Elecon Engineering Company Limited — Q2 FY26 earnings call

Call held 13 Oct 2025

Management summary

Elecon Engineering Company reported a resilient Q2 FY26 performance, with consolidated revenue growing 14% YoY to INR 578 crores and EBITDA at INR 126 crores. Strong order inflows across both Gear and MHE divisions, up 28% YoY to INR 688 crores, provide robust visibility. While international execution faced geopolitical delays and Gear division margins were temporarily impacted by product mix and costs, management expressed high confidence in achieving its full-year guidance of INR 2,650 crores revenue and 24% EBITDA margin, driven by accelerated H2 execution and a healthy order book.

Highlights

  • Consolidated revenue from operations grew 14% YoY to INR 578 crores in Q2 FY26.

  • Consolidated EBITDA increased 12% YoY to INR 126 crores, with a margin of 21.7%.

  • Order intake for Q2 FY26 was robust at INR 688 crores, reflecting a 28% YoY growth.

  • The Gear division contributed 76% of revenue, growing 9% YoY to INR 441 crores, despite international execution delays.

  • The MHE division showed strong growth, with revenue up 33% YoY to INR 137 crores and EBIT margin improving to 25.7%.

  • Annual guidance for FY26 maintained: consolidated revenue of INR 2,650 crores and EBITDA margin of 24%.

  • Capex budget for FY26-FY28 is estimated at INR 400 crores, funded partly by internal accruals.

  • Interim dividend of INR 0.50 per equity share declared.

Key financials

2 periods

Headline

  • Consolidated Revenue
    ₹578 Cr
    YoY +14%
  • Consolidated EBITDA
    ₹126 Cr
    YoY +12%
  • Consolidated EBITDA Margin
    21.7%
  • Consolidated PAT
    ₹88 Cr
  • Consolidated Order Intake
    ₹688 Cr
    YoY +28%

H1

  • Adjusted Revenue
    ₹1,043 Cr
    YoY +15.8%
  • Adjusted EBITDA
    ₹231 Cr
    YoY +12.7%
  • Adjusted EBITDA Margin
    22.1%
  • PAT (incl. one-time)
    ₹263 Cr

What they filed

Q1 FY27: revenue up 6.1%, net profit down 60.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue508 529 798 491 578 +14%552 +4%746 −7%521 +6%
EBITDA112 143 195 130 126 +13%109 −24%158 −19%109 −16%
Net profit88 108 146 175 88 +0%72 −33%6 −96%70 −60%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenueEBITEBIT MarginOrder Intake
Gear Division₹441 Cr₹85 Cr19.2%₹497 Cr
Material Handling Equipment (MHE) Division₹137 Cr₹35 Cr25.7%₹191 Cr
International Subsidiaries————

Guidance & targets

Export

  • Export Revenue Share Export · FY '30 · High confidence 50%
    As a part of our strategic vision, we aim to increase the share of exports to 50% of the total revenue by FY '30.

    — Prayasvin Patel, Chairman and Managing Director

Profitability

  • Gear Division EBITDA Margin Profitability · H2 FY26 · Medium confidence normalize
    We expect margins to normalize in H2 FY '26 as volumes pick and operating leverage comes into play through recently commissioned capacity ramp-up and order book converts faster into revenue.

    — Narasimhan Raghunathan, Chief Financial Officer

  • Consolidated EBITDA Margin Profitability · FY '26 · High confidence 24%
    To conclude, we are confident of achieving our annual guidance of achieving consolidated revenue of INR2,650 crores and EBITDA margin of 24 percentage in FY '26.

    — Narasimhan Raghunathan, Chief Financial Officer

  • Gear Division Margins Profitability · FY '26 · High confidence 25%
    We used to guide for about 25% margins in the Gear business. Should that be achievable for the year? Yes. Definitely. Once the turnover picks up in the second half as what CMD has said, the margin of whatever we have projected definitely is achievable.

    — Narasimhan Raghunathan, Chief Financial Officer

Revenue

  • Consolidated Revenue Revenue · FY '26 · High confidence INR 2,650 crores
    To conclude, we are confident of achieving our annual guidance of achieving consolidated revenue of INR2,650 crores and EBITDA margin of 24 percentage in FY '26.

    — Narasimhan Raghunathan, Chief Financial Officer

  • International OEM Revenue Revenue · FY '26 · Medium confidence EUR 7 million
    Okay, sir. Sir, that OEM business side, I think we are targeting EUR7 million in this year and I just want to understand on the customer onboarding side, is there any concerns about the margin dilutions to onboard new OEMs because OEMs contracts are technically competitive? We have considered all this situation. We are not expecting that what we had committed those margins, we will be able to maintain.

    — Balasubramanian, Analyst (confirmed by Prayasvin Patel)

  • H2 Revenue Revenue · H2 FY '26 · High confidence INR 1,500 crores
    And the guidance which we are targeting, we need to do INR1,500 crores in next, which essentially means the quarterly run rate of INR800 crores. So can you tell us like is it going to be a uniform execution or we should expect like in the range of INR650 crores, INR700 crores in Q3 and rest will be in Q4? See, we have done a fair good amount of capex and the new equipment have already started arriving. They are a lot of them have started producing for us, and we are reasonably confident that with the capacity increase that we have had and the new equipment, which are performing well, we should be able to achieve our targets with reasonable confidence.

    — Garvit Goyal, Analyst (implied by Prayasvin Patel's response)

Capex

  • Total Capex Capex · FY '26 to FY '28 · High confidence INR 400 crores
    Looking ahead, the capex budget for FY '26 to FY '28 is estimated at INR400 crores aligned with our long-term strategic goals.

