3QFY2016 Result Update | Capital
Goods
8 February 2016
Elecon Engineering Company
NEUTRAL
CMP
`61
Performance Highlights
Target Price
-
Standalone
Investment Period
-
Y/E March (` cr)
3QFY2016
3QFY2015
% chg (yoy) 2QFY2016
% chg (qoq)
Net Sales
120
113
6.0
111
8.0
Stock Info
EBITDA
19
28
(32.7)
28
(32.8)
Sector
Capital Goods
EBIDTA margin(%)
15.5
24.4
(891)bp
24.9
(939)bp
Adjusted PAT
2
6
(66.3)
7
(68.4)
Market Cap (` cr)
666
Source: Company, Angel Research
Beta
1.7
For 3QFY2016, Elecon Engineering reported a disappointing set of numbers on
52 Week High / Low
97/48
both the standalone and consolidated basis. The standalone top-line grew by
Avg. Daily Volume
2,76,052
6.0% yoy to `120cr while the EBITDA margin declined by 891bp yoy mainly on
Face Value (`)
2
account of unfavorable revenue mix involving bulk of the shipments of low
BSE Sensex
24,287
margins. The consolidated top-line grew by 10.6% on a yoy basis to `330cr
mainly led by the overseas business and growth in the Material Handling Business
Nifty
7,387
(MHE) business. But the EBITDA margin deteriorated sharply by 872bp yoy to
Reuters Code
ELCN.BO
2.8%, mainly owing to a spike in raw material cost and other expenses. The
Bloomberg Code
[email protected]
company has reported higher other income on its standalone business related to
profits from sale of land amounting to
~`22cr, adjusting for which, the
standalone bottom-line declined by 66.3% yoy to `2cr. On the consolidated basis,
Shareholding Pattern (%)
the bottom-line after adjusting for the above mentioned exceptional gains and
Promoters
57.3
minority interest reported a loss of `11cr.
MF / Banks / Indian Fls
7.3
Recovery in capex taking longer than expected, long term prospects intact: The
performance of the MHE business of the company has remained under pressure
FII / NRIs / OCBs
0.9
on account of delay in capex in the core sectors and due to slower execution at
Indian Public / Others
34.5
customer level. On the other hand, the PTE business which had been holding its
ground has faced some pressure in the current year. Although the recovery in
capex in core sectors has been slower than expected, the long term prospects for
Abs. (%)
3m 1yr
3yr
the MHE business remain intact. Additionally, the underperforming European
Sensex
(7.0)
(4.1)
24.0
subsidiary is undergoing restructuring and it has been PAT positive for the past
Elecon Engg
(19.9)
(5.8)
54.1
three quarters (PAT of `7cr in 9MFY2016). We expect the subsidiary to contribute
more meaningfully in the longer run.
Outlook and Valuation: The impending improvement in the economic scenario
3-year daily price chart
and the resultant capex is expected to drive up demand for the MHE business.
Also its PTE business stands to benefit for the same reason. However, owing to
120
near term issues like slow pace of execution at customers ends and delay in capex
100
in core sectors have been impacting the overall business of the company. We are
80
accounting for a modest 5.6% revenue CAGR over FY2015-17E to `1,482cr and
60
we expect net profit after minority interest to be at `42cr in FY2017E. At the
40
current market price, the stock is trading at 15.7 its FY2017E earnings. We have
a Neutral view on the stock.
