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Elgi equipments 38% Upside ENAM 2011 TOP Pick
A proxy to Industrial capex
● Elgi is a leading manufacturer of compressors catering to industries like mining, power, transport and
textiles. It is also engaged in manufacturing of automobile service station equipments. The compressor
industry is an oligopoly industry with only four players‐Elgi, Kirloskar Pneumatic, Atlas Copco and
Ingersoll‐Rand. The industry has huge entry barriers in the form of technology.
● Elgi manufactures a wide range of compressors catering to large number of industries thus insulating it
from downturn in a single industry. The company is focusing on increasing exports (exports account for
15% of the Elgi standalone business currently). Elgi is also increasing its international presence and has
acquired SA Belair which has given it a strong footing in Europe. It has a strong balance sheet with cash
of Rs. 122 cr. Elgi has been able to reduce working capital to sales from 22% in FY06 to 7.5% in FY10 (on standalone basis).
revenue and 92% to EBIT of the company. The company has averaged ~50% growth in net sales over the
last three quarters on a standalone basis. We expect revenue to grow at a CAGR of ~31% over
FY10‐12E(on a standalone basis). We have valued Elgi at Rs. 127/share giving an upside of 38%.
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