Elecon Engineering-- target of Rs. 101 ::Anand Rathi

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Elecon Engineering                                                                                         CMP  80                                                         Target 101 

Investment Arguments

~ Strong Order Book 
 ~Acquisition Opened the New Avenues for EECL 
~Strongest Player in MHE & TE Segment 
~Planning to Enter into New Ventures & CAPEX 
~Quoting at tantalizing valuation

 Company Description

Elecon Engineering Co Ltd (EECL), incorporated in 1951,  started with designing and building elevators and conveyors.   EECL is manufacturer of material handling equipments. The  Company is also engaged in manufacturing of industrial gears   and power transmission products in India. The Company   operates in two segments: Material Handling Equipment (MHE)   and Transmission Equipment (TE). The Company’s product   range includes design, engineering, manufacture, supply,   erection and commission of wagon tipplers, bucket wheel  stacker/reclaimers, barrel-type blender reclaimers, fertilizer   reclaiming scrapers, limestone pre-homegenizing and blending   plants, single and twin bucket wheel bridge-type reclaimers,  crawler-mounted rippers, stationary and shiftable conveying   systems for open cast lignite mines, integrated coal handling   plants for power stations, underground mining conveyors, opencast   conveying systems, and ferrous and non-ferrous foundry   products. The gear division manufactures helical and bevelhelical gear boxes, worm gear boxes and elevator tractor machines.

  

 Valuation

Over the last five years, EECL has traded at an average one-year  forward P/E of 8X-10x. At the current price of Rs. 80, the stock   discounts its earnings by 6.4x FY12E and 5.8x FY13E earnings.Considering 1) positive sector outlook 2) Improving revenue   visibility on strong order flows 3) faster execution cycle 4)  Improvement in EBIDTA margins and 5) strengthening of return   ratios, We see the 12 months price target of Rs. 101.