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

This is something which needs to be digged into. For example in 2022 if you had followed the priority of the government or higher budgetary allocation, it was in Railways & Defense. So if you had bought some good stocks in these two sectors, you would have already made 300 to 500% return on your investment within 2 years of investment. According to me, both these sectors are still a good sector to invest. Similarly, in the last 1 year one of the growth sector is Data Centre and there are quite a few stocks which are doing well in this sector. If you had picked up some good stock in this sector say in the month of Jan this year, you are already doubled your investment. I would rather spend more time in assessing which sector has growth potential because of change in government’s policy, that will give you multi-bagger return as compared to just looking at financials.

Nectar Lifesciences Ltd, 1st PPT:

It will all depend how much active an organisation is in responding to RBI observation with proof of compliance, and post that satisfaction of RBI to those submissions.

We all have seen, how proactive IIFL was is coordination with RBI – and still it took a good 6+ months time.

Even for JM Financials, it almost took 7.5 months time.

Being an investor in Navi debt products, I received this today morning.

“Dear Investor,
Greetings from Navi.

With regard to the Directions issued by the Honorable Reserve Bank of India dated October 17, 2024 to us, we wish to invite you to a virtual conference with the senior management of Navi Finserv. We are committed to conducting our business with the highest standards of compliance, customer service and transparency and aim to address any queries or concerns you might have with regard to your investments in our debt instruments.

Here is a virtual meeting link to join the conference. To ensure smoother coordination, we kindly ask that you follow these guidelines:

Try to join the meeting 10 minutes before the scheduled start time.
For the Q&A, feel free to post your questions and concerns in the chat, and our moderator will assist in addressing them.

Please refer to the video call details below:

Date : 21 October 2024

Start Time : 5:30 PM”

It is quite easy to understand no regulated entity be it Bank or NBFC can predict what negative action (and to what extant) RBI will take against them – but what matters is – their response that do or die situation.

Being an investor, I am yet to see that kind of action from Manappuram management – neither to their debt instrument holders, nor to equity owners.

Disc: Holding position in Manappuram considering its valuation, but trust in VP Nandkumar led management is reducing at an alarming stage