Elecon Engineering Company (EECL) is an industrial equipment manufacturing company which is trading at its highest level since January 2008 on the back of heavy volumes. On 22 June, the stock was 3 per cent higher than its daily value as compared to 1.4 percent dip in the S&P BSE Sensex.
Currently, the company has two business segments – transmission equipment and material handling equipment. The transmission equipment segment deals with the manufacturing of transmission equipment like gearboxes, couplings and elevator traction machines. The material handling segment is engaged in manufacturing of material handling equipment like stackers, bagging or weighing machines, raw material handling systems, reclaimers, wagon tipplers, wagon or truck loaders, crushers, feeders and port equipment. It is also engaged in executing projects on these material handling equipment and systems.
Speaking of this price hike, the stock has soared 83 percent as compared to 11 percent decline in the S&P BSE Sensex in the past three months. The market price of the company has more-than-doubled or has appreciated 109 percent from a level of Rs 131.70 on February 24, 2022. Earlier, it had hit a record high of Rs 343 on December 20, 2007.
Not only this but EECL has obtained the credit rating for bank facilities of Rs 500 crore from the credit rating agency viz., ICRA Limited (ICRA). This rating was assigned due to the leadership position of EECL in the transmission products segment i.e. gears where it has a sizeable market share of around 38 percent in India, supported by significant manufacturing capacities, an expansive geographic presence and an established presence in the material handling equipment segment (MHE).
The company is well established and has built itself a reasonable global footprint in recent years. The revenue mix is fairly diversified across geographies with international sales accounting for 35 percent of the consolidated revenues in FY2022, The rating agency said that:
“The ratings consider the favourable medium-term demand outlook with increased demand from end-users such as the steel, cement, sugar and power (flue gas desulphurisation or FGD projects) sectors. The order book is also strong at Rs 410 crore on a standalone basis and at Rs 605 crore on a consolidated basis as on March 31, 2022. Further, an order inflow guidance of around Rs 1,000 crore for FY2023 provides revenue visibility over the near term,”
In conclusion, one must look at the overall market outlook to gain the proper insight about the economics of the company before investing in.
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