Broker’s call: Elecon Engineering (Buy)

Elecon Engineering Company Ltd (EECL) has posted a robust revenue growth of around 11% year-on-year in the second quarter of fiscal 2027, driven by both its Gear and MHE divisions. The Gear division led with a 76% share of revenue, expanding by 11% thanks to robust overseas demand. Meanwhile, the MHE division, accounting for 24% of revenue, grew by 10% after completing two projects that had been delayed from the first quarter of fiscal 2027 and due to quicker customer approvals.

The order book expanded by 33% to ₹1,640 crore, while order intake rose by about 8% to ₹750 crore. Management anticipates further improvement in execution post-Diwali, as project clearances ramp up, projecting a 15% consolidated revenue growth for the second half of fiscal 2027. The company aims to sustain EBITDA margins at least at the levels seen in FY26.

Strong overseas business continues to be a key growth driver for Elecon. Profitability saw a boost from price hikes, a more favorable Gear product mix, and higher-margin export orders, despite MHE margins remaining under pressure. The company's healthy order book and improving project clearances enhance visibility for revenue in the second half of fiscal 2027.

However, due to moderate growth expectations, the P/E multiple has been reduced by approximately 15% to 26x, leading to a revised FY28E earnings estimate and a Buy rating with a target price of ₹525.