Elecon Engineering Company Ltd (NSE: ELECON) Q3 2025 Earnings Call dated Jan. 23, 2025
Corporate Participants:
Prayasvin Patel — Chairman abd Managing Director
Narasimhan Raghunathan — Chief Financial Officer
Kamlesh Shah — Group Chief Financial Officer and Key Managerial Personnel
Analysts:
Harshit Kapadia — Analyst
Garvit Goyal — Analyst
Ashwani Sharma — Analyst
Ganeshram Rajagopalan — Analyst
Ankur — Analyst
Pratik Kothari — Analyst
Mayank Bhandari — Analyst
Prateek Bhandari — Analyst
Rohit Singh — Analyst
Aashna Manaktala — Analyst
Anish Jobalia — Analyst
Unidentified Participant
Akash Vora — Analyst
Kashyap Javeri — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q3 FY ’25 Earnings Conference Call of Elecon Engineering Company Limited. [Operator Instructions]
I now hand the conference over to Mr. Harshit Kapadia. Thank you, and over to you, sir.
Harshit Kapadia — Analyst
Thank you thank you,. Good evening, everyone. On behalf of Elara Securities, we welcome you all for the Q3 FY ’25 and Nine-Month FY ’25 conference call of Elecon Engineering Limited. I take this opportunity to welcome the management of Elecon Engineering represented by Mr. Prayasvin Patel, Chairman and Managing Director; Mr. Shah, Group Chief Financial Officer; and Mr. Nassiman Hargunathan, Chief Financial Officer, along with their team. We will begin the — we will begin the call with a brief overview by management, followed by a Q&A session.
I’ll now hand the call to Mr. Prayasvin Patel for his opening remarks. Over to you, sir.
Prayasvin Patel — Chairman abd Managing Director
Thank you. Thank you. Good evening and a very warm welcome to everyone on our Q3 and nine months FY ’25 earnings conference call. I’m pleased to be joined today by my colleagues, Mr. Aayush Shah, Non-Executive Director; Mr. M. Nanda, Head of Gear Division; Mr. P.K., Head of MHE Division; Mr. Kamlesh Shah, Group CFO; and Mr. Narasimhan Raghunathan, CFO. We have uploaded the press release and investor presentation on the stock exchanges and on our company website. And I trust you have had an opportunity to go through the same. I will begin with a macro overview of the industry and the current business environment, followed by a detailed discussion on our financial performance by Mr. Narasimhan Raghunathan, RCFT. Elecon Engineering is a leading manufacturer of industrial gear solutions and material handling equipment, recognized for our technology, quality and reliability across diverse industries. We serve sectors such as steel, cement, sugar, power, marine with a strong commitment the organized industrial gear market in India. Our extensive distribution network reaches approximately 85 countries, strengthening our global footprint. Our business continues to be shaped by two key divisions, industrial Gears and material handling equipment. The gear division, which accounts for around 80% of our consolidated revenue has demonstrated resilience this year. We experienced a modest 2.1% year-on-year growth in Q3 FY ’25 and a decline of 3.6% year-on-year for the first-nine months of FY ’25. This performance is largely attributed to a slowdown in the steel and sugar sectors in India, where demand has been subdued specifically in domestic market. Further, external macroeconomic factors slow-down in the U.K., political instability in Europe and other geopolitical uncertainty have contributed to a cautious business sentiment and delayed capital investments. These factors have led to delayed order inflows and slower-than-expected growth in the gear division. Despite the above challenges, we have a healthy order book of INR684 crores as of December 31 December 2024 as against INR572 crores as of December 31 December 2023, which will convert into revenue in the coming quarters. We are seeking strong growth in our MHE. We are seeing a strong growth in our MHE division, which has shown remarkable resilience in the face of broader market challenges. Our MHE division witnessed a 52.2% year-on-year growth in revenue in the first-nine months of FY ’25 with a robust 75.9% year-on-year increase in order inflows for the same-period. This performance is a testament of our effectiveness of our strategic actions and the growing demand for material handling solutions across sectors. We are confident that the MHE division will continue to grow strongly and we expect healthy performance in Q4 FY ’25, underpinned by a strong order book. Although the gear division has experienced flat growth this year, we are highly optimistic about MHE division’s strong potential and its ability to drive balanced performance across the company. Despite challenges in the macro-environment, Telecom remains focused on its long-term growth strategy. We are actively diversifying our business portfolio and expanding into new sectors and geographies. Our extensive product portfolio combined with strong in-house R&D capabilities continues to differentiate us among the peers. Our custom-engineered solutions enable us to provide and meet the diverse needs of our clients. As we navigate through macroeconomic uncertainties, we believe that our commitment to diversifying revenue streams and focusing on high-growth areas such as MHE and untapped industries will provide us with greater resilience and a stable order flow. Further, we find it necessary to revise our revenue guidance to reflect the impact of the current market uncertainties. Slower-growth in key sectors and geopolitical factors on our outlook for FY ’25. On the consolidated level, we anticipate we may miss our revenue guidance by approximately 3% for FY ’25. However, we remain confident in our ability to maintain EBITDA margins of 24% for the full-year. Sustainability continues to be a key pillar of Elecon strategy. I’m proud to share that Elecon has recently reviewed approval for near-term science-based targets from the Science Based Targets Initiative London U.K. Election is committed to reducing its absolute Scope 1 and 2 greenhouse gases, GHG emissions by 54.6% by FY ’33 compared to our FY 2023 baseline. The commitments are a testament of our dedication to sustainability and are taking concrete steps to transition to renewable energy and reduce our carbon footprint across the value chain. Our ESG efforts are not just about meeting targets, they reflect our deep commitment to responsible business practices, employee well-being and communities we serve. Elecon continues to invest in initiatives that drive environmental and social value while uploading the highest standards of governance. With this, I would like to hand over the call to Mr, our CFO for financial performance of Q3 and nine months FY ’25. Over to you, Mr. Narsi.
