Views on Elecon Engineering Company Ltd. 4QFY2016 Results: Angel Broking

Views of Mr. Milan Desai (Research Analyst - Mid Caps, Angel Broking) on Elecon Engineering Company Ltd. 4QFY2016 Results:

Elecon Engineering Result Review

"For 4QFY2016, Elecon Engineering reported a mixed set of numbers. Its consolidated top-line reported de-growth of 10.6% on YoY basis to INR 415cr, which is below our estimate of INR 489cr. The disappointing performance can be related to the Material Handling Equipment (MHE) business as the standalone business reported a 7.7% YoY growth to INR 190cr. However, the consolidated EBITDA margin was able to sustain at 18.0% (18bp YoY decline) which can be attributed to improved profitability of the Benzlers-Radicon business as well as improvement in margins in the MHE business. The standalone gear business reported EBTIDA margin contraction of 520bp YoY to 18.7% mainly owing to higher raw material cost. On the bottom-line front, the consolidated net profit after adjusting for minority interest declined by 10.5% YoY to INR 28cr while the standalone business reported 31.8% YoY decline to INR 16cr due to higher operating expenses. The MHE business is estimated to have posted a net profit of INR 25cr (assuming minority interest of INR 10cr for 39.52%).

The company has announced that it will be merging the MHE business with Elecon Engineering and as per the arrangement, the shareholders of Elecon EPC (MHE business) will receive for every 2 (Two) Equity shares held, 37 (Thirty Seven) Equity shares in Elecon. Also, it will be focusing on the products aspect of the MHE business in the future and the merger will deliver economies of scale and financial benefits. At the current moment we maintain our NEUTRAL view on the stock and await further clarity on the overall performance of the businesses as well as clarity on the merger."

Shares of ELECON ENGINEERING CO.LTD. was last trading in BSE at Rs.62.3 as compared to the previous close of Rs. 62.5. The total number of shares traded during the day was 87483 in over 970 trades.

The stock hit an intraday high of Rs. 63.45 and intraday low of 61.75. The net turnover during the day was Rs. 5452774.

Source : Equity Bulls

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