Buy Elgi Equipments; target of Rs 190: ICICI Direct

ICICI Direct is bullish on Elgi Equipments recommended buy rating on the stock with a target price of Rs 190 in its research report dated January 07, 2021.

Broker Research

January 14, 2021 / 08:52 PM IST

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ICICI Direct's research report on Elgi Equipments

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 Rs 253 crore YoY. It performed well in key international markets led by Australia, US, Europe while South East Asia, and Gulf reported moderate performances. Margins are expected to improve due to ramp-up in international business, operating cost reduction initiatives to lead incremental revenue, future growth and positive operating leverage.

Outlook

We revise our target price from Rs 140 to Rs 190 (32x FY23 EPS of Rs 6.0) and maintain our BUY rating.

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