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    Elecon Engg.Co

    ELECONGood
    Capital Goods·11 Jul 2025
    Management Summary

    Elecon Engineering reported a robust Q1 FY26, with strong revenue and EBITDA growth driven by domestic market strength and exceptional performance in the MHE division. While the Gear division faced temporary margin pressures from new facility depreciation and product mix, management expressed confidence in normalization by year-end. The company highlighted a healthy order book, strategic capex plans, and promising opportunities in the defense and OEM export markets, underpinning a positive outlook for future growth.

    Highlights

    7
    • Consolidated revenue grew 25% YoY to INR 491 crores, driven by strong domestic demand.

    • Consolidated EBITDA increased 41% YoY to INR 130 crores, with margin expanding to 26.6%.

    • MHE division revenue surged 139% YoY to INR 133 crores, including INR 25 crores from arbitration settlement.

    • Gear division revenue grew 6% YoY to INR 357 crores, but EBIT margin declined to 18.4% due to accelerated depreciation and product mix.

    • Total order intake for the quarter was INR 480 crores, up 21% YoY, with an open order book of INR 710 crores.

    • Management guided for INR 400 crores capex over FY26-FY28, expecting INR 500 crores additional revenue.

    • Significant defense sector opportunities are anticipated, including a potential INR 1,000 crores+ P-17 order.

    What Changed2

    vs Q2 FY26

    Guidance items8 → 27 (+19)Risks discussed4 → 3 (-1)

    Key financials

    Single quarter

    06 metrics
    1. 01Consolidated Revenue₹491 Cr+25%YoY
    2. 02Consolidated EBITDA₹130 Cr+41%YoY
    3. 03Consolidated EBITDA Margin26.6%
    4. 04PAT (incl. one-time items)₹175 Cr
    5. 05Total Order Intake₹480 Cr+21%YoY

    Segment breakdown

    Gear Division
    ₹357 Cr Revenue₹66 Cr EBIT18.4% EBIT Margin73% Contribution to Revenue
    Material Handling Equipment (MHE) Division
    ₹133 Cr Revenue (reported)₹61 Cr EBIT (reported)27% Adjusted EBIT Margin₹134 Cr Order Inflow₹400 Cr Open Order Book
    List

    Guidance & targets

    27
    CategoryTargetPriority
    Market Share
    Exports Share of Total Revenue
    50%
    High
    Margin
    Consolidated EBITDA Margin
    24%
    High
    Margin
    Consolidated Margin Momentum
    24%
    High
    Margin
    MHE Sustainable Margin
    23%
    High
    Margin
    Gear Division EBIT Margin
    25%
    High
    Capex
    Overall Capex Budget
    INR 400 crores
    High
    Capex
    MHE Division Capex
    INR 35 crores
    High
    Capex
    Gear Division Capex
    INR 400 crores
    High
    Capex
    Overall Capex
    not more than INR 100 crores
    High
    Arbitration
    Arbitration Realization
    INR 20 crores+
    Medium
    Order Inflow
    Defense Sector Orders
    INR 200 crores
    Medium
    Order Inflow
    MHE Export Order
    US$ 1.8 million
    High
    Order Inflow
    MHE Export Order
    US$ 12 million
    Medium
    Order Inflow
    Defense Order (Q2)
    nearly INR 200 crores
    High
    Order Inflow
    Defense Order (P-17)
    INR 1,000 crores plus
    Medium
    Revenue
    MHE Division Revenue
    INR 650 crores
    High
    Revenue
    OEM Business Revenue
    EUR 7 million
    High
    Revenue
    Additional Revenue from Capex
    INR 500 crores
    High
    Revenue
    OEM Revenue
    INR 70 crores
    High
    Revenue
    CAGR
    25%
    High
    Operating Expense
    Consolidated Depreciation
    INR 100-105 crores
    High
    Operating Expense
    Gear Division Depreciation
    INR 90 crores
    High
    OEM Business
    OEM Scale-up Start
    January 2026 onwards
    High
    Order Book
    Order Visibility
    up to 2027
    High
    Order Execution
    Defense Order Execution (INR 200 cr)
    over 2 years
    High
    Order Execution
    Defense Order Execution (INR 1000 cr+)
    over 3 years
    High
    Product Mix
    Gear Division Engineered Product Mix
    50-55%
    High

