Since the beginning of April 2021, shares of Elecon Engineering Ltd. have increased exponentially from ₹63.70 to the current level of 379.80, representing a multi-bagger return of 496.23 percent.
The stock started on a weak note during the start of the year; it fell 30% in the first two months of the 2022, but since February end, the stock has begun to rise steadily and has risen by 165.59% to the present.
On June 22, the stock surpassed its prior high of ₹274.90 reached in December 2007 after nearly 14 years. In the last six months, the stock has climbed from ₹155.20 to ₹379.80, generating a return of over 144.51%. Further, the stock gave a 3-year return of 1056.16% as compared to the Nifty Small-cap 100, which gave a return of 79.19%. At the prevailing price, the stock traded at 29.07 times its trailing 12-month EPS of ₹13.86 per share and 4.06 times its book value.
Elecon Engineering is a small-cap stock with a market capitalization of ₹4,521.7 crore. The company is a leading manufacturer of mission-critical material handling equipment and power transmission solutions. The company designs manufacture and markets its sophisticated range of products through its network spread across India and through foreign equity participating companies in Singapore, Australia, South Africa, China, and Dubai in the Middle East.
Meanwhile, the gearboxes of India's first indigenous aircraft carrier, Vikrant (the first aircraft carrier to be built in India), were designed and supplied by Elecon Engineering, its website shows.
The company posted a 54.94% jump in its consolidated net profit to ₹42.3 crore for the June-ending quarter as against ₹27.3 crore in the corresponding quarter of the preceding fiscal.
The company's net profit in the past quarters were mixed. It recorded a net profit of 35.4 crore in the September 2021 quarter, 31.5 crore in the December 2022 quarter, and 46.3 crore in the previous quarter.
The EBITDA margin fell slightly to 19.80% in Q1FY23 as against 20.12% in the corresponding quarter of last year. While the company grew its EBIT margin by 28.75% and net profit margin by 116.69% in FY22. It also has a return on equity of 8.06% and a ROCE of 11.85% (5-year average).
It delivered an ROE of 13.37% in the year ending March 31, 2022, outperforming its 5-year average.
This quarter, the company became net debt free, beating its target of FY23. It is likely to accumulate excess cash levels over the next two years. However, the management would prefer to retain it for the time being as it seeks to stabilise the business and keep it healthy after coming out of a difficult phase over the last decade. This will help buffer against any downcycle in the future, Edelweiss said in its research report dated July 25, 2022.
Exports present a huge opportunity for Elecon, and the key challenge is to gain brand acceptance from customers. Many large clients have taken initial orders from Elecon, and the good performance of the product will ensure a larger, more stable order flow in the future, it added.
Vijay Kedia increased his stake in Elecon Engineering Company in the June quarter, according to the latest shareholding pattern, ET reported. Data showed Vijay Kishanlal Kedia held 20,75,000 shares, or a 1.85 percent stake in the company, as of June 30, up from 13.39,713 shares, or a 1.19 percent stake, in the previous quarter.
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