Buy Elgi Equipments; target of Rs 300: ICICI Direct

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26 Aug, 2025 12:21

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Elgi Equipments (Elgi) reported a muted Q1FY20 performance. On the topline front, the company's compressor business in the domestic market grew 5% YoY amid slowdown, international business grew 28% YoY while automotive segment grew 11.9% YoY. Overall, consolidated revenue, EBITDA grew by 12.9%, 4.5% respectively, YoY. PAT de-grew 8.1%. On a segmental basis, air compressor grew ~13% YoY to Rs 421.4 crore while automotive equipment grew 11.9% YoY to Rs 45.3 crore. EBITDA margins declined 70 bps YoY to 8.8% in Q1FY20 primarily led by a 270 bps increase in employee expenses on account of upfront set up costs in key geographies such as Europe. Profitability margins were impacted further by an increase in depreciation cost of 47.3% YoY, doubling of finance costs partly offset by 76% YoY increase in other income. Accordingly, PAT was at Rs 17 crore, down 8.1% YoY.

On the whole, we expect revenue, EBITDA and PAT growth of 17.5%, 23.1% and 27.5% CAGR, respectively, in FY19-21E. We maintain our BUY rating on the stock with a revised target price of Rs 300 i.e. 28x on FY21EPS of Rs 10.6.

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