annual report.

Elecon’s outlook for FY25 is conservative given the absence of big-ticket tendering during general elections in India, ongoing global turmoil, and the US presidential elections in Q3FY25.

Analysts at Elara Capital believe Elecon’s revenue could likely grow by 20-24 per cent CAGR over the next three years, driven by robust domestic demand and export opportunities arising for the company amid ongoing geopolitical events. While enquiries remain robust in Europe, supply chain disruptions and delay in deliveries are key risks to execution of such orders, the brokerage firm said.