20
-
Key Financials (Consolidated)
Y/E March (` cr)
FY2014
FY2015
FY2016E
FY2017E
Net Sales
1,293
1,329
1,359
1,482
% chg
(15.3)
2.8
2.3
9.0
Source: Company, Angel Research
Adj. Net Profit
15
16
9
42
% chg
(54.1)
9.8
(46.5)
384.7
EBITDA (%)
11.7
12.8
10.3
13.6
EPS (`)
1.4
1.5
0.8
3.9
P/E (x)
44.7
40.7
76.1
15.7
P/BV (x)
1.3
1.2
1.2
1.2
RoE (%)
2.8
3.1
1.6
7.8
Milan Desai
RoCE (%)
6.3
7.4
5.8
10.5
022 4000 3600
EV/Sales (x)
1.0
0.9
0.9
0.8
[email protected]
EV/EBITDA (x)
8.6
7.1
8.3
5.8
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
1
Elecon Engineering | 3QFY2016 Result Update
Exhibit 1: 3QFY2016 Standalone performance
Y/E March (` cr)
3QFY16
3QFY15
yoy chg (%)
2QFY16
qoq chg (%)
9MFY16
9MFY15
% chg
Net Sales
120
113
6.0
111
8.0
329
327
0.6
Net raw material
64
60
8.4
49
31.9
160
181
(11.5)
(% of Sales)
53.6
52.4
118bp
43.9
972bp
48.7
55.3
(667)bp
Staff Costs
12
10
21.9
14
(12.8)
36
29
24.3
(% of Sales)
10.0
8.7
131bp
12.4
(238)bp
10.8
8.8
206bp
Other Expenses
25
16
53.0
21
19.8
64
53
21.0
(% of Sales)
20.9
14.5
642bp
18.9
205bp
19.5
16.2
327bp
Total Expenditure
102
86
18.5
84
21.5
260
263
(1.0)
Operating Profit
19
28
(32.7)
28
(32.8)
69
64
7.4
OPM
15.5
24.4
(891)bp
24.9
(939)bp
21.0
19.7
133bp
Interest
9
7
23.3
9
1.5
26
22
18.6
Depreciation
12
12
(1.6)
12
0.8
35
37
(3.9)
Other Income
25.6
1.3
1812.5
3.2
689.2
31
10
226.6
PBT
23
10
144.0
10
129.0
39
15
12.6
(% of Sales)
19.3
8.4
9.1
11.9
4.7
Tax
6
3
3
11
5
(% of PBT)
26
32
32
29
32
Reported PAT
17
6
164.0
7
147.9
28
10
165.3
Extraordinary item
15
-
-
15
0
Adj. PAT
2
6
(66.3)
7
(68.4)
13
10
21.7
PATM
1.8
5.7
6.2
3.8
3.2
Source: Company, Angel Research
Exhibit 2: Actual vs. Estimate (Standalone 3QFY2016)
Particulars (` cr)
Actual
Estimate
Variation (%)
Total Income
120
122
(1.5)
EBIDTA
19
30
(37.7)
EBIDTA margin (%)
15.5
24.5
(900)bp
Adjusted PAT
2
9
(75.5)
Source: Company, Angel Research
Numbers disappoint on EBITDA and bottom-line front
For 3QFY2016, Elecon Engineering reported a disappointing set of numbers on
almost all fronts. The standalone top-line grew by 6.0% yoy to `120cr while the
standalone EBITDA margin declined by
891bp yoy mainly on account of
unfavorable revenue mix involving bulk of the shipments of low margins. The
consolidated top-line grew by 10.6% on a yoy basis to `330cr mainly led by the
overseas business and ~9% yoy growth in the MHE business. However, the
consolidated EBITDA margins deteriorated sharply by 872bp yoy to 2.8% mainly
on the back of spike in raw material cost and other expenses. The MHE business
like its competition is facing rough times owing to a tough operating environment
and has reported a loss at the EBITDA level.
The company has reported a higher other income on its standalone business
related to profits from sale of land amounting to ~`22cr, adjusting for which, the
standalone bottom-line declined by 66.3% yoy to `2cr. On the consolidated basis,
8 February 2016
2
Elecon Engineering | 3QFY2016 Result Update
the bottom-line after adjusting for the above mentioned exceptional gains and
minority interest reported a loss of `11cr against a net loss of `6cr in 3QFY2015.
The numbers were mostly below our estimates owing to a poor mix. Raw material
costs caused major variance in the actual numbers to our estimates.
Con-call Takeaways
The Management much like the past quarter has maintained its view that the
near term scenario remains subdued as customers are facing challenges in
terms of execution.
