"Elecon Engineering Ltd (EEL) registered strong net sales growth of 24.8% YoY as net sales increased to Rs 442 cr on account of strong execution in MHE segment. Operating margins declined by 144 bps to 14.5% on account of change in sales mix and increased pricing pressure in the industry. Further, higher tax provisioning lead to PAT growth of 1.4% vs PBT growth of 17%, as PAT increased to Rs. 23.9 cr. Order backlog at the end of the Q4FY12 stands at Rs 1212 cr, while company registered orders worth Rs 259 cr during the quarter."
"EEL registered strong net sales growth of 25% on back of robust order execution in MHE segment. MHE division net sales increased by 48% to Rs. 295.5 cr. Growth was driven on back of projects reaching threshold and also low base effect. However, strong growth in MHE segment was partially dampened by decline in growth of Gear division. Gear division registered a decline in sales of -1.4% as sales decreased to Rs. 154.1 cr on account of slow down in industrial demand. Operating margins declined by 144 bps to 14.5% v/s 15.9% in Q4FY11. MHE segment which earns lower margins constituted 66% of sales mix in current quarter v/s 56% in Q4FY11. This coupled with higher input cost resulted in margin decline of 144 bps. For FY12, Benzler Radicon registered sales of Rs 255 cr. However, the company EBIDTA margins declined to 2% on account of one time cost related to moving of production facilities. For FY13E margins are expected to go back to 5%-7%."
"At CMP of 53 EEL is trading at P/E of 8.1x its FY12 and 6.5x its FY13E EPS. Considering attractive valuation, EEL’s product profile and strong order flows in recent past we recommend a BUY on the stock with a price target of Rs 65 (P/E of 8 x its FY13E)," says KRChoksey research report.
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