Narasimhan Raghunathan — Chief Financial Officer
Thank you, sir. I will now take you through the highlights of our financial results for the quarter and the nine months ended December 2024. For the quarter ended 31st December 2024, our consolidated revenue from operations stood at INR529 crores, reflecting an 11.7 percentage year-on-year growth compared to INR474 crores in Q3 FY ’24. So the domestic market contributed 76 percentage to the consolidated revenue, while the remaining 24% came from overseas markets. The exports market remained subdued due to macroeconomic uncertainties and slowdown in developed economies. On the domestic market front, we achieved a growth of 16.4 percentage on a year-on-year basis, primarily due to the support from power, marine and other sectors. The steel and sugar sectors remained muted in the same-period. Our overseas revenue in Q3 FY ’25 stood at INR126 crores, a slight decline of 1.2 percentage year-on-year compared to INR128 crores in Q3 FY ’24. This was primarily due to a slowdown in the U.K. and European markets, geopolitical scenario and the global economic volatility, which adversely impacted business sentiment and project investments in these regions affecting our export performance. Our consolidated EBITDA for the quarter was INR143 crores, up from INR120 crores in Q3 FY ’24, representing a solid growth of 18.4 percentage. Consequently, our EBITDA margin improved to 27 percentage compared to 25.4 percentage in Q3 FY ’24. We have 150 basis-points improvement. This margin improvement was mainly driven by a favorable product mix, improvements in after-sales service and operational efficiencies. Our profit-after-tax for the quarter stood at INR108 crores, representing a 20.3 percentage margin, up from INR90 crores or 19.1% in the same quarter last year. This translates to a growth of 120 basis-points year-on-year. For the nine months ended December 2024, our financial performance remains solid. The consolidated revenue from operations stood at INR1429 crores compared to INR1,373 crores in the same-period last year, reflecting a 4.1% year-on-year growth. Our EBITDA for the nine months was INR347 crores compared to INR339 crores in nine months FY ’24. The EBITDA margin for the period stands at 24.3 percentage, which is stable despite the challenges faced in certain sectors and markets. The PAT for the nine months was INR269 crores compared to INR252 crores in nine months FY ’24, reflecting a 6.6 percentage year-on-year growth. The PAT margin for the period stood at 18.8 percentage. The gear division contributed a significant portion of our overall revenue, contributing 79 percentage of the total revenue in Q3 FY ’25. For the quarter ended December 2024, the Gear division’s revenue stood at INR417 crores, up by 2.1 percentage year-on-year compared to INR409 crores in Q3 FY ’24. The EBIT for the gear division in Q3 FY ’25 was INR116 crores, up from INR112 crores in Q3 FY ’24, reflecting a steady performance. The EBIT margin improved to 27.9 percentage in Q3 FY ’25 compared to 27.4 percentage in the same-period last year, driven by changes in the product mix. The order intake for the quarter was INR469 crores, reflecting a healthy 27.4 percentage year-on-year increase. As of 31st December 2024, our order book stood at INR684 crores, positioning our — positioning us for sustainable growth in the upcoming quarters. The Material Handling Equipment division delivered outstanding performance, contributing 21 percentage to total revenue in Q3 FY ’25. The MHS division’s revenue for the quarter was INR112 crores, up by 71.9 percentage year-on-year compared to INR65 crores in Q3 FY ’24. This growth was driven by a strong demand in both the product supply and aftermarket segments. The EBIT for MHE stood at INR35 crores compared to INR12 crores in Q3 FY ’24, reflecting a significant turnaround. The EBIT margin surged to 31.6 percentage in Q3 FY ’25, up from 18.6 percentage in Q3 FY ’24, an increase of 1,300 basis-points. This was primarily due to a favorable product mix and a higher contribution from the aftermarket business. The order inflow for the quarter stood at INR185 crores, up by 17.8 percentage year-on-year compared to INR157 crores in Q3 FY ’24. As of 31st December 2024, the open order book for MHE stood at INR421 crores, reflecting strong demand and growth prospects. On the balance sheet front, we are pleased to report a strong cash position. Our consolidated net free-cash surplus stood at INR500 crores plus as of 31st December 2024, providing us with significant financial flexibility to pursue growth opportunities and maintain operational resilience. Given the market conditions and the challenges faced in certain sectors, we find it necessary to revise our revenue guidance for FY ’25 with an anticipated miss of up to approximately 3 percentage in revenue growth compared to our earlier forecast. However, we remain confident in our ability to maintain EBITDA margins of 24% for the full-year. On that note, I would like to open the floor for questions you may have. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Garvit Goyal from Nvest Analytics Advisory LLP. Please go ahead.
