Elgi Equipments Ltd. share price target

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...

Elgi plans to expand its Electric Motors capacity while investing ~Rs2.5bn for phase 1 of MK2 plan to build new facilities of Portable business and GSC. We recently attended Elgi Equipments' plant visit & analyst meet, where the management highlighted the company's robust business performance driven by market share gains in the ISAAME (India, South Asia & Middle East) region amid strong demand and new product launches. However, North American...

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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...