    — Narasimhan Raghunathan, Chief Financial Officer

Risks & concerns

  • Geopolitical Volatility and International Order Delays

    medium

    Geopolitical situations in select international markets have led to timing-related delays in order receipt and execution, impacting overseas business.

    Management acknowledged

  • Temporary Margin Pressure in Gear Division

    low

    EBITDA margin was temporarily impacted by higher employee costs and a change in product mix within the gear division, but expected to normalize in H2 FY26.

    Management acknowledged

  • Fluctuating Credit Scenario in the United States

    low

    The credit scenario in the United States is fluctuating widely, but management is confident in achieving committed margins.

    Management acknowledged

  • Delays in Defense Project Finalization

    low

    Defense projects often face delays due to coordination among multiple agencies, pushing back order finalization timelines.

    Management acknowledged

Areas of evasion (2)

  • Specific revenue contribution from international services in the next 3-5 years
  • Exact quantum of the NGMV defense order

Q&A highlights

3 direct
International Execution Delays and H2 Recovery Outlook Direct
The pending order position is quite strong. The inquiry levels are also quite good, and the body language of the customers who have given us inquiry is they seem to be telling us that, look, we want to finalize the order soon. So that is giving us the encouragement and confidence that we will be able to achieve our targets.

This question addressed concerns about geopolitical volatility impacting international orders and sought clarity on the management's confidence in achieving H2 targets, which is crucial for full-year guidance.

Asked by Garvit Goyal

Gear Division Margin Decline and Future Outlook Direct
See, it all depends on the product mix, as I told you. It not only depends on the product mix, but it also depends on the turnover on the top line. So, by the end of the year, it will all even out to the projected EBITDA that we have defined. Yes. Definitely. Once the turnover picks up in the second half as what CMD has said, the margin of whatever we have projected definitely is achievable.

Analysts probed the reasons for the decline in Gear division EBIT margins, a key profitability metric, and management's response provided a clear explanation and reaffirmed confidence in margin recovery.

Asked by Vishal Biraia

Updates on Large Defense Orders (P-17 Bravo and Aircraft Carrier) Direct
We are expecting as of now that in the third quarter of this year, the tenders would be floated for the ships after which, once the shipyards get the order, they will then contact us for the requirement of the gearboxes. We are expecting that by Q3, Q4 of FY 2027, that is next year, the orders for P-17 Bravo would get finalized. What we find is that they will go in for this requirement very shortly. The duration -- time duration that we expect would be either the last quarter of this year, which would be last quarter at FY '26 or the first or second quarter of FY '27.

Defense orders represent significant opportunities for Elecon, and analysts sought specific timelines and updates on these large, high-value projects, which are critical for future growth.

Asked by Raj Shah

2 min read 6 chapters

Detailed narrative

Q2 & H1 FY26 Consolidated Performance

Elecon Engineering reported a 14% year-on-year growth in consolidated revenue from operations, reaching INR 578 crores in Q2 FY26. For the first half of FY26, adjusted consolidated revenue stood at INR 1,043 crores, up 15.76% from H1 FY25. Consolidated EBITDA for Q2 FY26 was INR 126 crores, a 12% YoY increase, with a margin of 21.7%. H1 adjusted EBITDA was INR 231 crores, with a margin of 22.1%. Profit after tax for Q2 FY26 was INR 88 crores, representing a 15.2% margin.

Robust Order Inflow and Book-to-Bill

The company demonstrated strong order intake in Q2 FY26, totaling INR 688 crores, a 28% growth year-on-year. Domestic order intake grew 32% to INR 516 crores, while overseas order intake increased 18% to INR 172 crores. The open order book as of September 30, 2025, stood at INR 771 crores for the Gear division and INR 455 crores for the MHE division, providing strong revenue visibility for upcoming quarters.

Segmental Performance: Gears and MHE

The Gear division, contributing 76% of consolidated revenue, delivered INR 441 crores in Q2 FY26, growing 9% YoY. Its EBIT margin, however, declined to 19.2% from 21.5% in Q2 FY25 due to product mix and higher employee costs. The Material Handling Equipment (MHE) division continued its strong growth trajectory, with revenue up 33% YoY to INR 137 crores and EBIT margin improving to 25.7% from 25.4% in Q2 FY25. MHE order intake surged 83.6% YoY to INR 191 crores.

International Business and Geopolitical Impact

Overseas business remained flat in Q2 FY26, impacted by timing-related delays in order receipt and execution due to geopolitical volatility in select international markets. Management acknowledged these delays but expressed confidence that the underlying demand remains healthy and execution will pick up pace in H2 FY26. The strategic vision includes increasing the share of exports to 50% of total revenue by FY30, with efforts to penetrate new territories like South America and parts of Europe and the Middle East.

Financial Outlook and Strategic Capex

Elecon reiterated its annual guidance for FY26, targeting consolidated revenue of INR 2,650 crores and an EBITDA margin of 24%. The company plans a capex budget of INR 400 crores for FY26 to FY28, aimed at capacity enhancement, quality improvement, and addressing wear and tear. This capex will be partly funded by internal accruals, with the balance potentially through operating leases. Management expects Gear division margins to normalize to around 25% by year-end as volumes scale up in H2.

Defense and New OEM Opportunities

The company provided updates on significant defense projects, anticipating tenders for P-17 Bravo ships in Q3 FY26 and order finalization by Q3/Q4 FY27. The INR 200 crores Aircraft Carrier order is expected to materialize in Q4 FY26 or Q1/Q2 FY27. While onboarding 18 new OEMs, management noted some delays in ramp-up due to geopolitical situations but expects orders of at least INR 30-40 crores from these clients. The company is also manufacturing units for new generation petroleum vessels (NG-OPVs).

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