Garvit Goyal
Hi, am I audible?
Prayasvin Patel
Yeah.
Garvit Goyal
Good evening, sir. I have three questions. One is like in this quarter, while our order book has grown, our top-line performance has fallen short of expectations. In PPT, it is mentioned that domestic steel and sugar industries are experiencing some challenges on the capex investment. Does that indicate like our customers in these sectors are delaying the deliveries of our? That is one. And if so, what factors gives us the confidence to achieve 750 plus year kind of revenue in Q4 and meet the — meet the FY ’25 guidance despite these challenges? That is my first question, sir. Thank you.
Kamlesh Shah
So far as the order book positions are concerned, yes, it is delayed from this two particular sector from steel and sugar. As you might be aware about the steel sector, they are facing a challenge due to the dumping of steel from China and the steel sector, they are waiting for the support from the government. So that’s the reason they are using the tactics to delay the ordering, though they are ready with the their capex plan, but they are delaying that — raising the orders from this. And so-far the revenue guidance are concerned, we already said we are — we may miss the revenue guidance by 3% and we are confident that we will achieve whatever we have given the guidance, both for revenue as well as for EBITDA margin.
Garvit Goyal
That means these industries will take the deliveries of the pending orders in Q4. Is my understanding correct?
Kamlesh Shah
Yeah. It is not necessary that we have that order present there and we have assumed. But we are not deepen upon what these two sectors only. They are one of the major contributors, but considering the order book presently which we are having, where that we have the scope available and we are confident to achieve the revenue what we have given.
Garvit Goyal
Understood. And building on the same question, assuming we execute current orders in Q4 and achieve the guidance you are seeing, would not that persistent demand issues in key and industries you mentioned will impact our future order inflows and if that is the case, should not it affect our revenue visibility in FY ’26?
Kamlesh Shah
Not necessarily because what we earlier said, now we are one. We are not dependent upon one particular sector one particular customer as well as now our geography is also widened. So we have the scope available to generate the order flows off. So while we give the guidance, we consider all the effects either the global geopolitical level or maybe at the domestic level, which is industry-specific also.
Garvit Goyal
But like you mentioned seed and are facing difficulties. And I think…
Kamlesh Shah
This is for the current year, what we estimated at the beginning of the year, which we have not achieved. But going-forward that it is going to — it is just a timing difference will be there, but it will come at any point of a time also.
Garvit Goyal
So how do you see FY ’26 shaping up for these industries.
Kamlesh Shah
So my team is working presently. So it’s — it’s too early for me to spell out the numbers and what exactly it will be there. So we will generally will do this in Q4 earnings call when we do in the month of April sometime.
Garvit Goyal
Understood. And one last question.
Prayasvin Patel
Let me interrupt slightly. Apart from this, next year, we are seeing a fairly positive requirement coming up in the marine sector as well as in the power sector. So these are the two areas where we feel that there is likely to be a healthy growth, okay. Because of the clients asking us for quotations, for information, technical information, we believe that those orders will crystallize in the next year, which will be certainly coming to help us achieve our goals.
Garvit Goyal
So do we expect these orders in middle of FY ’26 or in the beginning as well because we must be having some execution time also, right, to deliver the same.
Prayasvin Patel
So it will be between first and the 3rd-quarter somewhere in-between. The reason why it is difficult to anticipate is because quite often the clients take a long-time in decision-making. If they hasten up, it will be in the first-quarter. If they are normal, it will be in the second and if they slow-down, it will be the turn. So it’s difficult to say as of now, but our intention would be if possible that we execute the order in that particular calendar year, at least most of it.
Garvit Goyal
And can you hint upon the size of the orders, particularly from the Marin sector.
Operator
Sorry to interrupt Mr. Garve. If you have any follow-up question, please rejoin it.
Garvit Goyal
Okay. Thank you.
Operator
Thank you. The next question is from the line of Kashwin Sharma from Emkay Global. Please go-ahead.
Ashwani Sharma
Yeah, hi, sir. Am I audible?
Kamlesh Shah
Yes.
Ashwani Sharma
Yeah. Thanks for the opportunity. Sir, two questions. First is on the GAIL division again. If you can just give me the breakup in terms of sector-wise exposure that we have like steel and then sugar that you mentioned. Some sense on the sector-wise exposure?
Kamlesh Shah
Yeah. We will separately mail to you through our IR, that is SGA.
Ashwani Sharma
Okay.
Kamlesh Shah
Just keeping a note of the same.
Ashwani Sharma
Sure, sir. Secondly, we are anyways approaching towards end of FY ’25. If you can give us some guidance on FY ’26 as well.
Kamlesh Shah
It is in-process, even though you want whatever I give the guidance presently, it may have some changes. So please allow us time till April when we will have our earnings call-in Q4. During that time, we’ll discuss our numbers.
Ashwani Sharma
Perfect, sir. Okay. Those were my questions, sir. Thank you.
Kamlesh Shah
Thank you.
Operator
Thank you. The next question is from the line of Kanish Ram from Unifi Capital. Please go-ahead.
Ganeshram Rajagopalan
Yes, sir. Thank you for taking my question. Now I’m just following-up on question, right. In terms of the marine orders, if I remember correctly, in the previous quarter, you had mentioned that you would expect something to translate in Q3 and that the execution would be next year. But what I’m understanding from your comments today is that the order might actually come in only next year. And also if you could just give us the size of the order that you are seeing, please?
