Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Elecon Engineering Co Ltd (BOM:505700, Financial) reported a 4.8% year-on-year growth in consolidated revenue for Q2 FY25, reaching INR508 crore.
- The company achieved a significant 154% year-on-year increase in order inflows for the MHE division in Q2 FY25.
- Elecon's export contribution stands at 28% for H1 FY25, with a goal to increase overseas revenue contribution to 50% by FY30.
- The MHE division saw a robust revenue growth of 77.8% year-on-year, reaching INR210 crore in Q2 FY25.
- Elecon has made significant ESG commitments, prioritizing renewable energy sources and employee well-being and safety.
Negative Points
- The gear division's revenue for Q2 FY25 decreased by 5.9% year-on-year due to delayed order inflow and execution.
- The consolidated EBITDA for Q2 FY25 declined to INR112 crore from INR119 crore in Q2 FY24, with the EBITDA margin dropping to 22.1%.
- Higher freight costs and one-time repairs and maintenance expenses negatively impacted margins.
- The PAT margin for Q2 FY25 decreased by 100 basis points to 17.3% compared to Q2 FY24.
- The company faced challenges due to geopolitical tensions affecting freight routes, leading to increased costs.
Q & A Highlights
Q: Can you explain the impact on margins due to raw material costs and one-off expenses?
A: The margins vary based on the product mix. This quarter, margins were affected by extra freight costs due to geopolitical issues and one-time maintenance expenses. However, we are confident of maintaining our annual margin guidance of 24%. - Prayasvin Patel, Executive Non-Independent Chairman of the Board, Managing Director
Q: What caused the slowdown in order inflow during the second quarter?
A: The slowdown was due to the elections, which caused clients to delay order releases. The momentum picked up in the second quarter, and we expect to execute these orders in the third quarter. - Prayasvin Patel, Executive Non-Independent Chairman of the Board, Managing Director
Q: Can you quantify the one-time costs and their impact on margins?
A: We incurred INR7.32 crore in maintenance costs and an additional INR1 crore due to air freight expenses. These are one-time costs, and we have addressed the freight issue with clients for future adjustments. - Narasimhan R, Chief Financial Officer
Q: How do you see the business environment and order inflow for the future?
A: The business environment remains strong in India and overseas. We expect a 15% growth this year and are optimistic about sustaining this growth in the future, especially with the increasing demand in sectors like power, mining, steel, and cement. - Prayasvin Patel, Executive Non-Independent Chairman of the Board, Managing Director
Q: What is the outlook for the MHE segment and its profitability?
A: The MHE segment has shown impressive profitability due to a change in our business model, focusing on product sales rather than EPC contracts. This model is sustainable, and we expect continued growth in this segment. - Prayasvin Patel, Executive Non-Independent Chairman of the Board, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
