Elecon, Weekly – Had posted this chart earlier around 400 levels. It corrected from there on low volumes for 3 weeks and has since then started upmove, with this week likely going to be the breakout week. Numbers came in last week and they were exceptional. Last concall had hinted at good performance and expanding margins owing to operating leverage. Looks like that is playing out.
This quarter’s call is very bullish on the outlook for the business as well. Expanding margins, improving return ratios, good order book, debt gone to zero. Its a good play on Defence as well as Industrial capex (Steel, Power, Cement). Guidance – 1500 Cr for FY23 and 2000 Cr for FY24. Margins could be around 22% on this. It looks like higher energy costs abroad are driving business (could be more structural, long-term growth). Exports will be 50% by FY30 (Right now 10-12%).
Valuation is in favour considering the growth opportunity and structural tailwinds in the business and also net debt-free balance sheet.
Vimta, Monthly – Good triangle consolidation and a breakout post Q2 results and concall. Here as well the future looks very good considering its doing well in pharma, electronics and food testing as well with diagnostic business being the only drag. The NFL setup along with FSSAI (PPP partnership) at JNPT could start contributing to numbers in the second half. Here again future could hold good topline growth along with margin expansion. Valuations not very demanding considering the growth opportunities perhaps.
Disc: Have positions in Elecon between 350-400, added more post results. Vimta between 400-450
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