Kamlesh Shah
Yeah. We have that order, which will be extributable over the period of two years.
Ganeshram Rajagopalan
So you received the order?
Kamlesh Shah
What we discussed, we are just going to receive one order and that is there. And our next — the second order was what we said it is expected any turn-in FY ’26 next year.
Ganeshram Rajagopalan
Okay, sir. I think you’re making 1/4, which is the size of the order. So what you’re saying is you received one order, you’re expecting another next year. So if you could just quantify these orders please?
Kamlesh Shah
Order value will be ranging from 60 to 70c. I don’t have the exact figure at this point over-time, but we’ll just circulate the same to you also.
Ganeshram Rajagopalan
Understood. Thank you. And just the second question is in terms of the customer profile in the MHE and gearbox segment, because there’s a bit of a divergence in performance between the segments, right? So in terms of the end-customer, how different are they? And what is the strength that MHE has that gearbox present right now in terms of customer profile?
Prayasvin Patel
Sorry, I can’t hear you clearly.
Kamlesh Shah
Hear you clearly.
Ganeshram Rajagopalan
Is it better now?
Prayasvin Patel
No, can you just be near to your mic? I think then it will be more clear.
Ganeshram Rajagopalan
Yeah, I’m just speaking out-of-the phone. I’m not sure.
Prayasvin Patel
That’s better? Yeah.
Ganeshram Rajagopalan
So I just wanted to understand in terms of sector exposure in the MHE and gearbox, how different is it, right, because on one-side, we have a downturn in cement and steel capex, which is hurting the gearbox division, but you have the MHE performing so strongly. I’m trying to understand where the divergence is coming from.
Prayasvin Patel
The divergence is basically coming between products and a project kind of situation because MHE is — MHE equipments are being consumed by them when they go in for the large project. Gear boxes look like an individual product. So there is a mindset difference and quite often the project when it goes to a particular client, it gets converted into a product order at a later-stage. So that is where the difference comes in. Apart from that though steel sector has shown less of gear orders, however, the steel sector has shown a strong requirement in the material handling business. So it is very contrasting. What it looks like is that the industry is holding on to capex plans for a while to put pressure on the government to reduce the or to increase the tariffs or the duty on Chinese imports.
Ganeshram Rajagopalan
Understood, that’s very clear. And the last question is just on the OEM contract that you are pursuing overseas, if I remember the 11 or 12, if you have a status update on how…
Prayasvin Patel
Sorry, we can’t — can’t okay properly.
Ganeshram Rajagopalan
Is this better?
Prayasvin Patel
Yeah.
Ganeshram Rajagopalan
So this is the last question. On the OEM contract that you are pursuing overseas, right? I think there are 11 or 12 of them. Is there any status update over what’s happened in this quarter and how that — how that order side is scaling up?
Kamlesh Shah
Yeah. I think what we said I think in the Q2 calls also we said I think we started accelerating the revenue from these OEMs. Though we plan — at the beginning of the AB plan that we may achieve a turnover of nearly INR25 crores to INR30 crore, but I think we are now at least expected it will reach to INR50 crore to INR60 crores at the optimum level itself for this year.
Ganeshram Rajagopalan
Okay, this is from across all the OEMs.
Kamlesh Shah
Yeah, across all the OEMs.
Ganeshram Rajagopalan
Perfect. Understood. Thank you.
Operator
Thank you. The next question is from the line of Ankur from Alpha Capital. Please go-ahead.
Ankur
Hello, sir. Thank you for taking my questions. And sir, congrats for a good recovery in order book, which was lacking for last couple of quarters. Sir, my first question is, my first question, sir is on the MHE side. Given the strong outlook you talked about and in the presentation also and so what kind of revenue mix in terms of MHE can get, say, over the next couple of couple of years?
Kamlesh Shah
Revenue mix. So revenue mix, yes, it is — we are expecting the revenue mix between the gear and MHE is now going to improve. Until now they are hovering between 15% to 20%. So in the coming years, I think we expect that it will — that percentage or that sale will also improve going-forward.
Ankur
Yeah, got it, sir. And sir, my next question is again talking about FY ’26. I think you even say you are not giving any concrete guidance, but given first-half was quite weak of this year due to election and overall delays, do we expect second-half, do we expect FY ’26 to be to be a decent similar growth year or better growth year than this year or how should we look about as an early sign or is it like a budget will depend — things will depend on-budget?
Prayasvin Patel
So we are reasonably positive that the budget should be bringing us better results. However, we feel that this first-quarter of FY will be far better than the last year.
Ankur
Got it,sir.
Prayasvin Patel
Just to turn out the numbers for it, which we will present it in the April…
Narasimhan Raghunathan
Earnings call.
Prayasvin Patel
But as of now, it looks like the first-quarter is going to be reasonably strong.
Ankur
Got it, sir. And sir, given full-year to 20025, even if we miss it by 3% or so, our Q4 has to be quite good versus last many several quarters. So are we confident on that, sir?
Prayasvin Patel
Absolutely.
Ankur
Got it, sir. Thank you and all the best.
Prayasvin Patel
Thank you.
