Elgi Equipments Ltd. share price target

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In Q4FY21, air compressor international sales (including exports from India) is estimated to have contributed ~45% to air compressor sales in Q4FY21. It continues to perform well in key international markets led by Australia, US, Europe while South East Asia and Gulf are expected to rebound gradually. Margins are expected to further improve due to ramp-up in international business, optimisation of operating cost leading to incremental revenue, future growth and positive operating leverage. Also, Elgi is expected to...

India business seeing decent traction amid economic recovery Elgi's standalone air compressor (domestic & direct exports compressor) grew 14.2% YoY to | 323.0 crore (~59% of consolidated topline). Pure domestic air compressor sales came in better than expected with growth of ~20% YoY | 264 crore. Elgi is on track in its strategy to optimise employee cost and primarily in India business. Elgi has seen activities across all major industries and expects further revival in capacity building with smaller incremental investments by industries. Its disrupted AB series oil free...

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 | 253 crore YoY. It performed well in key international markets led by Australia, US, Europe while South East Asia, and Gulf reported moderate...

Visible green shoots in India business amid challenges Elgi's standalone air compressor (domestic plus direct export) revenue declined mere 3% to | 263 crore in Q2FY21. While pure domestic air compressor sales came in better than expected with decline of 11% YoY to | 191 crore. Elgi is on track on 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 further revival in capacity building with smaller incremental investments by industries. Its...

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...