    Risks & concerns

    5
    RiskSeverity

    Geopolitical volatility impacting overseas deliveries

    Hold of deliveries in the Middle East due to Israel-Iran war situation, deferring INR 14 crores of revenue to Q2/Q3.Management acknowledged

    medium

    Margin pressure in Gear division from new facility and product mix

    Accelerated depreciation from new manufacturing facility, increased employee costs, brand-building initiatives, and an unfavorable product mix (less engineered products) impacted Q1 EBIT margin, but expected to normalize by year-end.Management acknowledged

    medium

    Uncertainty regarding US tariffs impacting MHE export strategy

    Plans for US assembly centers and outsourcing marketing efforts are pending the outcome of US tariffs.Management acknowledged

    low

    Areas of Evasion(2)

    • Specific quantum of brand-building/employee costs
    • Detailed sector breakups for revenue

    Q&A highlights

    3

    “This was due to some hold of deliveries for the routes in the Middle East because of Israel and Iran war kind of situation, and the delivery will get clear by the Q2 sometime. ... INR 14 crores.”

    Reveals specific geopolitical risks impacting current quarter's overseas performance and provides a quantitative impact on deferred revenue.

    asked by Vishal, Bandhan AMC

    3 min read6 chapters

    Detailed Narrative

    01

    Robust Q1 FY26 Performance Driven by Domestic Demand

    Elecon Engineering reported a strong Q1 FY26, with consolidated revenue growing 25% year-on-year to INR 491 crores. This growth was primarily fueled by a significant 41.4% increase in domestic revenue, reaching INR 367 crores. The strong domestic performance helped offset a 7% decline in overseas revenue, which stood at INR 124 crores, partly due to geopolitical headwinds in the Middle East. The reported revenue for the quarter also included a one-time📎 INR 25 crores from arbitration claim settlement in the MHE division.

    02

    EBITDA Expansion Despite Gear Division Headwinds

    Consolidated EBITDA for Q1 FY26 increased by 41% year-on-year to INR 130 crores, with the EBITDA margin expanding to 26.6% from 23.5% in Q1 FY25. However, the Gear division's EBIT margin saw a decline to 18.4% from 23.7% in the prior year. This was attributed to accelerated depreciation from a newly commissioned manufacturing facility, increased employee costs, brand-building initiatives in overseas markets, and an unfavorable product mix (43% engineered vs. a normal 50%+). Management expects consolidated EBITDA margin to normalize at 24% and Gear EBIT margin to reach 25% by year-end as production ramps up and product mix improves.

    03

    MHE Division's Exceptional Growth Trajectory

    The Material Handling Equipment (MHE) division delivered an outstanding performance, with reported revenue soaring 139% year-on-year to INR 133 crores. Excluding the INR 25 crores arbitration settlement, MHE revenue still grew by an impressive 93.6%. The adjusted EBIT margin for MHE stood at a healthy 27%, driven by a favorable product mix and higher contribution from the aftermarket business. Management projects MHE revenue to reach INR 650 crores for FY26 and aims to maintain a sustainable margin of 23% over the next 2-3 years, supported by strong demand from power, cement, and steel sectors.

    04

    Strong Order Inflow and Backlog Provide Future Visibility

    Total order intake for the quarter was INR 480 crores, reflecting a healthy 21% year-on-year increase. As of June 30, 2025, the company's open order book stood at INR 710 crores, providing a strong foundation for future growth. The Gear division's overseas order inflow grew 10% year-on-year to INR 119 crores. Management expressed high confidence in future prospects, citing clear visibility for order inflow, execution, and revenue up to 2027, and projecting a 25% CAGR for the next three years.

    05

    Strategic Capex and Defense Sector Opportunities

    Elecon has outlined a significant capital expenditure budget of INR 400 crores for the FY26-FY28 period, with INR 400 crores allocated to the Gear division over three years and an additional INR 35 crores for the MHE division in FY26. This capex is expected to generate an additional INR 500 crores in revenue. The company is actively pursuing substantial opportunities in the defense sector, anticipating an order of nearly INR 200 crores in Q2 and a large P-17 order exceeding INR 1,000 crores by Q4 FY26 or FY27, with execution periods of 2-3 years.

    06

    Expanding OEM Business and International Footprint

    Elecon has expanded its OEM customer base to 18, with most now in commercial production, and expects a larger scale-up from January 2026. The OEM business generated EUR 2 million in Q1 and is projected to reach EUR 7 million for FY26, contributing INR 70 crores in revenue this year. The company is also strategically focused on increasing its export share to 50% of total revenue by FY30, with specific MHE export orders of US$1.8 million expected in Q2 and a potential US$12 million order by Q4 FY26/Q1 FY27, as it builds its global footprint.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.