The margin drop at the standalone level was owing to higher share of low
margin orders and lower contribution from sale of spares. The spares which
used to contribute ~20-25% in prior quarters were much lower.
The international subsidiary has remained positive and has posted a PAT of
`7.1cr for 9MFY2016.
Tech-Pro situation remains unchanged. The consolidated receivables stood at
`775cr (~`608cr for MHE division, ~`60cr for Benzlers and ~`105cr for
standalone).
The MHE order book stood at `990cr while the Benzlers Group’s order book
stood at ~`60cr.
Consolidated debt stood at ~`600cr.
The other income was higher on account of sale of land to the promoter(s)
who were leasing the land from the company. The proceeds were ~`25cr for
which the company reported gains of ~`22cr.
Investment Argument
Capex in core sectors yet to pick up, long term prospects intact
The MHE business of the company has been undergoing a rough phase with
slower execution and lack of uptick in orders owing to a poor operating
environment. The performance has remained under pressure as pick-up in capex
in core sectors is taking longer than expected. However, the outlook remains intact
for the MHE business on account of imminent improvement in capex in power,
mining and port sectors. Further, the declining interest rate scenario should
improve liquidity in the market that has hampered execution at the client level.
Considering the near term muted outlook, we expect the MHE business’ top-line to
post a revenue CAGR of 3.7% over FY2015-17E to `556cr.
8 February 2016
3
Elecon Engineering | 3QFY2016 Result Update
Exhibit 3: MHE Revenues and Growth trend
Exhibit 4: Standalone PTE Revenue and Growth trend
900
MHE Revenue (LHS)
MHE Growth (RHS)
PTE Revenue (LHS)
Growth (RHS)
620
15
20.0
800
18.0
600
9.9
10
15.0
8.0
700
8.4
580
5
10.0
3.7
600
560
0.4
2.5
-
5.0
3.1
500
-
540
(5)
(0.8)
400
(5.0)
520
(10)
300
(10.0)
500
(15)
(15.8)
200
(15.0)
480
(20)
(16.4)
100
(20.0)
460
(25)
(24.4)
-
(25.0)
440
(30)
FY2012
FY2013
FY2014
FY2015
FY2016E FY2017E
FY2012
FY2013
FY2014
FY2015
FY2016E FY2017E
Source: Company, Angel Research
Source: Company, Angel Research
The standalone PTE business which was holding its ground till now has come
under pressure owing to the above mentioned reasons. The order book remains
healthy at `252cr providing revenue visibility. The utilization levels remain low at
40-45% which should improve once the capex cycle turns around. Going forward,
we expect the standalone business to post a CAGR of 5.2% over FY2015-17E to
`557cr. Owing to operating leverage coming into play, we expect the EBITDA
margin to improve from the present levels of ~21.0% (9MFY2016) to 23.6% in
FY2017E.
Exhibit 5: Standalone EBITDA & EBITDA Margins
Exhibit 6: Standalone PAT and PAT Margins
EBITDA (LHS)
EBITDA Margins (RHS)
PAT (LHS)
PAT Margins (RHS)
140
25.0
45
8.0
23.6
40
7.1
7.0
120
22.6
21.2
20.0
20.0
35
6.6
6.6
6.0
100
17.3
30
5.4
5.0
15.0
80
25
4.0
60
20
10.0
3.0
15
2.8
40
2.0
10
5.0
20
5
1.0
-
-
-
-
FY2013
FY2014
FY2015
FY2016E
FY2017E
FY2013
FY2014
FY2015
FY2016E
FY2017E
Source: Company, Angel Research
Source: Company, Angel Research
Benzlers-Radicon restructuring to have a meaningful impact in
the long run
Elecon Engineering is in the process of restructuring its operations in Europe, which
is more likely to be along the lines of shifting of some production to India to
develop higher quality products that meet European standards at a lower cost. The
company will shift a major portion of production to India in the longer run. This
along with other cost cutting measures undertaken by the Management and with a
gradual recovery in Europe, should lead the subsidiary to have a meaningful
contribution over the longer term. At present the EBITDA margin for Benzlers-
Radicon is more likely to continue to be at 7-8%, which although would improve to
~10% over the longer run. The subsidiary has turned PAT positive so far in the
year reporting a PAT of ~`7cr in 9MFY2016.
