PlanBucks: 09/10/2006

Broking house, Sushil Finance is bullish on Elecon Engineering. It has
maintained buy rating on the stock with a target price of Rs 1,200.

*
"FY2006 was an eventful year for Elecon Engineering, as it achieved highest
ever turnover, production and profits. Brief excerpts of the issues
discussed at the AGM are presented herewith.

*Continuing growth momentum in FY2007
*
"Elecon has continued its strong growth momentum in current year as well.
For the first five months period ended August 2006, its revenues increased
by 79% YoY to Rs 1960 million as compared to Rs 1090 million in previous
comparable period. In Q1FY07, its revenues had grown by 33.8% YoY to Rs
945.7 million. Elecon has continued its trend of strong growth in current
year as well and is well on track to meet our estimates for FY07."

*New initiatives*

The management out lined a couple of new initiatives, which could further
spearhead its growth in FY08 and onwards.

*To foray into Windmills manufacturing*

"Elecon has entered into collaboration with Turbowinds NV of Belgium for
manufacturing Wind Electric Generators of 600 KW rating. Towards this, it
has recently signed an agreement with Centre for Wind Energy Technology
(C-WET) for certification of 600 KW Windmills. Since Elecon already sells
Windmill gearboxes (which is the heart of any wind mill) and given that its
MHE division is as such very strong in designing and fabrication (which are
the skill set required even for a Windmill manufacturer), we believe Elecon
has a winning strategy at hand. Elecon expects to supply at least 50 numbers
of Windmills in the FY08, which, we believe, could bring in incremental
revenues to the tune of Rs 1500 million in FY08."

*To foray into fabrication of Ship Blocks*

"Elecon is planning to foray into fabrication of Ship Blocks and has entered
into exclusive agreement with Pipavav Shipyards. We like the strategy of
Elecon to venture into a related business but with a low risk. Moreover, it
compliments its existing business portfolio since Elecon's engineering skill
set and experience in large scale engineering works is best suited to
execute this kind of massive work."

"Pipavav Shipyards would also benefit from this agreement, as they can
concentrate on designing and execution of overall ship and entrust block
fabricating work to Elecon. Since fabrication of blocks will be done at the
shipyard, Elecon does not require additional land for this project. While
the exact timelines and investments required are yet not freezed, we believe
it may take about a year before the whole project gets kicked off and the
capex requirement for various equipments and machineries may be in the range
of Rs 300 million to Rs 500 million."

*Initiating steps to grow its exports going forward*

"In FY2006, Elecon set up its base in Middle East and has received
encouraging response for its line of products. Recently, it has also deputed
its personnel in China to undertake market research and explore growth
opportunities in China. Elecon's Exports in FY2006 was a modest Rs 219
million, however, the company plans to focus on growing its revenues from
the international markets in a big way over the next 2 to 3 years."

*Outlook and valuation
*
"Elecon Engineering is very well placed to grow rapidly over the next few
years given its strong technology offering, market leadership and
positioning in core sector, dynamic management and sound financials. Going
forward, heavy investments in core sector and industries are expected to
deliver high growth in Elecon's MHE business. Similarly, boom in the
industrial segment will ensure continued strong growth numbers for TE
division as well."

"We like Elecon's decision to foray into windmill manufacturing, as there is
immense potential for wind power generation in India and with fuel prices
going up phenomenally in past couple of years, there is greater emphasize
being placed on wind power generation in India and globally. Similarly,
venturing into Ship Block fabrication business would ensure incremental
revenues and would open up a complete new line of business with lower risk
but high scalability."

"Going forward, we expect the company to continue its current trend of
strong performance. We expect its revenues to grow by 61% and 25% in FY07E
and FY08E, EBIDTA margins to grow by 110 bps to 14.6% in FY07 and 100 bps to
15.6% in FY08 and its APAT to grow by 53% and 51% in FY07 and FY08
respectively."

"At the current price of Rs 1000, the stock is trading at a valuation of 13x
& 9x its FY07E and FY08E earnings of Rs 78 and Rs 110 respectively. We
recommend a Buy on the stock and retain our price target of Rs 1200, at
which the stock would quote at PER of 11x and EV/Cash Profit of 10x based on
its FY08E numbers."
Source:-Moneycontrol

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Stay in Touch
ajay@sarthimanagement.com

PlanBucks

Friday, September 15, 2006

*The Sushil Finance report on Elecon Engineering:

Thursday, September 14, 2006

Recommendation for 14-09-2006

Sujana Universal Accumlated by Big Brokerage HOuses

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