Elecon Engineering hosted a conference call on July 18, 2024. In the conference call the company was represented by Prayasvin B. Patel, Chairman & Managing Director and Kamlesh Shah, CFO.

Key takeaways of the call

Order intake in Q1FY25  stood higher by 9.7%YoY to Rs 545 crore [Gears Rs 396 crore, MHE Rs 149 crore] compared to Rs 497 crore [Gears Rs 446 crore, MHE Rs 51 crore].

Open order book as end of Jun 31, 2024 stood at Rs 947 crore [Gears Rs 598 crore, MHE Rs 349 crore] compared to Rs 793 crore [Gears Rs 655 crore, MHE Rs 138 crore]

Continue to remain optimistic of new order wins across sectors and across both division – Gear & MHE.

Customised gears accounted for 45% and standardized gear accounted for 55% in Q1FY25.

One overseas OEM has asked the company to deliver products to their subsidiary in India. So the company has booked Rs 4 crore in Q1FY25 and accounted it as domestic biz revenue. 

Decline in gear division revenue for the quarter ended June 2024 is primarily due to slower order inflows during the last quarter, influenced by the general elections, which impacted both private and public capital expenditure. However, the company anticipates that post-election stability and government support for infrastructure development will have a positive impact.

Despite weak Q1FY25, the company remain committed to its annual guidance given at the start of the fiscal i.e. consolidated revenue of Rs 2225 crore (growth of 15%) and sustaining EBITDA margin of FY24 for FY25 as well.     

After election results enquiries have started flowing and it is good. Expect the orders are to get finalized in a month or so.

Next year seems attractive the momentum gained this year will get traction next year and marine sector contribution to be higher next year.

In Gears, the company likes to grow in areas of high speed, marine and overseas rather than increasing market share in domestic beyond certain level, which increase the competition and squeeze the margin.

Overseas revenue in Q1FY25 stood at Rs 133 crore up 18%.  On track to achieve its goal of deriving 50% of   revenue from overseas markets by FY30. In Q1FY25, the international business contributed approximately 34% (up from 27% in Q1FY24) to its overall consolidated revenues. With strong endorsements from existing OEMs and   ongoing brand-building and marketing efforts, the company is confident in reaching this ambitious target.

Gear division contributed over 85% of the revenue in Q1FY25. Comprehensive product portfolio gives distinct competitive advantage.  Offer catalogue and engineered products.  Steady increase of tailored product helped increase share of engineered products in gear division revenue.

The MHE segment continues to enhance its profitability.  In Q1FY25, the MHE Segment  EBIT margin increased by approximately 320 basis points, reaching 26.0%, driven by an improved product mix and leveraging opportunities in the aftermarket service segment. MHE margin will sustain above 20% plus going forward.

Internationally expands partnerships with OEMs.