praveen
28-10-2008, 09:02 AM
By Saarthi
Established in 1951, Elecon Engineering Company Ltd. (EECL) is a leading manufacturer of bulk Material Handling Equipment (MHE) and Asia’s largest producer of industrial gears. Beginning with the design and manufacture of Elevators and Conveyors, from which the company derives its corporate identity viz. Elecon, it has grown over the years to emerge as the pioneer of mechanised bulk material handling equipment in India. For more than 5 decades, it has been supplying hi-tech equipments to core sectors such as steel, fertilisers, cement, coal, petrochemicals, lignite and iron are mines, power stations, defence and port mechanisation in India and abroad. It has a reputed clientele including NTPC, BHEL, NMDC, Tata Steel, ACC, Grasim, Jindal Group, L&T etc. With its manufacturing facility in Gujarat, EECL has the following two business segments:
Material Handling Division (55%): This division is engaged in the engineering, design, manufacture, supply, erection and commissioning of several MHEs including trippers, wagon trippers, stakers, reclaimers, crushers, feeders, scrapers, conveyors, roller screens, ship loaders, wagon loaders etc. Over the years, EECL has gained expertise in designing and execution of turnkey contracts for crushing, screening, stacking, blending and reclaiming plants for bulk materials such as coal, limestone, iron-ore, bauxite, overburden, rock phosphate and fertilizers.
Industrial Gears Unit (45%): In India, EECL is the largest player in industrial gears with 26% market share. It manufacturers an exhaustive range of helical gears, worm gears, planetary gears, hi-speed gears, coupling etc. apart from geared motors for precision applications. Its products find application in virtually every industry engaged in manufacturing or in power generation. It also has technical skills in providing customised gear boxes for steel mills, high speed turbines, sugar mills, marine vessels, coast guard ships, plastic extrusion, antenna drives and for satellites in the Indian Space programme.
Wind Mill Division (New Business): With its strategy of diversification, EECL started the new business of setting up of Wind Turbine Generator (WTG) farms and manufacturing of WTG gear boxes in FY08. It has a technology tie-up with Turbowinds NV, Belgium, for windmill farms. For certification of windmills upto 600-KW, it has signed an agreement with C-WET and has already set up a 6 WTG wind farm in Gujarat and 4 WTG wind farm in Maharashtra. It has also started manufacturing WTG gear boxes with capacities of 1 MW to 2 MW, which are import substitutes, and has become the first Indian company to manufacture gear boxes of such sizes. Since it’s a new venture, EECL is yet to prove its credentials but this sector holds tremendous potential for future growth as corporates are getting more & more conscious about green power and global warming apart from the tax benefits.
As on 30 September 2008, EECL had orders in hand of Rs.1772 cr. comprising Rs.1527 cr. for MHE division and Rs.245 cr. for the Gear Division. Importantly, the company has live enquiries of around Rs.2500 cr., which may get converted into firm orders in coming months.
EECL came out with its Q2FY09 results last week. Sales improved by 35% to Rs.252 cr. but PBT remained flat at Rs.24 cr. After higher tax provision, PAT declined by 7% to Rs.16 cr. Similarly for H1FY09, it registered 35% growth in sales to Rs.421 cr. but net profit remained flat at Rs.28 cr. Hence on a conservative basis, it is estimated to clock a turnover of Rs.950 cr. with net profit of Rs.55 cr. for FY09. This translates into EPS of almost Rs.6 on its current equity of Rs.18.60 cr. having a face value of Rs.2 per share. Last year, the company issued 2:1 bonus due to which its equity expanded to Rs.18.60 cr. from Rs.6.20 cr. in FY07. In line with the market sentiment, EECL’s share price has also collapsed to sub Rs.50 levels from a high of Rs.340. Investors are, therefore, advised to buy this stock at declines in the range of Rs.35-40 for a price target of Rs.75 in 15 months.
Established in 1951, Elecon Engineering Company Ltd. (EECL) is a leading manufacturer of bulk Material Handling Equipment (MHE) and Asia’s largest producer of industrial gears. Beginning with the design and manufacture of Elevators and Conveyors, from which the company derives its corporate identity viz. Elecon, it has grown over the years to emerge as the pioneer of mechanised bulk material handling equipment in India. For more than 5 decades, it has been supplying hi-tech equipments to core sectors such as steel, fertilisers, cement, coal, petrochemicals, lignite and iron are mines, power stations, defence and port mechanisation in India and abroad. It has a reputed clientele including NTPC, BHEL, NMDC, Tata Steel, ACC, Grasim, Jindal Group, L&T etc. With its manufacturing facility in Gujarat, EECL has the following two business segments:
Material Handling Division (55%): This division is engaged in the engineering, design, manufacture, supply, erection and commissioning of several MHEs including trippers, wagon trippers, stakers, reclaimers, crushers, feeders, scrapers, conveyors, roller screens, ship loaders, wagon loaders etc. Over the years, EECL has gained expertise in designing and execution of turnkey contracts for crushing, screening, stacking, blending and reclaiming plants for bulk materials such as coal, limestone, iron-ore, bauxite, overburden, rock phosphate and fertilizers.
Industrial Gears Unit (45%): In India, EECL is the largest player in industrial gears with 26% market share. It manufacturers an exhaustive range of helical gears, worm gears, planetary gears, hi-speed gears, coupling etc. apart from geared motors for precision applications. Its products find application in virtually every industry engaged in manufacturing or in power generation. It also has technical skills in providing customised gear boxes for steel mills, high speed turbines, sugar mills, marine vessels, coast guard ships, plastic extrusion, antenna drives and for satellites in the Indian Space programme.
Wind Mill Division (New Business): With its strategy of diversification, EECL started the new business of setting up of Wind Turbine Generator (WTG) farms and manufacturing of WTG gear boxes in FY08. It has a technology tie-up with Turbowinds NV, Belgium, for windmill farms. For certification of windmills upto 600-KW, it has signed an agreement with C-WET and has already set up a 6 WTG wind farm in Gujarat and 4 WTG wind farm in Maharashtra. It has also started manufacturing WTG gear boxes with capacities of 1 MW to 2 MW, which are import substitutes, and has become the first Indian company to manufacture gear boxes of such sizes. Since it’s a new venture, EECL is yet to prove its credentials but this sector holds tremendous potential for future growth as corporates are getting more & more conscious about green power and global warming apart from the tax benefits.
As on 30 September 2008, EECL had orders in hand of Rs.1772 cr. comprising Rs.1527 cr. for MHE division and Rs.245 cr. for the Gear Division. Importantly, the company has live enquiries of around Rs.2500 cr., which may get converted into firm orders in coming months.
EECL came out with its Q2FY09 results last week. Sales improved by 35% to Rs.252 cr. but PBT remained flat at Rs.24 cr. After higher tax provision, PAT declined by 7% to Rs.16 cr. Similarly for H1FY09, it registered 35% growth in sales to Rs.421 cr. but net profit remained flat at Rs.28 cr. Hence on a conservative basis, it is estimated to clock a turnover of Rs.950 cr. with net profit of Rs.55 cr. for FY09. This translates into EPS of almost Rs.6 on its current equity of Rs.18.60 cr. having a face value of Rs.2 per share. Last year, the company issued 2:1 bonus due to which its equity expanded to Rs.18.60 cr. from Rs.6.20 cr. in FY07. In line with the market sentiment, EECL’s share price has also collapsed to sub Rs.50 levels from a high of Rs.340. Investors are, therefore, advised to buy this stock at declines in the range of Rs.35-40 for a price target of Rs.75 in 15 months.