8 February 2016
4
Elecon Engineering | 3QFY2016 Result Update
Consolidated Financials
Exhibit 7: Revenue Assumptions
(` cr)
FY2015
FY2016E
FY2017E
Revenue
Elecon EPC (MHE)
517
513
556
Elecon Standalone
503
516
557
Radicon Benzlers (PTE) & Others
384
408
453
Less: Inter Company
76
78
84
Consolidated
1,329
1,359
1,482
Source: Company, Angel Research
Recovery in Capex across industry to improve top-line
We have scaled down our expectation in the near term as the recovery at the
ground level is taking longer than expected. However, we expect the recovery to
gather steam only after FY2016E (2HFY2017E). We have built in a revenue CAGR
of 5.6% over FY2015-17E to `1,482cr.
Exhibit 8: Revenues to improve on revival in capex
Exhibit 9: EBITDA Margin to witness improvement
Revenue (LHS)
Revenue Growth (RHS)
250
EBITDA (LHS)
EBITDA Margins (RHS)
16.0
1,550
15.0
13.6
13.
6 14.0
1,500
200
10.0
9.0
12.8
12.0
11.7
1,450
5.0
10.0
150
10.3
1,400
2.8
2.3
-
8.0
1,350
(5.0)
100
(5.4)
6.0
1,300
(10.0)
4.0
1,250
50
(15.0)
2.0
1,200
(15.3)
1,150
(20.0)
-
-
FY2013
FY2014
FY2015
FY2016E FY2017E
FY2013
FY2014
FY2015
FY2016E
FY2017E
Source: Company, Angel Research
Source: Company, Angel Research
EBITDA margin to expand
Post the decline in profitability in 3QFY2016, we expect the EBITDA margin to
decline to 10.3% in FY2016E and recover to 13.6% in FY2017E. Adjusting for
minority interest, the company’s net profit is expected to be at `42cr for FY2017E.
8 February 2016
5
Elecon Engineering | 3QFY2016 Result Update
Exhibit 10: PAT trajectory
45
PAT (LHS)
PAT Margins (RHS)
3.5
40
3.0
2.9
35
2.5
30
2.1
25
2.0
20
1.5
15
1.2
1.2
1.0
10
0.6
0.5
5
-
-
FY2013
FY2014
FY2015
FY2016E
FY2017E
Source: Company, Angel Research
Outlook and Valuation
The impending improvement in the economic scenario and the resultant capex is
expected to drive up demand for the MHE business. Also its PTE business stands to
benefit for the same reason. However, owing to near term issues like slow pace of
execution at customer’s end and delay in capex in core sectors has been impacting
the overall business of the company. We are accounting for a modest 5.6%
revenue CAGR over FY2015-17E to `1,482cr and we expect the net profit after
minority interest to be at `42cr in FY2017E. At the current market price, the stock is
trading at 15.7x its FY2017E earnings. We have a Neutral view on the stock.
Exhibit 11: One-year forward P/E band
150
Price (`)
5x
11x
17x
23x
130
110
90
70
50
30
10
(10)
Source: Company, Angel Research
8 February 2016
6
Elecon Engineering | 3QFY2016 Result Update
Key Risks
Competition - Competition from other smaller players who bid at lower margins
will have a negative impact on the company’s business growth.
Failure of revival in capex - Both the main businesses of Elecon Engineering
benefit indirectly from improvement in infrastructure as well as capex in core
sectors. Contraction in capex will have a negative impact on the business.
Higher exposure to Coal Handling - The company’s MHE business derives most of
its revenues (60-70%) from the coal handling segment for power projects. Further
delay in allocation of blocks, environmental clearances, land acquisition and other
policy related issues will have a negative impact on the business.
