Buy Elgi Equipments: target of Rs 140: ICICI Direct

ICICI Direct is bullish on Elgi Equipments recommended buy rating on the stock with a target price of Rs 140 in its research report dated November 10, 2020.

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November 12, 2020 / 18:11 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Elgi Equipments

Elgi Equipments (Elgi) reported a strong Q2FY21 with consolidated revenue up 8% YoY to Rs 480.3 crore vs. I-direct estimate of Rs 398.2 crore. Standalone revenue (domestic & direct exports compressor) de-grew 3% YoY to Rs 263.2 crore (~55% of consolidated topline) while international compressor business posted robust growth of 43.8% YoY (contributing ~38% of consolidated topline), the automotive segment revenue declined 23.8% YoY (~7% of firm's topline). EBITDA margins improved significantly by 630 bps YoY to 13.8% in Q2FY21 (much better than our estimates of 6%) primarily due to better revenue booking and significant reduction in operating expenses as business operations and demand revived in key geographies. Hence, absolute EBITDA almost doubled to Rs 66.3 crore YoY (vs. our estimate of Rs 23.9 crore). PAT came in at Rs 33.3 crore, up 185% YoY mainly on account of better profitability margins, higher other income. Other income grew 65% to Rs 5.3 crore on a YoY basis.

Outlook

Going ahead, further traction in international market, new products like oil free compressors (AB series) would aid growth while green shoots of revival visible in India business would further aid topline. Also, its strategy on cost reduction, focus on cash business would help deal with working capital, debt reduction and liquidity situation. We expect revenue, EBITDA growth of 7.9%, 37%, CAGR, respectively, in FY20-22E. We revise our target price to Rs 140 (32x FY22 EPS of Rs 4.4) and upgrade our rating from HOLD to BUY.

For all recommendations report, click here