Elgi Equipments (ELEQ) delivered decent performance during the quarter, with revenue rising 8.2% YoY, while EBITDA margin contracted marginally by 25bps YoY to 14.0%. Domestic order enquiries remained healthy; however, geopolitical instability and tariff-related uncertainties delayed order finalizations. In overseas markets, Europe and Australia saw a modest...

Elgi Equipments (ELEQ) reported a healthy quarter, with revenue growing 14.7% YoY and EBITDA margin improving by 64bps to 15.1%. During the quarter, the domestic order inquiries remained strong though the order finalizations were delayed. ELGI's newly launched Stabilisor' is on track for a full market rollout by Q3FY26. High margin Aftermarket sales remain a key focus amid the...

We downgrade our rating from BUY to HOLD on the stock.

Going ahead, traction in international market, new products like oil free compressors (AB series) would aid growth while a revival is expected in the India business, which continues to face challenges across verticals. However, its strategy on cost reduction, focus on cash business would help deal with working capital, debt and liquidity situation. We expect revenue, EBITDA growth of 7.1%, 30.1% CAGR, respectively, in FY20-22E. We revise...

Headwinds continue for India business amid challenges Elgi's domestic air compressor sales remained subdued in Q1FY21. The company is on track in its strategy to curtail employee cost and reduce fixed cost by 15-20% in FY21E primarily in India business. Elgi has seen activities across all major industries and expects some revival in capacity building with smaller incremental investments by industries. Its disrupted AB series oil free compressor that is gaining good traction in India as well as abroad. After-market (~24% to India topline), is likely to start gaining traction from...

Headwinds continue for India business amid challenges Macroeconomic headwinds continued to impact Elgi's domestic air compressor sales growth in Q4FY20. The company adopted a strategy to curtail employee cost and reduce fixed cost by 15-20% in FY21E mainly in India business. However, the management expects some revival in capacity building in food & beverage, pharma to gain further traction with its disrupted AB series oil free compressor that is gaining good traction in India. After-market (~24% to India topline), is likely to start gaining traction from...

Revenue and profits for 15 days Q4FY20E and Q1FY21E are likely to be a complete washout. However, a gradual revival is expected from July 2020 till April 2021 for business activities to return to January 2020 levels. EBITDA for FY20E is likely to get impacted by 15-20% Though it is difficult to assess, Elgi has guided at a scenario where revenue is expected to decline between 12% and 50% depending on various product lines and geographies. India revenue (~55% of total...

Companies like Larsen & Toubro and KEC with exposure to the Middle East and North Africa (MENA) region are expected to get impacted by the recent more than 60% fall in crude oil prices to US$22/barrel. This is expected to impact overall orders/awarding from the MENA region. Companies like Elgi Equipments, AIA Engineering, Thermax, Engineers India and Kalpataru Power with exposure to international geographies like Europe, Middle East, China for sales or essential raw material may get impacted. However, lockdowns in India, UK, Europe and other geographies due to Covid-19 are...

Macroeconomic headwinds continued to impact Elgi's domestic air compressor sales growth in Q3FY20 As per management commentary, conversions were sticky & inquiries have also dropped in Q3FY20. However, the management is cautiously optimistic as some revival in capacity building in food & beverage, pharma, textile industries is expected. After-market (~24% to India topline), has been languishing over last year and is likely to start recovering from H2FY21E. Consequently, debt has gone up by | 135 crore and working capital has also increased owing to inventories that need...

Elgi Equipments (Elgi) reported a subdued Q2FY20 performance. On the topline front, the company's compressor business (domestic + direct exports) in the domestic market de-grew 4% YoY amid a slowdown, international business grew 6% YoY while automotive segment de-grew 5.5% YoY. Overall, consolidated revenue, EBITDA declined 1.6%, 23% respectively, YoY. PAT de-grew 54% YoY to | 11.7 crore. On a segmental basis, air compressor declined ~1% YoY to | 396.8 crore while automotive equipment declined 5.5% YoY to | 48.0 crore. EBITDA margins declined 210...

Margins Contraction in Pumps Segment Continued: The company's revenues have grown by 39.9% YoY due to growth in pumps and valves segment, EBITDA margins improved by 92 bps majorly due to improvement in margins of Valves segment.

Focus on Inorganic Growth, Margin Pressure to Continue: Elgi Equipments Q2FY19 results came below our estimates. YoY earnings de- grew by 8.4% despite a YoY revenue growth of 21.2% aided by domestic market growthof 22%.

Pressure on Margins to continue: Elgi Equipments Q1FY19 results camebelow our estimates. Despite YoY revenue growth of 16.5%, EBITDA margin has improved marginally by 42 bps to reach 9.5% for Q1FY19.

Top line growth to continue: FY18 full year EPS grew by 29% aided by a revenue growth of 17% on the back of improved volumes & revival in international operations. EBITDA for the full year got affected to the tune of Rs. 30 cr due to higher manpower costs majorly in India & higher raw material costs. However, EBITDA margin for the full year expanded by 80 bps to reach 11% for FY18.

Realizations and Deferred Orders Lag the Performance: Shakti's revenue de-grew by 24.7% YoY due to deferment of solar integrated orders from Madhya Pradesh which they got in this quarter. Shakti is still looking for amajor traction in solar pumps business as there is a huge opportunity in the solar pump segment. The absolute EBITDA and margins have declined by 29.5% and 91 bps respectively.

Solar Pumps to be the Growth Driver; Shakti's revenue grew by 47.4% YoY, majorly supported by a very strong performance from solar pump integrated business and solar OEM business. The margins also improved by 448 bps YoY, due to higher operating leverage and economies of scale.