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.
|