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...

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...

Macroeconomic headwinds impacted the company's domestic air compressor sales growth in Q1FY20. As per management commentary, a similar trend is expected to continue in Q2 as well. After-market contributes ~24% to India's topline. Generally, these are higher margin businesses. Improved contribution from this will help stabilise margins, going ahead. On the automotive side, despite a slowdown in automobile sales, Elgi recorded healthy growth aided by two OEM client additions in India. An improvement in infrastructure investment and recovery in automotive industry are key...

Newer products, traction in international market to drive growth Elgi has introduced newer products such as oil free compressors, AB series, which have the potential to disrupt the overall air compressor market and may potentially help boost growth. With a sharp focus on the international front, the company continues to invest on building a solid base in key markets of US and Europe through its subsidiaries Patton's and Rotair, respectively. The company has prudently scaled down its operations and rationalised costs in markets like China, Brazil. International business viz....

ICICI Securities Ltd | Retail Equity Research Elgi Equipments (Elgi) reported Q3FY19 numbers that were below our estimates in terms of topline mainly due to comparatively lower growth of 10.4% in standalone entity (i.e. India, direct export & products sold to foreign subsidiaries) compared to robust growth of ~19% YoY in the international market The overall topline was at | 470.2 crore, up 13.2% YoY. We had estimated 17% revenue growth at | 486 crore. On a segmental basis,...

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%.

Elgi Equipments reported steady Q2FY19 numbers, above our estimates in terms of topline growth, mainly due to strong demand growth (~23.4% YoY) in its air compressor segment. Revenues came...

solutions including a wide range of air compressors. It is the second largest Indian player (~22%) only behind global market leader Atlas Copco. Globally, it is the eighth largest player commanding ~1.3% market share. Its manufacturing facilities are spread across India, Europe & America. Air compressors, automotive equipment contributed 88.1%, 11.9%, respectively in FY18. With a profitable turnaround of foreign subsidiaries like Rotair in Italy, Patton's in US, coupled with signs of growth revival in Indian operations, Elgi is in a sweet spot for solid...

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.

Top line to growth to continue: We assess the Q3FY18 as positive. YTD EPS grew by 28% owing to both revenue growth of 11% and EBITDA margin expansion of 107 bps. We expect the EBITDA margin to further expand and reach 16% levels due to easing material costs aided by an anticipated 25% growth in international business in near future.

Consolidated revenue growth of 25% YoY, revival of international subsidiaries, margin expansion of 300 bps YoY and positive management commentary (15%+ growth) were the hallmark of Q3FY18 results.

Q2 consolidated revenue grew 15% YoY at Rs 3.7 bn with domestic business growing ~10% YoY and key subsidiaries growing 23% YoY. Higher input cost partially offset benefits from operating efficiencies, with EBITDA margin up ~150 bps YoY at 12%.

Consolidated revenue in Q1FY18 grew 5% YoY (after 2 quarters of de-growth) to Rs 3.7 bn, in line with our estimate. This was led by domestic revenue (Rs 2.3 bn; up 7% YoY) and cessation of revenue decline in the international operations.