Elecon Engineering hits over 14-year high; stock zooms 83% in 3 months

An order inflow guidance of around Rs 1,000 crore for FY2023 provides revenue visibility over the near term, analysts said

Shares of Elecon Engineering Company (EECL) hit an over 14-year high of Rs 274.90 as they rallied 6 per cent on the BSE in Wednesday's intra-day trade. The stock of the industrial equipments company was trading at its highest level since January 2008 on the back of heavy volumes.

At 01:24 PM, the stock was 3 per cent higher at Rs 266.70 as compared to 1.4 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled as 3.02 million equity shares, representing 2.5 per cent of the company's total equity, changed hands on the NSE and BSE.

In the past three months, the stock has zoomed 83 per cent as compared to 11 per cent decline in the S&P BSE Sensex. The market price of the company has more-than-doubled or has appreciated 109 per cent from a level of Rs 131.70 on February 24, 2022. Earlier, it had hit a record high of Rs 343 on December 20, 2007.

EECL said that it has obtained the credit rating for bank facilities of Rs 500 crore of the company from the credit rating agency viz., ICRA Limited (ICRA).

The ratings assigned factor in the leadership position of EECL in the transmission products segment i.e. gears with a sizeable market share of around 38 per cent in India, supported by significant manufacturing capacities, an expansive geographic presence and an established presence in the material handling equipment segment (MHE).

Additionally, EECL has developed a reasonable global footprint in recent years and its revenue mix is fairly diversified across geographies with international sales accounting for 35 per cent of the consolidated revenues in FY2022, ICRA said in rationale.

"The ratings consider the favourable medium-term demand outlook with increased demand from end-users such as the steel, cement, sugar and power (flue gas desulphurisation or FGD projects) sectors. The order book is also strong at Rs 410 crore on a standalone basis and at Rs 605 crore on a consolidated basis as on March 31, 2022. Further, an order inflow guidance of around Rs 1,000 crore for FY2023 provides revenue visibility over the near term," the rating agency said.

The Stable outlook on the long-term rating reflects ICRA's opinion that EECL's revenues and accruals will be supported by its comfortable order book along with expectations of a healthy order inflow in the near to medium term. Also, the company will continue to benefit from its established track record in the transmission and the MHE segments, ICRA said.

Elecon Engineering has two business segments – transmission equipment and material handling equipment. The transmission equipment segment engaged in manufacturing of transmission equipment like gearboxes, couplings and elevator traction machines. The material handling segment is engaged in manufacturing of material handling equipment like raw material handling systems, stackers, reclaimers, bagging or weighing machines, wagon or truck loaders, crushers, wagon tipplers, feeders and port equipment. It is also engaged in executing projects on these material handling equipment and systems.