EEC bags order worth `21cr
Elecon Engineering (EEC) has bagged order worth `21cr from Wonder Cement,
Rajasthan. The order consists of supply of stackers, reclaimers and auxiliaries to the
cement plant. Total order book at the end of August 2010 stood at `1,567cr, while new
order till the end of August 2010 stood at `782cr (`499cr for MHE and `283cr for gears).
We believe an improving economic scenario (indicated by the revival in IIP), continued
government focus on infrastructure spends and pick-up in private capex augur well for
companies providing MHE solutions for the core sectors of the economy. The government's
strong focus on the power sector, through ’Power for all by 2012’, is expected to result in
an expansion of the sector’s generation capacity, leading to higher opportunities for MHE
players, while the mining and port sectors would throw up combined opportunities worth
around `7,000cr.
We estimate EEC's adjusted PAT to post a 22% CAGR over FY2010–12E, led by stronger
order inflow and a reduction in interest outflow due to deleveraging of the balance sheet
on account of better working capital management. We expect RoCE and RoE to improve
from 13% and 22% in FY2010 to 19% and 23% in FY2012E, respectively.
At `100, the stock is available at 9.4x FY2012E earnings and 6.1x FY2012E EV/EBITDA.
We recommend Accumulate on the stock with a Target Price of `107.
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