Why Is Keynote Capital Bullish on Elecon Engineering Despite Margin Pressure?
Keynote Capital has reaffirmed its positive stance on Elecon Engineering Company Ltd. (EECL), citing resilient domestic demand and healthy order inflows even as margins faced slight pressure. The brokerage has maintained a Buy rating with a target price of ₹751, against the current market price of ₹542.95, reflecting solid upside potential driven by sectoral strength.
Elecon Engineering continues to benefit from infrastructure growth across power, steel, and cement industries, which together contributed nearly 79% of its total revenue in Q2 FY26. The company reported a 14% year-on-year rise in total revenue during the quarter, led by an 18% growth in the domestic market. However, international revenues, contributing 21% of total turnover, remained flat due to geopolitical uncertainties.
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The gear division, which makes up about 76% of total revenue, saw 9% year-on-year growth—moderate compared to previous quarters due to execution delays and geopolitical disruptions. Meanwhile, the Material Handling Equipment (MHE) segment, representing around 24% of revenues, registered a strong 33% year-on-year jump, highlighting diversification strength within Elecon’s portfolio.
The company’s EBITDA margin slipped slightly to 22% in Q2 FY26 from 23% in the same quarter last year, primarily due to higher employee expenses and a change in product mix. Profit after tax remained largely flat, but management commentary suggests continued order momentum and domestic resilience should support future profitability.
During the quarter, Elecon’s order book and intake rose by about 27% and 28% year-on-year respectively, underscoring demand traction in the domestic market. The firm remains confident of sustaining growth momentum in India, even as international operations are impacted by the Middle East geopolitical crisis.
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While near-term profitability pressures may persist, Keynote Capital expects operating leverage and sustained domestic orders to drive earnings improvement in the second half of FY26. The strong balance sheet, improving execution cycle, and diversification across key industrial sectors continue to position Elecon as a long-term beneficiary of India’s manufacturing and infrastructure expansion themes.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that Elecon Engineering’s sustained domestic order inflow and leadership in the gear and MHE markets underscore its long-term potential. Despite short-term margin compression, structural growth in core sectors provides a solid base for future upside.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
