Vijay Kedia Stock Posts 37% Growth In Q2 Net Profit, Dividend Declared; Buy?

Mid-cap capital goods firm Elecon Engineering Company has a market valuation of Rs 9,041.63 Cr as of Friday's closing session. Elecon Engineering Company Ltd. was founded in 1951 and is recognised as a leader in the production of industrial gear motors and reducers, material handling equipment, mining equipment, and casting techniques.

One of the largest manufacturers of industrial gears and material handling equipment in Asia is Elecon. The company has declared strong Financial Results for the quarter & half year ended 30th September 2023 along with an interim dividend for its eligible shareholders.

Elecon Engineering Company Results

The company has declared a consolidated revenue of Rs 485 Cr in Q2FY24 up by 24.8% YoY from Rs 389 Cr in Q2FY23. Elecon Engineering Company's EBITDA surged 28.2% YoY from Rs 93 Cr to Rs 119 Cr in the quarter ended 30th September 2023. During the quarter under review, its consolidated net profit stood at Rs 89 Cr compared to Rs 65 Cr in the same quarter of FY23, representing a growth of 37.3% YoY.

Orders received during Q2 FY24 were Rs 416 Cr, and as of September 30, 2023, there were Rs 738 Cr in orders on hand. For FY24, the firm anticipated revenues of Rs 2,000 Crs.

Shri Prayasvin B. Patel, Chairman & Managing Director of Elecon Engineering Co. Ltd said, "India is positioned to solidify its status as a global manufacturing powerhouse, owing to unwavering government support and substantial investment inflows. Our optimism regarding the sector's expansion remains unwavering, and at Elecon, we proudly uphold our position as the market leader. We continue to provide industrial gear solutions rooted in a rich legacy of over seven decades of invaluable experience."

"We are dedicated to advancing research and product development, reflecting our core mission to offer high-quality, technologically advanced, and globally competitive product range. Our strategic approach involves exploring new geographic markets, maximizing opportunities within our existing markets, and expanding our presence across newly added industries by delivering top-notch services with the lowest possible lead times," he added.

"In the quarter ending on September 30, 2023, our consolidated revenue stood at Rs. 485 Crores, a growth of 25% on Y-o-Y basis. This growth is a majorly attributable to increase in order inflows across industries, increasing wallet share among existing customers & onboarding of new customers," said Shri Prayasvin B. Patel.

"Elecon specializes as one of the Asia's largest Industrial Gear Box Solution company offering the widest range of products diversified across industries such as Cement, Power, Steel, Sugar etc. The revenue from our Industrial Gear division for Q2 FY24 stood at Rs. 423 Crores, with an EBIT Margin of 26%. We've successfully revived our MHE division through efficient operations & discontinuing the EPC business. Within the MHE division, our focus remains on product supply and aftermarket services, yielding a revenue of Rs. 62 Crores for Q2 FY24, a 12% Y-o-Y growth. The EBIT Margin for the MHE division for the quarter stood at 21%, showcasing an improvement of ~700 basis points," the Chairman stated.

"With a robust order book spanning various segments, a steadfast focus on penetrating overseas markets, and our commitment to maintaining a leadership position in the domestic market, we remain optimistic of outperforming the Industry," said Shri Prayasvin B. Patel.

Elecon Engineering Company Dividend

The company's Board of Directors declared an interim dividend of Rs. 1.00 (or 50%) each equity share worth Rs. 2 for the fiscal year 2023-2024. The interim dividend will be paid to all shareholders of the firm on or after Wednesday, 8th November 2023. The record date for determining the shareholders' eligibility for the interim dividend shall be Tuesday, October 31, 2023.

Elecon Engineering Company Share Price Target

Mandar Bhojane, Equity Research Analyst at Choice Broking said, "ELECON is currently trading at 809. On the daily chart, the price has been consistently forming higher highs and higher lows, indicating a strong uptrend. If the price manages to sustain above the 860 level, it suggests the potential for a short-term target of 1000. Moreover, the price has been trading within a range of 852 to 772, demonstrating a period of sideways consolidation. In the event of a breakout above 852, it is likely to encounter immediate resistance at 950. On the flip side, substantial support is evident near the 772 level."

"Additionally, ELECON is presently trading above critical Exponential Moving Averages (EMAs), including the 20-day, 50-day, 100-day, and 200-day EMAs. This reinforces its bullish momentum and implies the possibility of further upward price movement. The Relative Strength Index (RSI) currently stands at 53.61 and is trending upwards, indicating growing buying momentum.

Furthermore, the Stochastic Relative Strength Index (Stoch RSI) has recently exhibited a positive crossover from the oversold region. This confluence of technical indicators suggests that ELECON may have the potential to reach a target price of Rs 1000 in the near term," Mandar Bhojane further added.

"To prudently manage risk, it is advisable to implement a stop-loss (SL) at Rs 760 to safeguard your investment in the event of an unexpected market reversal. In summary, considering the technical analysis and current market conditions, ELECON appears to present an attractive buying opportunity for those targeting a Rs 1000 price objective, provided that sound risk management strategies are in place," the equity research analyst of Choice Broking stated.

Elecon Engineering Company Shareholding Pattern

During Q2FY24, Elecon Engineering Company recorded promoter shareholding of 59.29%, FIIs stake of 4.88%, DIIs stake of 2.92%, and public stake of 32.90%. As per the shareholding pattern of Elecon Engineering Company for the July-September 2023 quarter, ace investor Vijay Kishanlal Kedia held 18,00,000 shares of the company in his portfolio or 1.60% stake in the company.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.