Operator
Thank you. The next question is from the line of Pratik Kothari from Unique PMS. Please go-ahead.
Pratik Kothari
Hi, yes, good afternoon. Thank you. Sir, first question on MHE. I mean, we do hear across about the new steel, power, etc capacity which is yet to come up. So one, what is driving this growth? I mean, I mean this massive 70%, 80% even in our order book order inflow. So if you can highlight because these projects which we were anticipating were yet to come. So these are existing ones who are kind of giving us this orders some on the MHE side, sir.
Prayasvin Patel
Actually the — as long as MHE is concerned, the bigger projects or the large projects are on, these smaller projects are what is going through a turmoil right now. And which is the reason why we are seeing this kind of a gap between the two. The larger projects would also mean larger requirements of gears, but that will come in subsequently. So what is going to happen is that while the MHE is doing well, as an after-effect of that will be that the gears will also do well.
Pratik Kothari
Correct. So this MHE that we are executing or the orders that you’re getting, these are all new projects which are coming up across industry.
Prayasvin Patel
Sorry, can you repeat that, please?
Pratik Kothari
Yeah. So my question was just the MHC, the strong order inflow execution that we are seeing. Are these for projects which are already in-place or this are some new capacities which are coming up?
Prayasvin Patel
Got it. No, they are new capacities that are coming up. And that is what we are also trying to see to it that in the future, as many orders that we can fold up or take it in our — under our sleeve, we will try our utmost to do that.
Pratik Kothari
Correct. And then sir, this kind of strong margins 30% plus. I mean this is lack of competition given what has happened in this MHE industry over the last 10 years or I mean, because we still have lot of capacity also in-house left to ramp this up. So I mean, where can this operating leverage go up to.
Prayasvin Patel
See, this is only because of the product mix that we have been able to achieve this. There would be fluctuations in this kind of margins over a period of time, okay. So it is difficult to ascertain whether we will be able to maintain this on a year-on-year basis. However, always our — we are always striving to improve our margins.
Pratik Kothari
Correct, correct. And sir, one question on Gears. This OEMs that we had started I think two, 3/4 back. So one, how is the response for the orders that we have sent out? And I believe those were few initial trials or prototypes which we had sent, which ultimately was to reflect into much larger orders. So how is that conversation going about?
Kamlesh Shah
So this is what I just said in the earlier questions. So what we anticipated during this year, we were — at the beginning of the year, we anticipated the revenue of nearly INR25 crore from these OEMs, but we are quite confident will cross INR50 crore to INR60 crore of this also. And in fact, we are getting the repeat order or maybe somewhere they also increase the volume also or they might — they also have given some new product for us also for the development?
Pratik Kothari
Okay. Correct. Correct. And sir, last maybe broad comment on-ground. So you did talk about the slowdown or what your tactic that the steel industry itself is going through given the pain. How about other industries that we are presented, be it rubber, cement, power, I mean, how are things on-ground? Because post elections, I mean we do hear about some in general, some macro, not many capacities, etc., coming up. So I mean, how are we looking at things on-ground.
Prayasvin Patel
See, there is a lot of planning that has been going on. However, it has not materialized or crystallized into orders. I believe that it is just that the momentum has slightly slowed down, okay. We believe that it should catch-up very soon. Okay, that is our analysis and hopefully we are right, okay, going-forward, because we believe that projects — it is not that projects are getting canceled. They’re just getting delayed.
Pratik Kothari
All right, correct. Great. Thank you and all the best, sir.
Prayasvin Patel
Thank you.
Operator
Thank you. The next question is from the line of Mayank Bhandari from AMSEC. Please go-ahead, sir.
Mayank Bhandari
Thanks for the opportunity.
Prayasvin Patel
Thank you.
Mayank Bhandari
Sir, what would be the breakdown of the standard versus specialized gear in nine months.
Kamlesh Shah
So for the nine months, now considering in this quarter we are having a better revenue from EP, that is engineered product. So with this for nine months, we are now CPs at 51% and EP that is engineered customers product, it is 49%.
Mayank Bhandari
Okay. And you had earlier mentioned that this will be 50-50% going-forward going-forward?
Kamlesh Shah
Yeah. So what we said during, we just started getting the engineer product customized product order from July onwards. And considering the manufacturing period of three to four months, it will now start coming up from Q3, which is getting reflected now and the Q4 is also there.
Mayank Bhandari
Okay, from Q4, it will be reflected.
Kamlesh Shah
The Q3 is also reflected. Q4 will also be there.
Mayank Bhandari
Okay, okay. So basically I’m just trying to understand the slowdown is more in the standard year.
Kamlesh Shah
No, there is no such slowdown. That the mix will always under change due to any — on a period-on-peer basis, there may be a timing difference will be there.
Mayank Bhandari
Okay, okay. And sir, what would be the capex for nine months that we have done so-far?
Kamlesh Shah
You did a capex of INR75 crore until now and the balance we are just going to complete in Q4. All machines are now started coming up and by Q4, all the machines will be there except one or two, which may come up anytime in Q1 of the next year.
Mayank Bhandari
So full-year capex number could be more than INR120 crores.
Kamlesh Shah
So it will be more than INR150 crore-plus.
Mayank Bhandari
Okay. And this is the — earlier you had highlighted that this is for the standard gear, right?
