When one talks of air compressors and automobile service station equipments Elgi equipments is the name that crosses the mind. ELGI is today, the market leader and Asia's largest manufacturer of air compressors and automobile service station equipment. The products are used in a wide range of applications in areas ranging from mining, defence, transport, pharmaceuticals, power, oil, railways, chemicals, textiles, printing to ship building, paper, electronics, telecommunications, medical, food & beverages and plastics.
The product lines today, broadly comprise, Rotary Compressors, Reciprocating Compressors Centrifugal Compressors, Automotive Equipment, Diesel Engines and Manufacturing and engineering services. ELGI has two manufacturing locations in Coimbatore, India, with 22 acres of land and 352,000 sq ft of built up factory area.
The company is now attempting to go global and has rather already started treading the path in the same direction. The company on one hand has announced the acquisition of a company in Europe engaged in the manufacture, sales and service of compressors, while it has already established three subsidiaries one each in Gulf, China and Brazil.
Currently exports account for about 30% of the sales of the company, while its acquisition of small and medium sized companies and with establishment of subsidiaries abroad, the share should increase going forward. However, the domestic demand is also buoyant and should help the company post steady growth for another 2-3 years.
The management was quick to respond to recessionary situation and resorted to cost cutting. Containing cost seems to have paid good dividend to the company, which has seen a jump in profit after tax, though sales grew by about eight per cent, in the second quarter of current fiscal compared to the corresponding quarter last year. While the net sales/income from operations on a standalone basis jumped to Rs 137.98 crore in the second quarter from Rs 127.47 crore, the net profit went up to Rs 16.38 crore from Rs 11.48 crore. The EPS was higher at Rs 2.61 (Rs 1.83). Both compressors and automotive equipment divisions saw good increase in turnover, though compressor manufacture is its core business.
According to the consolidated results, the total income during the quarter was Rs 161.52 crore (Rs 146.66 crore) and the net profit was Rs 17.27 crore (Rs 12.68 crore). The share of compressor business in the turnover was Rs 137.75 crore and automotive equipment Rs 22.32 crore. Going forward, the share of automotive equipments could be larger, especially the way, the automotive segment is growing domestically.
As far as the dividend policy of the company is concerned, the company pays out good dividend, with dividend yield standing close to 3%. Apart from dividend income, one can expect a steady 15-16% growth year on year. So, all those looking for steady stream of income and capital appreciation to the tune of 15%, may have a look at Elgi as a prospective buying opportunity.
The product lines today, broadly comprise, Rotary Compressors, Reciprocating Compressors Centrifugal Compressors, Automotive Equipment, Diesel Engines and Manufacturing and engineering services. ELGI has two manufacturing locations in Coimbatore, India, with 22 acres of land and 352,000 sq ft of built up factory area.
The company is now attempting to go global and has rather already started treading the path in the same direction. The company on one hand has announced the acquisition of a company in Europe engaged in the manufacture, sales and service of compressors, while it has already established three subsidiaries one each in Gulf, China and Brazil.
Currently exports account for about 30% of the sales of the company, while its acquisition of small and medium sized companies and with establishment of subsidiaries abroad, the share should increase going forward. However, the domestic demand is also buoyant and should help the company post steady growth for another 2-3 years.
The management was quick to respond to recessionary situation and resorted to cost cutting. Containing cost seems to have paid good dividend to the company, which has seen a jump in profit after tax, though sales grew by about eight per cent, in the second quarter of current fiscal compared to the corresponding quarter last year. While the net sales/income from operations on a standalone basis jumped to Rs 137.98 crore in the second quarter from Rs 127.47 crore, the net profit went up to Rs 16.38 crore from Rs 11.48 crore. The EPS was higher at Rs 2.61 (Rs 1.83). Both compressors and automotive equipment divisions saw good increase in turnover, though compressor manufacture is its core business.
According to the consolidated results, the total income during the quarter was Rs 161.52 crore (Rs 146.66 crore) and the net profit was Rs 17.27 crore (Rs 12.68 crore). The share of compressor business in the turnover was Rs 137.75 crore and automotive equipment Rs 22.32 crore. Going forward, the share of automotive equipments could be larger, especially the way, the automotive segment is growing domestically.
As far as the dividend policy of the company is concerned, the company pays out good dividend, with dividend yield standing close to 3%. Apart from dividend income, one can expect a steady 15-16% growth year on year. So, all those looking for steady stream of income and capital appreciation to the tune of 15%, may have a look at Elgi as a prospective buying opportunity.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the Lead associate on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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