Elecon Engineering Limited

Elecon Engineering Q2FY23 Con call Imp pints:
• Guidance: Standalone and Consolidated Revenue target of Rs. 1,500 Crores and Rs. 2,000 Crores respectively by FY24- This will be achieved keeping in mind bottom-line thus maintain margins & no price cuts- current operating margin guidance of 22% will sustain
• Planned Capex of Rs. 100 Crores over a period of two years considering revenue growth projection and long lead time for key machineries- 15Cr is solar of this
• Overseas & Exports Revenue composition to be 50% in Consolidated Total Revenue by FY30- Have started moving into south America & Canada from US markets as part of our strategy- Right now we are at 10%
• Outstanding retention money is 60CR- Till now all judiciary orders in our favour
• Order book (In hand) – Gear business 602cr & MHE 104CR for H1FY23
• New product development planetary gearboxes – Used in all type of industries – we have specialisation in cement, wind mills, coal handling, sugar plants-potential will be from few 100 to 1000Crs exact assessment is difficult – 300 to 500cr on annualised basis
• Freight costs have now rationalised- however receipt of material time is not reduced leading to longer lead times
• 70% revenue is from larger gearboxes & 30% from small to medium
• Defence orders on hand – 80 Crs. Indian navy & coastguard’s biggest competitors. Till now demand in same was cyclical typically 3-4 years. Now due to governments focus on shipbuilding we expect strong growth 5-7 years – 100 to 200crs orders can be expected potentially
• Steel, cement, power & sugar sectors constitute main order book
• EV opportunity for gearbox manufactures has lot of potential for likes of us – especially with domestic EV manufacturers. Will update once we sign for similar opportunity. In terms of skillset & deliverables falls under our expertise
• In MHE division margin to be increased to 15-17% as we achieve 400 CR benchmark- Conservatively will maintain as what we are doing now- Railways/ highways/ construction industry will drive growth
• Gear business margin is 24%- this will continue
• Operating at close to 60-65% without subcontracting- can increase more subcontracting without comprising margins. Even in house can go upto 85%
• We have put in a team to explore opportunities in defence apart from Navy in air force & other auxiliary departments. Since we have expertise to supply high precision complicated components.
• We are compared to likes of Flendor in tarnation markets. Our local presence through Benzlors/ Radiance in local markets helps us
• 30% gearboxes are customised & balance catalogue products.
• We are keeping our eyes open for right inorganic opportunities
• We have product line supplying to metros & railways excluding export, compressor also might come in future based on our capablity