Prayasvin Patel
We are double — doubling the capacity of standard gear. It is not correct. This is basically there are two aspects. One is replacement of the old machines for enhancing the productivity and quality and the other one is for taking up special assignments especially for customers in the export area for their special requirements.
Mayank Bhandari
Okay. I think earlier we were looking-forward to double the capacity of standard gears is what I had understood. Okay. But it will be to the…
Prayasvin Patel
That is a separate project which is coming up. It is being enhanced to improve the delivery times. However, the capacities are not going to get further enhanced.
Mayank Bhandari
Okay.
Prayasvin Patel
They may increase by 5%, 10%, but nothing more.
Mayank Bhandari
No. Okay. So next year capex would be how much then?
Kamlesh Shah
That we are still because working. The team is already working for the next year plan and they are just working for the next three years how they will require, what would be the business in-house. It is in-process. This allows the time till April. We’ll spell out the numbers both on the revenue growth side as well as on the capex side on the April call.
Prayasvin Patel
But please be rest assured that all the capex is being done from the internal revenues only.
Mayank Bhandari
Okay. Thank you, sir.
Prayasvin Patel
Thank you.
Operator
Thank you. The next question is from the line of Prateek from AART Ventures. Please go-ahead.
Prateek Bhandari
Yeah. Hi, sir. Thanks for the opportunity. Just as you mentioned that you are facing the slowdown in the steel and the sugar industry. But I want to understand on the contrary, which other industries are relatively performing better and has been able to give some growth to the gear division.
Prayasvin Patel
The power sector has been doing reasonably well. And going-forward, we believe that next year also the growth or the orders coming in flowing in from power sector will further enhance it. We believe that cement is pausing for a while, which should also release some reasonably good orders next year. Okay. Marine sector for us also seems to be promising for the next year.
Prateek Bhandari
All right. And also wanted to understand, have we seen a stability in the freight cost because we see some — we saw some impact of higher freight costs in the previous quarter. So where are we in terms of the freight cost? Are we seeing some stabilization during the quarter and the coming quarter.
Kamlesh Shah
So now the freight cost is stabilized. So whatever the effect of the increase in the rate both for vessels as well as containers, it is already there. So now we can say it is stabilized now.
Prateek Bhandari
All right. All right, sir. Thanks for answering my question.
Prayasvin Patel
Okay. Thank you.
Operator
Thank you. The next question is from the line Rohit from Nvest Analytics Advisory LLP. Please go-ahead.
Rohit Singh
Hi, just one question. You mentioned we will get marine orders in FY ’26, but I think the number is very small. So how do you think like — is it going to drive our growth in FY ’26.
Prayasvin Patel
Got it, sir. No, the numbers are not small. It is — right now we have an order with us, which is a small order value-wise. And going-forward, we see that we expect a healthy number of orders coming our way in the marine plan.
Rohit Singh
Got it, sir. That’s it from my side, sir. Thank you.
Prayasvin Patel
Thank you.
Kamlesh Shah
So this business hello, can you hear us?
Operator
Yes, yes. Now, I can hear you.
Kamlesh Shah
Yes, I think somewhere we get a disturbance also. We don’t know what else.
Operator
Yes, yes, sir. So the next question is from the line of Aashna from HDFC AMC. Please go-ahead.
Aashna Manaktala
Yeah, hi, good evening, sir. Sir, how sustainable are our MHE EBIT margins? We’ve delivered very strong margin. So for next couple of quarters, how do we see that?
Prayasvin Patel
MHE margins will go through fluctuations. Okay, positive as well as negative. So it is difficult to ascertain because they will depend on the type of product mix that we are able to-market and sell depending upon the demand. However, we are reasonably confident that we should be able to maintain anywhere between 20% to 22%.
Aashna Manaktala
Doing 20% to 30%.
Prayasvin Patel
20% to 22%.
Aashna Manaktala
Okay, ’22. Okay. Understood. And you mentioned that a lot of margin expansion in this quarter was driven by aftersales. So what portion of our revenue is now coming from aftersales?
Narasimhan Raghunathan
Just for the nine months ended, it is approximately for the nine months ended.
Aashna Manaktala
For nine months, our aftermath — after-sales, it contributes to around 49% of the revenue.
Kamlesh Shah
Our total sales from the composition between the product and the service, it is 34%. From 34% is from the service and 66% is the product sales.
Aashna Manaktala
Okay, this is for nine months.
Kamlesh Shah
Yeah, nine months.
Aashna Manaktala
Okay. And do we have the same number for this quarter?
Kamlesh Shah
For this quarter, it is 38% from the service and 62% from the product.
Aashna Manaktala
Understood. Okay. And sir, what portion of our order book would be slow-moving right now, probably from steel and sugar, if you could guide on that.
Kamlesh Shah
I’m just keeping a note of the same and I’ll just circulate this separately through our IRSG.
Aashna Manaktala
Okay, okay. And within power, you said the power is good going segment for us. That I understand is for gear division is what you were saying.
Prayasvin Patel
So it is for both. However, gear would have a higher impact.
Aashna Manaktala
But for gears, what is the application for us within power if you could give some outlook on that.
Prayasvin Patel
It is conveyor systems. It could be just about any equipment all equipment have a huge amount of gear requirements.
