SSKI: 'Outperformer' Elecon Engineering

SSKI reiterate's 'Outperformer' on Elecon Engineering with a 12-month price target of Rs 1,366.

The company has reported strong FY06 results, which are ahead of SSKI's expectations; net profit has grown by 213% yoy to Rs 31.50 crore on the back of improvement in margins from operating efficiencies, raw material cost management and lower tax rates.

A sharp traction in material handling business and improved order backlog position have led to topline growth of 63.3% yoy. More importantly, EBITDA margin has improved by 220bp yoy to 14.6% for FY06, driven by strong focus on raw material cost management and economies of scale.

Going forward, SSKI see continued momentum in order intakes, capacity expansion and stable metal prices as the main earnings drivers. Given robust traction across divisions, huge order enquiry backlog of over Rs 1,000 crore and firm investment environment, they maintain their FY07 and FY08 earnings numbers.

SSKI estimates 38% CAGR in Elecon's consolidated earnings over FY06-08.