Elecon Engineering Limited

Elecon Engineering Q2 & H1 FY25 Earnings Call Key Takeaways:

Financial Performance:

• Consolidated Revenue: Rs. 508 crore in Q2 FY25, up 4.8% YoY. H1 FY25 revenue at Rs. 901 crore,
  a 0.1% YoY increase.
• Gear Division Revenue: Rs. 398 crore in Q2 FY25, down 5.9% YoY. H1 FY25 revenue at Rs. 732
  crore, a 6.6% YoY decrease.
• MHE Division Revenue: Rs. 110 crore in Q2 FY25, up 77.8% YoY. H1 FY25 revenue at Rs. 169
  crore, a 45.8% YoY increase.
• Consolidated EBITDA: Rs. 112 crore in Q2 FY25, down 5.4% YoY. H1 FY25 EBITDA at Rs. 205
  crore, a 6.4% YoY decrease.
• EBITDA Margin: 22.1% in Q2 FY25, down 239 bps YoY. H1 FY25 margin at 22.7%, down 159 bps
  YoY.
• Profit After Tax: Rs. 88 crore in Q2 FY25, down 1% YoY. H1 FY25 PAT at Rs. 161 crore, down 0.3%
  YoY.
• Net Cash Surplus: Rs. 500+ crore as of September 30, 2024.
• Interim Dividend: Rs. 0.50 per share declared.

Operational Performance:

• Order Intake (Gear): Rs. 432 crore in Q2 FY25, up 15.2% YoY. Order book at Rs. 627 crore as of
  September 30, 2024.
• Order Intake (MHE): Rs. 104 crore in Q2 FY25, up 153.9% YoY. Order book at Rs. 339 crore as of
  September 30, 2024.
• Export Revenue: Rs. 122 crore in Q2 FY25, up 24.2% YoY. H1 FY25 export revenue at Rs. 255
  crore, contributing 28% of total revenue.
• Aftermarket Sales: Contributed 29% of total revenue in Q2 FY25.
• Overseas MHE Order: Secured a $1.65 million order in Q2 FY25.

Future Outlook:

• Management maintains the annual revenue guidance of Rs. 2,225 crore for FY25.
• Expects to achieve a consolidated EBITDA margin of 24% for FY25.
• Confident in achieving guidance based on the existing order book and anticipates robust demand in
  H2 FY25.
• Aims to achieve 50% revenue contribution from overseas business by FY30.
• Expects strong growth momentum to continue into the next financial year, driven by power, mining,
  steel, and cement sectors.
• Foresees sustained growth in the MHE segment, driven by product supply and aftermarket services.

Concerns:

• Q2 FY25 revenue in the gear division was lower than expected due to delayed order inflows and
  execution challenges.
• EBITDA margin was impacted by higher freight costs, one-time repair and maintenance expenses,
  and changes in product mix.
• Uncertainty regarding geopolitical tensions and global economic conditions.

Other Important Points:

• Completed a capex cycle of Rs. 200 crore over the past three years, focused on upgrading facilities
  and adding machine tools.
• Actively pursuing new OEM partnerships, particularly in export markets.
• Focusing on expanding presence in Russia due to shifting global supply chains.
• Highlighting the healthy contribution of aftermarket sales to overall profitability, particularly in the
  export market.
• Emphasizing the sustainable growth strategy and commitment to profitability in the MHE division