Elecon Engineering hosted a conference call on Jan 23, 2025. In the conference call the company was represented by Narasimhan, CFO.

Key takeaways of the call

Order intake for Q3FY25 and 9mFY25 was up 24.6%YoY to Rs 654 crore[Gears Rs 469 crore up 27.4%yoy; MHE Rs 185 crore, up 17.8%yoy] and up 20.7%yoy to Rs 1735 crore [Gears Rs 1297 crore; MHE 438 crore]  respectively.

Order book as end of Dec 2024 stood at Rs 1105 crore [gears Rs 684 crore (Rs 572 crore in Dec 2023 end); MHE Rs 421 crore (Rs 219 crore in Dec 2023 end)].

Slow growth in key sector and geopolitical situation will result in 3% point slippage in the revenue growth rate guidance given earlier for FY25. But there is will be no change in the EBITDA margin which will remain 24% for FY25 full year.   Earlier in Q2FY25 conference call the company was confident of achieving its   annual guidance of Rs 2225 crore (up 15%), an EBITDA margin of 24% for FY ''25 on the back of the order book on hand and execution of the same in the  balance part of FY ''25. As far as FY26 annual guidance, it will be too early to give and will provide at Q4FY25 conference call.  However Q1FY26 will be better than Q1FY25.  

Gear registered near flat growth in Q3FY25. Revenue from Gear Division was impacted on account of sluggishness in domestic market, resulting in delay of capex investments.

Revenue from MHE Division grew by 72% Y-o-Y in Q3FY25. MHE continue to do well in Q4FY25 given strong order book.

Order booking from steel and sugar, who are major contributor to order booking are delayed. The steel sector order intake was impacted as steel sector expect government support as it face dumping of steel from China.   Cement is pausing a while and that is also expected to pick up next fiscal. The power sector order inflow is strong and that is expected to continue ordering next fiscal as well along with marine.

See healthy growth in marine and power sector in FY26 there is lot of enquiries and expect that to crystallize next fiscal (in Q1FY26- Q3FY26).  The current marine order book is very small in value terms but the company expects strong meaningful order flow from marine sector in FY26.

Commercial production for OEM orders has started. Revenue from OEM order is expected to go up to Rs 50-60 in FY25 compared to earlier expectation of Rs 25-30 crore. New product development is also offered by the existing 11 OEMs and the company is also looking to add more OEMs.

Capex incurred till 9mFY25 was Rs 75 crore of the Rs 150 crore capex for FY25.  The capex is largely towards efficiency and delivery improvement rather than capacity expansion. All capex is done through internal accruals.

About 76% of consolidated revenue come from domestic and balance from exports.  

Product: Service revenue mix for Q3FY25 and 9mFY25 was about 62%/38% and 66%/34% respectively.

Revenue mix is expected to improve from 15-20% contribution from MHE is expected to go up.

For 9mFY25 the standard products was 51% and engineered products is 49%.

Slowdown in UK and European markets with project investment slowdown in these markets impacted exports.

EBITDA margin in Q3FY25 expanded by about 160 bps to 27%   driven by favorable product mix and aftermarket sales.

EBITDA margin for 9mfy25 was 24.3% despite challenges in certain segments.  9MFY25 Gear Division margins were impacted on account of higher freight costs and one time repair and maintenance expenses incurred in Q2FY25.

MHE margin will fluctuate depending the product mix, but hope to maintain a margin of 20-22% on sustainable basis.