Overall, Elgi's strategy to expand in new geographies in Europe, continued growth momentum in the US, Australia and expected rebound in South East Asia & Gulf markets are expected to contribute significantly to incremental growth in coming years. A rebound was visible in Q2FY21 performance with air compressor international sales (including exports from India) contributing ~57% to total air compressor sales registering growth of ~39% to Rs. 253 crore YoY. It performed well in key international markets led by Australia, US, Europe while South East Asia, and Gulf reported moderate performances. Margins are expected to improve due to ramp-up in international business, operating cost reduction initiatives to lead incremental revenue, future growth and positive operating leverage.
Valuation & Outlook
Going ahead, further traction in the international market, new products like oil free compressors (AB series) would aid growth while green shoots of revival visible in India business would further aid topline. Also, its strategy on cost reduction, focus on cash business would help deal with working capital, debt reduction and liquidity situation. We expect revenue, EBITDA growth of 12.2%, 34.9%, CAGR, respectively, in FY20-23E backed by international growth and positive operating leverage. We revise our target price from Rs. 140 to Rs. 190 (32x FY23 EPS of Rs. 6.0) and maintain our BUY rating.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ElgiEquipments_CoUpdate_Jan21.pdf
Shares of ELGI EQUIPMENTS LTD. was last trading in BSE at Rs.159.25 as compared to the previous close of Rs. 158.95. The total number of shares traded during the day was 13636 in over 454 trades.
The stock hit an intraday high of Rs. 160.85 and intraday low of 156.25. The net turnover during the day was Rs. 2177166.