Foreign Exchange - The Benzlers-Radicon group has transferred some lines of
production (~30% of subsidiary’s turnover) from Sweden to India. It plans on
scaling it up to ~60-80% in a gradual manner. Depreciating Euro against the INR
will have a negative impact on the margins of the subsidiary.
Company Background
Established in 1951, Elecon Engineering pioneered breakthrough innovations in
the manufacture of MHE and power transmission solutions and is one of the
largest manufacturers of MHE and industrial gears in Asia. The company has
expanded its skills and expertise to execute EPC contracts and has transformed into
a fully integrated EPC company executing several projects in India. The company’s
acquisition of Benzlers - Radicon from David Brown Gear Systems Group in 2010
adds to the expertise in manufacturing customized gearboxes for steel mills, high
speed turbines, and satellites for Indian Space Research Program and Naval
aircraft carriers.
Standalone business - The Power Transmission business of the company is the
largest gear manufacturing company in Asia. Its market share currently stands at
~30% with customer presence across India and countries like Australia, Africa,
South East Asia, Middle East, and Europe. As on FY2014, the standalone revenues
accounted for ~39% of its overall sales.
Elecon EPC Projects Ltd - Elecon EPC Projects became a 60.48% subsidiary of
the company with the balance held by the Promoter family. It was formed to
manage the core MHE business of the company and today it is the third largest
MHE company in India with products and solutions for various industrial sectors in
India. Its FY2014 revenues accounted for ~39% of Elecon Engineering’s overall
sales.
8 February 2016
7
Elecon Engineering | 3QFY2016 Result Update
Exhibit 12: Business Structure
Elecon Engineering
Co. Ltd
Elecon Transmission
Elecon EPC Projects
Standalone (PTE)
Inernational Ltd (PTE)
(MHE)
100%
60.48%
AB Benzlers
Radicon UK
Radicon US
Source: Company, Angel Research
Benzler-Radicon Group - Elecon Engineering acquired Benzler-Radicon in
October 2010 from the UK based engineering company David Brown. Benzler-
Radicon have over 60 years of experience and have a reputation for being market
leaders in the design and manufacture of screw jacks, shaft mounted gearboxes
and industrial reducers.
Products
Its Power Transmission division involves design and manufacturing of the
following:
Power Transmission Solutions
Helical and Bevel Helical Gear boxes
Wind Mill Gear boxes
Planetary Gear boxes
Elevator Traction
Worm Gear boxes
Marine Gear boxes
Geared & Flexible Couplings
Loose Gear boxes
High Speed Gear boxes
Special Gear boxes
Its product range in the MHE segment includes design, engineering, manufacture,
supply, erection and commissioning of the following -
Material Handling Equipment
Wagon tipplers
Crawler-mounted trippers
Stationary and shiftable conveying systems for open
Bucket wheel stacker/reclaimers
cast lignite mines
Barrel-type blender reclaimers
Integrated coal handling plants for power stations
Fertilizer reclaiming scrapers
Fertilizer reclaiming scrapers
Limestone pre-homegenizing and
Underground mining conveyors
blending plants
Single and twin bucket wheel bridge-
Open-cast conveying systems
type reclaimers
8 February 2016
8
Elecon Engineering | 3QFY2016 Result Update
Profit and loss statement (Consolidated)
Y/E March (` cr)
FY2013
FY2014
FY2015E
FY2016E
FY2017E
Total operating income
1,527
1,293
1,329
1,359
1,482
% chg
(5.4)
(15.3)
2.8
2.3
9.0
Net Raw Materials
807
624
677
715
742
% chg
(14.1)
(22.6)
8.4
5.6
3.8
Mfg. Exp. & Erection Charges
131
142
147
152
163
% chg
35.9
8.4
3.8
3.6
7.1
Personnel
185
174
143
151
161
% chg
27.9
(5.8)
(17.7)
5.3
7.0
Other
196
202
192
201
213
% chg
(12.4)
2.9
(4.8)
4.7
6.0
Total Expenditure
1,319
1,142
1,159
1,219
1,280
EBITDA
208
151
170
140
202
% chg
(0.2)
(27.5)
12.4
(17.4)
44.3
(% of Net Sales)
13.6
11.7
12.8
10.3
13.6
Depreciation& Amortisation
57
62
72
66
69
EBIT
151
89
98
74
133
% chg
(5.6)
(40.9)
9.9
(24.8)
80.2
(% of Net Sales)
9.9
6.9
7.4
5.4
9.0
Interest & other Charges
82
74
81
77
72
Other Income
7
15
17
37
17
(% of Net Sales)
0.5
1.2
1.3
2.7
1.1
Recurring PBT
69
15
17
(3)
61
% chg
(25.9)
(77.9)
12.9
(119.7)
-
Exceptional items
(27)
-
-
-
-
PBT (reported)
50
31
34
34
78
Tax
21
15
17
20
31
(% of PBT)
41.4
49.3
49.5
60.0
40.0
PAT (reported)
29
16
17
13
47
Minority Interest (after tax)
12
1
1
(10)
5
Profit/Loss of Associate Company
0
0
0
0
0
Net Profit after Minority Int.
