Elecon Engg.Co

Elecon Engineering reported a resilient Q3 FY26 performance with consolidated revenue from operations at INR 552 crores, a 4.3% year-on-year growth from INR 529 crores in Q3 FY25. Despite this, consolidated EBITDA stood at INR 109 crores, translating to an EBITDA margin of 19.8%, a decline from INR 143 crores in Q3 FY25. Profit after tax for the quarter was INR 72 crores, representing a PAT margin of 13%. The company's consolidated order intake for Q3 FY26 was INR 701 crores, reflecting a 7% year-on-year growth.

The Gear division, contributing approximately 78% of consolidated revenue, delivered a largely stable performance with revenue growth of 1.3% year-on-year, reaching INR 429 crores in Q3 FY26 compared to INR 423 crores in Q3 FY25. However, EBIT for the division declined significantly to INR 78 crores from INR 118 crores in Q3 FY25, with EBIT margin falling to 18.2% from 27.8% in the prior year. This was primarily attributed to higher employee costs and an unfavorable product mix, including a smaller, first-time order for the Indian Navy. The order intake for the quarter was INR 464 crores, and the open order book stood at INR 811 crores as of December 31, 2025.

The MHE division continued its strong growth momentum, delivering a 16% year-on-year revenue growth, with quarterly revenue at INR 123 crores compared to INR 105 crores in Q3 FY25. Growth was driven by robust demand from sectors like power, cement, mining, and ports. EBIT for the division was INR 25 crores, down from INR 33 crores in Q3 FY25, impacted by product mix. Order intake for the quarter was INR 237 crores, a significant increase from INR 185 crores in Q3 FY25, and the open order book stood at INR 561 crores as of December 31, 2025, reflecting strong growth prospects.

The consolidated order intake for Q3 FY26 was INR 701 crores, a 7% YoY growth, contributing to a healthy open order book. However, the Gear division experienced muted growth due to timing-related factors, including delays in order inflows and customer-driven dispatch deferments, with approximately INR 30-40 crores of revenue deferral from Q3 to Q4 FY26 or Q1 FY27. Management expects a faster execution of orders in Q4, particularly for catalogue products with shorter manufacturing cycles, to support improved performance. The open order book for the Gear division was INR 811 crores and for MHE was INR 561 crores as of December 31, 2025.

Consolidated EBITDA margins declined to 19.8% in Q3 FY26, primarily due to flat revenue performance, higher employee costs, and a change in product mix. The Gear division's EBIT margin saw a substantial drop to 18.2% from 27.8% YoY, partly due to a first-time, smaller-value order for the Indian Navy which incurred higher manufacturing and learning costs, impacting margins by 0.5% to 1%. Management expects margins to normalize as volumes pick up and operating leverage comes into play, with an overall impact of 2-3% on margins from competitive scenarios.

Elecon Engineering revised its FY26 outlook, expecting consolidated revenue to be lower by up to approximately 5% and adjusted EBITDA margins to be lower by up to approximately 2% compared to earlier guidance, citing near-term softness. Despite this, the company maintains a long-term growth guidance of 20-25% over the next three years. A capex outlay of INR 400 crores is planned for FY26 to 2028, with INR 35-40 crores specifically for the MHE division in Q1 FY27 to expand capacity and upgrade machinery. The company aims for 50% of its revenue to come from exports by FY30.

The company is actively pursuing export growth through OEMs, consultants, and distributors across 95 countries, despite geopolitical situations impacting near-term performance. They are confident in reaching 50% export revenue by FY30, leveraging past efforts and customer relationships. In the domestic market, Elecon aims to maintain its leadership position and nearly 40% organized market share, but will not pursue aggressive market share increases if it compromises margins, focusing instead on product enhancement and cost reduction. They are optimistic about demand from power, steel, cement, and sugar sectors.