Accumulate Elgi Equipments; target of Rs 608: Prabhudas Lilladher

Prabhudas Lilladher's research report on Elgi Equipments

Elgi Equipments (ELEQ) reported muted revenue growth of 3.1%, while its EBITDA margin declined by 165bps YoY to 14.1%. During the quarter, the company introduced 2 new products aimed at enhancing its competitive positioning. The first, ‘Stabilisor’ is designed as a superior alternative to variable frequency drives (VFDs), while the second is a lower rating air compressor specifically developed to counter Chinese imports in the discount segment. Introduction of new products, coupled with an increasing market share in the premium screw compressors segment, will strengthen the company’s growth trajectory in the domestic market. Internationally, while the portable business continues to face challenges in the US, Europe and Australia, the industrial segment is witnessing sustained traction in the US. Additionally, the European market appears to have bottomed out and is now on a recovery path. The company’s intensified focus on key export geographies is expected to further accelerate export growth. Furthermore, the globally expanding installed base positions the company for increased aftermarket revenue and sustained market share gains. However, a slowdown in the automotive sector could pose challenges for the automotive equipment business.

Outlook

The stock is currently trading at a PE of 40.5x/34.5x on FY25/26E. We maintain ‘Accumulate’ rating with a TP of Rs608 (same as earlier), valuing the company at a PE of 43x Sep’26E (same as earlier).