18
15
16
24
42
& P/L Asso.Co.
Extraordinary Expense/(Inc.)
(14)
0
-
15
-
ADJ. PAT
32
15
16
9
42
% chg
(46.0)
(54.1)
9.8
(46.5)
384.7
(% of Net Sales)
2.1
1.2
1.2
0.6
2.9
Basic EPS (`)
3.5
1.4
1.5
0.8
3.9
Fully Diluted EPS (`)
3.5
1.4
1.5
0.8
3.9
% chg
(46.0)
(60.8)
9.8
(46.5)
384.7
Dividend
11
11
12
13
20
Retained Earning
16
3
3
-2
23
8 February 2016
9
Elecon Engineering | 3QFY2016 Result Update
Balance sheet (Consolidated)
Y/E March (` cr)
FY2013
FY2014
FY2015E
FY2016E
FY2017E
SOURCES OF FUNDS
Equity Share Capital
22
22
22
22
22
Reserves& Surplus
516
510
514
511
535
Shareholders’ Funds
538
532
536
533
556
Minority Interest
34
35
36
26
31
Total Loans
697
633
552
552
530
Other Long Term Liabilities
128
139
113
113
113
Long Term Provisions
5
3
3
3
3
Deferred Tax Liability
44
43
36
36
36
Total Liabilities
1,446
1,386
1,276
1,263
1,269
APPLICATION OF FUNDS
Gross Block
904
908
895
922
949
Less: Acc. Depreciation
360
400
455
522
591
Less: Impairment
-
-
-
-
-
Net Block
544
508
440
400
358
Capital Work-in-Progress
10
7
4
4
4
Lease adjustment
-
-
-
-
-
Goodwill
81
87
84
82
79
Investments
13
14
15
15
15
Long Term Loans and advances
11
19
17
17
17
Other Non-current asset
39
65
54
54
54
Current Assets
1,425
1,357
1,351
1,389
1,474
Cash
32
22
32
61
47
Loans & Advances
155
115
109
111
121
Inventory
393
358
346
354
386
Debtors
838
853
858
857
913
Other current assets
8
9
6
6
6
Current liabilities
679
675
692
702
736
Net Current Assets
746
682
659
688
738
Misc. Exp. not written off
-
-
-
-
-
Deferred Tax Assets
3
3
3
3
3
Total Assets
1,446
1,386
1,276
1,263
1,269
8 February 2016
10
Elecon Engineering | 3QFY2016 Result Update
Cash flow statement (Consolidated)
Y/E March (` cr)
FY2013
FY2014
FY2015E FY2016E FY2017E
Profit before tax
50
31
34
34
78
Depreciation
57
62
72
66
69
Change in Working Capital
(171)
55
32
1
(64)
Direct taxes paid
(21)
(15)
(24)
(20)
(31)
Others
(7)
(15)
(17)
(37)
(17)
Cash Flow from Operations
(92)
116
97
43
35
(Inc.)/Dec. in Fixed Assets
(120)
(1)
20
(25)
(25)
(Inc.)/Dec. in Investments
1
(2)
(1)
-
-
(Incr)/Decr In LT loans & adv.
