Elecon Engineering Company hosted a conference call on Apr 22, 2024. In the conference call the company was represented by Prayasvin B. Patel, Chairman & Managing Director.

Key takeaways of the call

Strong growth in revenue and profitability in FY24 is largely attributable to increased order inflows across industries, increase in wallet share among existing customers & new customer addition.

Order intake in FY24 stood at Rs 1994 crore [Gears at Rs 1601 up 15%YoY; MHE at Rs 393 up  76%YoY from Rs 273 crore] and the order book as end of March 2024 stood at Rs 796 crore [ Gears Rs 536 crore, MHE Rs 260 crore].

Overseas OEM Business:  Successfully signed-off 11 OEM Business in overseas market having annual estimated business volume of about Euro 6.0 Mn. Commercial production against this orders is expected to start from FY25. Expanding network in overseas market  as well to expand overseas business. Overseas contribution to top line in FY24 is 24%.  Contracts from 11 OEMs is from across diverse industries and these reference is powerful catalyst for future growth and associations.

Arbitration awards: Out of total arbitration award amount of Rs 63 crore the company as of March 2024, have successfully realized Rs 37.2 crore.  Further the company has initiated fresh arbitration proceedings worth a value of Rs 31.0 crore during Q1FY24.  The company is optimistic of favorable outcomes. 

Performance against the initial guidance for FY24:  The company reported an EBITDA margin of 24.5% for FY24 well exceeding the initial EBITDA guidance of 22%. But in case of revenue there was a marginal deviation (a drop of about 3%) against the year start consolidated revenue guidance of Rs 2000 crore and that is largely due to decrease in RM prices and consequently the contract value was lower with benefit passing on to customer as per contract. 

Consolidated revenue expected for FY25 on conservative basis will be Rs 2225 crore (a growth of 15%) and this is considering the geo political situation/tensions in west Asia, disruption in Supply Chain and Elections in India & USA in 2025.  But the company is confident of sustaining FY24 EBITDA margin in FY25 as well.    Of the Rs 2225 crore of revenue for FY25, gears will be Rs 1861 crore and  MHE Rs 364 crore.   Overseas operations revenue (exports from India and  revenue from overseas operations) in FY25 will be Rs 250 crore.

Performance solidifies its status as the leading domestic gear player with approximately 39% market share in the industrial gear segment.

Entering FY25 and beyond, the company aim to expand its presence in international markets while reinforcing relationships with current OEM partners and forging new alliances.  Concurrently, it recognizes India’s vast potential and upswing in capex cycle and are committed to retain its leadership position.

From Q3FY25 onwards the orders from 11 OEMs will start flowing from them and currently it is not part of the order book.

Lot of orders may be delayed due to elections and thus this conservative revenue guidance. However if the opportunity arises and order inflow improves the company will do better.  In domestic market the PSU ordering will be largely impacted due to elections.

Anticipate OB for company to align with current capex trend in the country.

Several products currently under development and reinforce our market position and growth for the company going forward.

Capacity utilization in FY25 is 74% in FY2024.  MHE currently operating around about 40-45%.