Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Eimco Elecon (India) Ltd
Slowing down
Fundamental Grade 4/5 (Superior fundamentals)
Valuation Grade 5/5 (CMP has strong upside)
Industry Machinery
Fair Value Rs 339
CMP Rs 228
Eimco Elecon (India) Ltd’s (Eimco Elecon’s) Q3FY11 revenues were in line with
CRISIL Equities’ expectations. Revenue growth slowed down in the reported
quarter with lower realisation from equipment sales. With the new products
gaining traction in the market, we continue to expect that both new products
and the company’s entry into new sectors will drive growth. Consequently, we
maintain our earnings estimates, introduce FY13 estimates and maintain our
fundamental grade of ‘4/5’.
Q3FY11 result analysis
• Eimco Elecon’s revenues increased a meagre 4% y-o-y largely due to
lower realisation from equipment sales with the product mix biased
towards low-value equipment. However, this decline was offset by the
growth in spares business.
• EBIDTA margins declined by 22 bps due to lower realisations on
equipment sales and higher other expenditure.
• Adjusted PAT grew ~3.4% y-o-y to Rs 20 mn due to lower depreciation
costs from the sale of non-core assets and lower interest costs due to the
decline in debt. Adjusted EPS grew in line with profits at ~3.4% to Rs 3.5
per share.
• We expect the slowdown in growth witnessed in Q3FY11 will continue in
Q4FY11. For 9MFY11, adjusted PAT increased by 52% y-o-y, whereas our
full year estimates for FY11 factored in 32% y-o-y growth. For FY12, we
expect both new products and more contribution from the high-margin
spare sales to drive growth.
Key developments; new products gain traction
In Q2FY11, the company’s new product universal drilling machine (UDM), had
witnessed a strong sales growth. In Q3FY11, company’s another new product,
AL120 wheel loader for the mining and construction market, gained traction.
We expect that new products for underground mining as well as entry into the
construction equipment market will drive growth.
Valuations: Current market price has strong upside
We continue to value Eimco Elecon using the discounted cash flow method. We
roll forward our model to FY13 and revise our fair value to Rs 339. Our fair
value implies P/E multiples of 9.2x FY12E and 7.3x FY13E. Our valuation
grade is ‘5/5’.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Eimco Elecon (India) Ltd
Slowing down
Fundamental Grade 4/5 (Superior fundamentals)
Valuation Grade 5/5 (CMP has strong upside)
Industry Machinery
Fair Value Rs 339
CMP Rs 228
Eimco Elecon (India) Ltd’s (Eimco Elecon’s) Q3FY11 revenues were in line with
CRISIL Equities’ expectations. Revenue growth slowed down in the reported
quarter with lower realisation from equipment sales. With the new products
gaining traction in the market, we continue to expect that both new products
and the company’s entry into new sectors will drive growth. Consequently, we
maintain our earnings estimates, introduce FY13 estimates and maintain our
fundamental grade of ‘4/5’.
Q3FY11 result analysis
• Eimco Elecon’s revenues increased a meagre 4% y-o-y largely due to
lower realisation from equipment sales with the product mix biased
towards low-value equipment. However, this decline was offset by the
growth in spares business.
• EBIDTA margins declined by 22 bps due to lower realisations on
equipment sales and higher other expenditure.
• Adjusted PAT grew ~3.4% y-o-y to Rs 20 mn due to lower depreciation
costs from the sale of non-core assets and lower interest costs due to the
decline in debt. Adjusted EPS grew in line with profits at ~3.4% to Rs 3.5
per share.
• We expect the slowdown in growth witnessed in Q3FY11 will continue in
Q4FY11. For 9MFY11, adjusted PAT increased by 52% y-o-y, whereas our
full year estimates for FY11 factored in 32% y-o-y growth. For FY12, we
expect both new products and more contribution from the high-margin
spare sales to drive growth.
Key developments; new products gain traction
In Q2FY11, the company’s new product universal drilling machine (UDM), had
witnessed a strong sales growth. In Q3FY11, company’s another new product,
AL120 wheel loader for the mining and construction market, gained traction.
We expect that new products for underground mining as well as entry into the
construction equipment market will drive growth.
Valuations: Current market price has strong upside
We continue to value Eimco Elecon using the discounted cash flow method. We
roll forward our model to FY13 and revise our fair value to Rs 339. Our fair
value implies P/E multiples of 9.2x FY12E and 7.3x FY13E. Our valuation
grade is ‘5/5’.
No comments:
Post a Comment