Elecon Engineering Company Limited — Investor Meet, 29-01-2025: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** In Q3 FY '25, Elecon Engineering reported consolidated revenue of INR 529 crore, an increase of 11.7% year-on-year from INR 474 crore. The Gear division, accounting for 79% of revenue, saw modest growth of 2.1%, with revenues of INR 417 crore. Meanwhile, the EBITDA rose to INR 143 crore, with a margin of 27%, a notable improvement from 25.4% in the prior year. The profit after tax (PAT) grew 20.3% to INR 108 crore, leading to a PAT margin of 20.3%. The nine-month figures showed revenue growth of 4.1%, leading to a consolidated revenue of INR 1,429 crore and PAT of INR 269 crore.

**Future Outlook and Growth Drivers:** Management anticipates slower growth due to subdued demand in key sectors like steel and sugar, but sees potential in the Material Handling Equipment (MHE) division, which recorded a robust 55.2% increase in nine-month revenue. The company plans to diversify its portfolio and invest in R&D to cater to emerging markets, indicating long-term growth strategies remain intact.

**Order Book and Operational Updates:** As of December 31, 2024, Elecon holds a strong order book of INR 684 crore, up from INR 572 crore the previous year. The MHE division's order inflows grew 75.9%, reinforcing its growth outlook. However, there are delays in order executions from the steel and sugar sectors due to geopolitical and economic uncertainties.

**Analyst Q&A Insights:** Analysts inquired about revenue and profitability guidance, highlighting a cautious outlook amidst market challenges. Elecon expressed confidence in achieving an ambitious Q4 target of over INR 750 crore, emphasizing diverse order sources beyond the struggling sectors. Concerns were raised regarding future order visibility given persistent issues in key industries; management maintained a positive stance on order flows owing to a broader geographic reach.

**Market or Regulatory Updates:** The conference call underscored the stabilization in freight costs, easing prior pressures on margins. Despite ongoing geopolitical uncertainties, management reiterated commitment to sustainability, bolstered by a recently approved science-based targets initiative aimed at reducing greenhouse gas emissions.

**Strategic Focus Areas:** Elecon is focusing on expanding its presence in high-growth sectors like power and marine while improving operational efficiencies in the face of macroeconomic challenges. The improvement in product mix significantly contributed to the margin enhancements observed.

**Investor Insight:** Current trends indicate a resilient financial position, particularly in the MHE segment, supporting a favorable investment stance. Despite revising revenue growth expectations slightly downwards due to market conditions, the solid order book and emerging growth areas suggest a 'buy' sentiment remains justifiable, while closely monitoring potential risks.