Growth Visible Beyond Short-Term Hiccups; Maintain BUY
Est. Vs. Actual for Q3FY26: Revenue: MISS; EBITDA: MISS; PAT: MISS
Changes in Estimates post Q3FY26
FY26E/FY27E/FY28E: Revenue: -5%/0%/0%; EBITDA: -13%/0%/0%; PAT: -11%/0%/0%
Recommendation Rationale
• Short-Term Issues Impacting Revenue Recognition: Despite a robust order book, the company reported revenues of Rs 522 Cr during the quarter, reflecting a modest YoY growth of 4%. The subdued performance was largely attributable to order delays and execution deferrals arising from customer-driven factors. Flattish revenue growth, higher employee costs, and an unfavourable product mix also weighed on margins during the quarter.
• Continued Momentum in the MHE Division: The MHE segment delivered healthy growth, with revenues rising 13% YoY to Rs 123 Cr. As per the management, the division continues to secure steady order inflows from the domestic market and expects incremental contributions from international markets going forward. A strong open order book and a robust enquiry pipeline provide confidence in improved performance ahead.
• Growth Expected to Pick Up: The management indicated that execution is picking up pace, and the company is likely to recoup growth from Q4FY26. While some orders from earlier quarters will contribute to growth in Q4, a large portion of orders received earlier in the year is expected to be executed over the next two quarters. Margins are also expected to recover as revenue recognition improves and the product mix normalises.
Sector Outlook: Optimistic
Company Outlook & Guidance: Management has revised its FY26 revenue guidance downward by up to ~5% from the earlier guidance of Rs 2,650 Cr. Adjusted EBITDA margins are expected to be lower by up to ~2% compared to the earlier guidance of 24%. Despite the near-term moderation, improvement is anticipated, supported by a strong order book and a robust enquiry pipeline. Growth is expected to be driven by seasonal demand and sustained traction in key enduser industries, particularly cement, steel, sugar, and power. Over the medium term, the company expects to maintain this growth momentum and continues to progress toward its strategic objective of generating 50% of consolidated revenues from international markets by FY30.
Current Valuation: 24x Sept’27E (Unchanged)
Current TP: Rs 635/share (Unchanged).
Recommendation: We maintain our BUY rating on the stock.
Financial Performance: Elecon’s quarterly performance fell short of expectations. Revenues stood at Rs 552 Cr, up 4% YoY but down 5% QoQ, missing estimates by 11%. EBITDA was reported at Rs 109 Cr, declining 23% YoY and 13% QoQ, and falling short of estimates by 28%. EBITDA margins contracted to 19.8% compared to 27.0% in Q3FY25 and 21.7% in Q2FY26. PAT came in at Rs 72 Cr, registering a decline of 33% YoY and 18% QoQ.
Elecon Engineering Company Ltd – Q3FY26 Result Update – 12012026_12-01-2026_08
