Multibagger Elecon Engineering stock plummets 17% on weak Q1 FY25 earnings

Shares of Elecon Engineering, one of Asia's largest providers of industrial gear solutions and material handling equipment, plummeted by 17% in intraday trading today, reaching a six-week low of ₹1,092 per share. This sharp decline followed the company's June quarter performance report released on Wednesday, which fell short of Street expectations, leading to a significant sell-off.

Its revenue from the gear division stood at ₹334 crore in Q1FY25, down from ₹361 crore in Q1FY24. The company attributed this decline to weak order inflows caused by the general elections during the quarter. However, Elecon Engineering expects a demand uptick in the remaining nine months of FY25, which should help recover the revenue loss experienced in the June quarter.

The MHE division reported revenue of ₹58 crore, up 9% year-on-year from ₹54 crore in the same quarter last year. The EBIT for the MHE division grew 24% year-on-year, reaching ₹15 crore in Q1FY25, with EBIT margins improving to 26.0% from 22.8% in Q1FY24, an increase of approximately 320 basis points. This improvement was driven by a better product mix and higher contributions from the aftermarket segment.

The company emphasised its focus on supplying products and expanding its aftermarket business within the MHE segment, which has significantly boosted profitability. Elecon Engineering continues to secure new orders for product supply and capitalise on growing opportunities in the aftermarket sector, according to the company's earnings filing. 

Overall, revenue from operations for the June ending quarter stood at ₹392 crore, a 5.3% decrease from ₹414 crore in Q1FY24. EBITDA also declined by 7.6%, coming in at ₹92 crore compared to ₹100 crore in the previous year. The net profit remained flat at ₹73 crore year-on-year in Q1, but it fell 30% sequentially.

Commenting on the results, Prayasvin B. Patel, Chairman & Managing Director of Elecon Engineering Co. Ltd., said, "For Q1 FY25, Elecon reported consolidated revenues from operations of ₹392 crore, achieving an EBITDA margin of 23.5%."

"The company’s unwavering focus on profitability has been instrumental in its progress. Elecon delivered a PAT margin of 18.7% in Q1 FY25, reflecting a Y-o-Y growth of 110 bps and a Q-o-Q increase of around 30 bps. We continue to remain optimistic about new order wins across sectors and across both our division – Gear & MHE," he added. 

Meanwhile, the stock has rebounded from its intraday low and is currently trading down by 7% at ₹1,226 as of 11:30 a.m. Despite this decline, it has delivered an impressive return of 831% in 28 months. 

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