Elecon Eng - Fundamental BUY

Elecon Engineering Face Value - Rs 2 Buy Rs 367
Ticker: 505700 Equity: Rs 6.13 crore H/L: Rs 478/144
Elecon Engineering (EEL) is into manufacturing of material handling equipments, which are used in a range of products from elevators, conveyors and gears to material handling plants. EEL has a dominant position in the industrial gear business, with 26 per cent plus market share in the industry. EEL also manufactures the largest gearbox in the country. The company has a strong order backlog of Rs 505 crore and Rs 150 crore in the material handling division and transmission equipment division respectively. This overall order backlog of Rs 655 crore is around 1.48x its FY06 revenue and gives a clear visibility of earnings going forward. The company is planning to manufacture wind mill gearboxes and is also planning to manufacture wind mills below 600 KVA capacities. The segment has good amount of opportunities and also has better margins than the existing business segments. EEL has posted strong results in 9MFY07 with positive improvement at the operating level. The company is expected to carry similar performance in FY08 and hence is a good buy at current levels.