Shares of Elecon Engineering, a manufacturer of material handling equipment and industrial gears, have risen exponentially from ₹190 to ₹432 in just six months, producing a return of 127 percent. The stock had a rough start to the year, losing 30 percent of its value in the first two months. However, it has been steadily rising since March and has risen by 226 percent to date.
Elecon Engineering has delivered astounding returns of 1,162 percent over the last three years while in the last five years, the stock price has surged 482.56 percent.
At the current market price of ₹425.95, the stock is 232.77 percent up from its 52-week low of ₹128.
Elecon Engineering delivered a robust performance in Q2 FY23, beating analysts' estimates. The company reported an 82 percent YoY jump in its consolidated net profit to ₹64.5 crore compared to ₹35.4 crore in the year-ago quarter. The company's profit has increased as a result of the decline in finance costs.
Total revenue increased by nearly 26 percent to ₹392.9 crore in Q2 FY23, compared to ₹312 crore in the same period of last year. The company reported an operating profit of ₹92.6 crore for the September quarter, an increase of 38.83 percent when compared to ₹66.7 crore in the corresponding quarter of the last fiscal.
Adding to that, the company recorded its highest-ever EBITDA margin of 23.83 percent during the quarter, an expansion of nearly 235 basis points YoY and 403 basis points over the preceding quarter.
After a solid Q2 show, domestic brokerage firm Edelweiss raised its target price on the stock to ₹480 per share from an earlier price of ₹374; it valued the stock at 20x FY24E PE. The brokerage updated its EPS forecasts by 25 percent and 15 percent for FY23 and FY24, respectively while largely maintaining the consensus revenue forecast.
"The company delivered an excellent set of numbers for the September quarter, led by strong execution and record margins in the gear business," said the brokerage.
Edelweiss said the order book remains healthy at ₹714 crore, comprising ₹564 crore at the standalone level (+12% QoQ) and the overall gear segment at ₹602 crore.
The company became net debt-free in this quarter, beating its target for FY23, and is likely to accumulate excess cash levels over the next two years. The management indicated it would consider a dividend payout, but the final consideration rests with the board.
The small-cap stock has a market capitalisation of ₹4,854.33 crore. The company designs, manufactures 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.
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.
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