32
(34)
13
-
-
Others
7
15
17
37
17
Cash Flow from Investing
(80)
(22)
49
12
(8)
Issue of Equity
3
-
-
-
-
Inc./(Dec.) in loans
32
(64)
(82)
(10)
(17)
Dividend Paid (Incl. Tax)
(14)
(12)
(14)
(16)
(24)
Others
163
(28)
(40)
-
-
Cash Flow from Financing
185
(104)
(137)
(26)
(41)
Inc./(Dec.) in Cash
13
(9)
9
29
(14)
Opening Cash balances
19
32
22
32
61
Closing Cash balances
32
22
32
61
47
8 February 2016
11
Elecon Engineering | 3QFY2016 Result Update
Key ratios (Consolidated)
Y/E March
FY2013
FY2014
FY2015E
FY2016E
FY2017E
Valuation Ratio (x)
P/E (on FDEPS)
20.5
44.7
40.7
76.1
15.7
P/CEPS
7.4
8.7
7.6
8.9
6.0
P/BV
1.2
1.3
1.2
1.2
1.2
EV/Net sales
0.9
1.0
0.9
0.9
0.8
EV/EBITDA
6.5
8.6
7.1
8.3
5.8
EV / Total Assets
0.9
0.9
0.9
0.9
0.9
Per Share Data (`)
EPS (Basic)
3.5
1.4
1.5
0.8
3.9
EPS (fully diluted)
3.5
1.4
0.0
0.0
0.3
Cash EPS
9.6
7.0
8.1
6.9
10.2
DPS
1.2
1.0
1.1
1.2
1.8
Book Value
57.9
48.8
49.2
48.9
51.1
DuPont Analysis
EBIT margin
9.9
6.9
7.4
5.4
9.0
Tax retention ratio
0.6
0.5
0.5
0.4
0.6
Asset turnover (x)
1.3
1.0
1.1
1.2
1.3
ROIC (Post-tax)
7.4
3.5
4.1
2.6
7.2
Cost of Debt (Post Tax)
7.0
5.6
6.9
5.6
8.0
Leverage (x)
1.2
1.1
0.9
0.9
0.8
Operating ROE
7.9
1.2
1.5
0.0
6.5
Returns (%)
ROCE (Pre-tax)
11.3
6.3
7.4
5.8
10.5
Angel ROIC (Pre-tax)
12.7
7.0
8.2
6.6
12.0
ROE
6.5
2.8
3.1
1.6
7.8
Turnover ratios (x)
Asset TO (Gross Block)
1.8
1.4
1.5
1.5
1.6
Inventory / Net sales (days)
90
106
97
94
91
Receivables (days)
194
239
235
230
225
Payables (days)
189
216
215
210
210
WC cycle (ex-cash) (days)
150
194
177
168
162
Solvency ratios (x)
Net debt to equity
1.2
1.1
0.9
0.9
0.8
Net debt to EBITDA
3.1
4.0
3.0
3.4
2.3
Int. Coverage (EBIT/ Int.)
1.9
1.2
1.2
1.0
1.9
8 February 2016
12
Elecon Engineering | 3QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and MCX Stock Exchange Limited. It is also registered as a Depository Participant with CDSL and
Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel has received in-principal approval
from SEBI for registering as a Research Entity in terms of SEBI (Research Analyst) Regulations, 2014. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its associates
including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by
Analyst. Angel or its associates/analyst has not received any compensation / managed or co-managed public offering of securities of
the company covered by Analyst during the past twelve months. Angel/analyst has not served as an officer, director or employee of
company covered by Analyst and has not been engaged in market making activity of the company covered by Analyst.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from
or in connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Elecon Engineering
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15
8 February 2016
13