Aashna Manaktala
Okay. Is the understanding correct that this would be largely our regular gears and not the catalog products and not the customized ones.
Prayasvin Patel
It could be more.
Aashna Manaktala
Okay, sir. Understood. Okay. Okay, sir. So how confident are we in terms of reaching the new revenue guidance that you have given because that is close to some INR740 crores of top-line in Q4.
Kamlesh Shah
So now it is only two months are remaining, if I say practically. So we have that clarity and accuracy available also.
Aashna Manaktala
Okay. Sir, one last question on my side. So the exports that you mentioned that we are doing right now, like our estimate is doing delivering around INR50 crores INR60 crores of OEM orders, right? So how — my understanding is these are still trial orders that we are doing for them. Have any of these OEMs converted to a long-term sustainable orders?
Kamlesh Shah
So these are the — these OEMs are with the sustainable orders only long-term sustainable orders. So the commercial products have already started for most of them are already started the commercial production also.
Aashna Manaktala
Okay.
Kamlesh Shah
And this is a sustainable order. This is sustainable the OEMs what we sign-up also.
Aashna Manaktala
Okay. So these are things — so how analyze that in terms of — if these are regular orders, so what kind of an annual revenue do we have a visibility of like beyond 25 for these orders right now?
Kamlesh Shah
So what I just — in the last question also I said, because there is some additional new product development is also offered to us by these existing 11 OEMs also from them.
Aashna Manaktala
Okay.
Kamlesh Shah
And we also anticipate that this should also increase, not only from the existing 11 OEMs, but this will also help me to get the more OEMs to be basket in our — in our portfolios.
Aashna Manaktala
I understand that from my question was basically like we’ve done around INR50 crore INR60 crores of revenue in FY ’25. So this will further translate to higher orders, but this INR50 crore INR60 crores is what I understand would have largely come in Q3 and Q4, right? So how much will this balloon to at least in ’26, we would have some sense on that right now.
Kamlesh Shah
So we have — because presently the team is already working. This — I think my worth his team will just working on that. How much we can generate additional business from these 11 OEMs or what new OEMs they are anticipating in the coming year also. So I think by April ’25 when we’ll have that Q4 earnings call, we will have more. Even if I say anything presently, we’ll not the purpose either on your side or on my side also.
Aashna Manaktala
Okay, sir. Thank you. Thank you for that.
Kamlesh Shah
Thank you.
Prayasvin Patel
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Anish from Girik Capital. Please go-ahead.
Anish Jobalia
Yeah, hi, sir. Good evening. Congrats for a decent quarter and come back-in H2. So just want to understand typically like in terms of the order inflow over the nine months, we have grown at almost like 9%, right, in the gears division. But our revenue growth has been very divergent from the order inflow growth. And given that now we have much more shorter-cycle of the products that we are supplying. So why is that happening? Is it that the order inflow is not getting converted into revenues? And if you could just help you understand why and also whether all of that will be, you know executed in Q4, is that how to think about situation?
Kamlesh Shah
So situation in China, I think what we discussed earlier, after the general elections and the first budget of the new government, all things started gearing up and that’s how we started getting the order and this flow started from July onwards to get the order sourced. Okay. That this presently it appears that it may be a while compared to what you are seeing quarter-on-quarter in the earlier period. But this year there would be to one the India election as well as the U.S. elections.
Prayasvin Patel
So the margins have been fluctuating slightly and the reason being or have dipped slightly in the gear division is because of the fact that the product mix is such, plus the question is the supplies that have been manufactured have not yet, a lot of them have not yet been picked-up by these clients. So the expensive geared units have yet not been picked-up by the clients. So that is — is changing the scenario. However, over a period of time, it should even out.
Anish Jobalia
So this quarter in Q4, like the sales and the revenues that — I mean the revenues that we’ll be doing. So would it be largely from our existing order book, which will convert to revenues or I mean the order book as of Q3 of FY ’24?
Kamlesh Shah
Yeah. It will be from the Q3 only. However, for the product to some extent, I can also convert the order into revenue up to February whatever the order size get.
Anish Jobalia
Okay, okay. So basically the gears division order book is higher by 20%, right, versus the last year. So this is giving the confidence to achieve this almost like INR630 odd crores of top-line from the gears, right, because or how would this be split the INR70 INR740 crores that we’ll be doing like how will this be split between the gears and material handling.
Kamlesh Shah
Honestly, I don’t have the breakup available for Q4 of that INR730 crore of the revenue what we are estimating, but I’ll just the same to you through.
Anish Jobalia
Okay, sir, all the best for the coming quarters.
Operator
Thank you. [Operator Instructions] The next question is from the line of from is an individual investor. Please go-ahead.
Unidentified Participant
Yeah. Thank you very much for the opportunity. I had a couple of questions, which are slightly longer-term in nature since the quarterly numbers have already been discussed. Sir, if we just have to look at the next couple of years, earlier we had given you know, not a guidance, but a number about 20% growth, which could expect in the next couple of years. And Mr. Patel, in the initial remarks spoke about some new products or diversification. Is there anything else which — on which you can throw some color as to any new products or new geographies which we are looking at? So that’s the first question. And then the second question in terms of the margins, we are now guiding for a 24% margin in the current year. So over the next couple of years, what kind of levers do we have so that we can maintain the margins around these levels? Thank you so much.
Kamlesh Shah
So-far as the margins are concerned, we already said 23% is my sustainable margin. However, on a year-to-year basis or maybe on a quarter-to-quarter basis, that margin may undergo a change. Sometimes we are getting the better margins because of change the revenue mix. Whenever we give the guidance for the revenue as well as for the margin, it is based on certain historical data and the margin profile for each product range of group of products.
Unidentified Participant
And in terms of the overall revenue growth for the next couple of years and anything which we should know of in terms of new products or new geographies or any other diversification, sir?
Operator
Yeah. Please come again to the question queue.
Unidentified Participant
Okay. Thank you.
Operator
Thank you. The next question is from the line of Akash. Please go-ahead.
Akash Vora
Yeah. Thanks for the opportunity and congrats on a good set of numbers. Sir, my question would be to ask me, sir. Sir, would like to understand from you the current only ground picture in the Indian market, especially with respect to the capex that is happening. So we are hearing off and on that the government capex has slowed down, the private capex is not picking-up. So what exactly is happening? And going-forward as well, which sectors especially do you expect to drive your gears and MHE department respectively in FY ’26 and FY ’27?
Prayasvin Patel
And see normally the MHE business rotates around power sector, power, steel, cement. These are the three major sectors from which we get orders, okay. There are also other sectors from which we get orders like iron-ore mines and so forth. But I would say basically from these iron steel and cement sector. Apart from this, in gears it varies tremendously because almost every sector is being requiring gears, so it’s difficult to assert it assertate where exactly the thrust would come in from. But right now the sectors which are hot are steel, power and to slight extent does that answer your question?
Akash Vora
Yeah. Any comments of yours on private capex and the government capex, how is it happening on-the-ground?
Prayasvin Patel
What I feel is the pace in at which new projects were coming in has slowed down. Large projects are still continuing, okay, because they have — whichever has been in advanced stages are continuing, so they are not stopping. The new projects are slightly getting delayed. Either it is due to a lack of clarity or it is due to the fact that they might be pausing for a while due to various reasons but I believe that over a period of time they will continue to pursue these projects and it will result in more orders.
Akash Vora
Understood. Just a last follow-up question on that, sir. So the last…
Operator
Mr. Akash?
Akash Vora
Yes. That’s a follow-up question. Yeah. Sorry. So by larger projects, do you mean greenfield capex is on, but brownfield capex has been stalled. Is that what you’re planning to convey?
Prayasvin Patel
It is the greenfield projects, which have already started-off and they are in the pipeline of being you know executed, they are continuing, okay. It is the brownfield projects which are slowing down.
Akash Vora
Understood, sir. Thank you.
Operator
Thank you. The next question is from the line of Kashyap from Emkay Investment Managers. Please go-ahead.
Kashyap Javeri
Yeah. Thank you, and thank you for this opportunity. I just wanted to reconfirm in earlier question, at one point you mentioned that sustainable margin would be 2022, but later on, probably I heard in the other comments that it’s about ’23. Now if I go back a few years ago also in not-so-great periods also, our year margins always used to be adjusted for bed heads about 22% plus kind of a number. So one, if you can clarify on that number? And two, if probably more modest commentary is because of the new OEM supplies to overseas market, which is supposed to start in some time is that the reason why we are not sort of giving a better than that number?
Kamlesh Shah
Yeah. So in terms of the sustainable margin, I said, considering at the consol level, we said 23% is my sustainable margin.
Kashyap Javeri
Okay.
Kamlesh Shah
20% margin is there 20% to 22% margin is for the MHC division. Specific — for specific for the MHC division.
Kashyap Javeri
Okay. Understood. And the 23% in yield would also take into account the OE supplies which will start for overseas market sometime next year.
Kamlesh Shah
Again, I’m repeating, 23% sustainable margin is at the consoled revenue, which includes both gear as well as plus domestic and my India business as well as my overseas business. That is a standalone as well as both put together.
Kashyap Javeri
Understood. Understood. Understood. Thank you so much.
Prayasvin Patel
Yeah. And one more comment I need to make is that we as a company have been trying extremely hard to see to it that the margins are sustained or are continuously improving, okay. So that has been the endeavor of the entire organization and that has been also the endeavor of every employee in the organization. So that is what we are trying hard. And we also do a very vigorous exercise to see to it that we will be able to maintain this even during the rough times.
Kashyap Javeri
Understood. Understood. Thank you so much.
Prayasvin Patel
Thank you.
Operator
Thank you. That was the last question. I will now request the management for closing comments.
Prayasvin Patel
In the closing, I would like to thank you all for joining this call and for your continued support of Elecon Engineering. While we face challenges in certain sectors, particularly in our gear division, we are confident in the resilience of our business model. Driven by our strong MHE division and a diversified approach to growth. We remain focused on long-term value-creation and are optimistic about our ability to navigate the current environment. We have a solid order book, robust product offerings and a clear strategy for expanding our international presence. While we are revising our revenue guidance of this year, we continue to focus on maximizing value for our shareholders. Thank you once again for your participation and trust in Elecon Engineering. If you have any further questions or inquiries, please do not hesitate to reach-out to our Investor Relations advisors SGA or our CFO, Mr. Narasimhan. Thank you.
Operator
[Operator Closing Remarks]