Elecon Engineering: Gearing Up for Growth Amidst Global Headwinds

Elecon Engineering Company Limited, a prominent player in industrial gear solutions and material handling equipment (MHE), has announced its Q2 and H1 FY26 financial results, showcasing a resilient performance despite a challenging external environment. The company reported a consolidated revenue of INR 578 crores for Q2 FY26, marking a 14% year-on-year (YoY) growth. Consolidated EBITDA stood at INR 126 crores, a 12% increase YoY, while Profit After Tax (PAT) reached INR 88 crores. The order intake for the quarter was particularly strong at INR 688 crores, reflecting a robust 28% YoY growth.

For the half-year ended September 2025 (H1 FY26), adjusted consolidated revenue was INR 1,043 crores, up from INR 901 crores in H1 FY25, after adjusting for a one-time arbitration income. Adjusted EBITDA for H1 FY26 stood at INR 231 crores, an increase from INR 205 crores in H1 FY25, with an EBITDA margin of 22.1%. The company's open order book as of September 30, 2025, stands at INR 1,226 crores, compared to INR 966 crores in the previous year, providing strong revenue visibility.

Segmental Performance: MHE Leads the Charge

The Gear division, which contributed 76% of the total revenue in Q2 FY26, delivered a steady performance with a 9% YoY revenue growth, reaching INR 441 crores. However, its EBIT margin declined to 19.2% from 21.5% in the prior year, primarily due to higher employee costs, a change in product mix (engineered vs. catalog products), and accelerated depreciation on newly capitalized assets. Despite some delays in order execution in international markets due to geopolitical volatility, domestic demand for gears remained healthy, especially from the power, cement, and steel sectors.

In contrast, the MHE division demonstrated strong growth momentum, with revenue increasing by 33% YoY to INR 137 crores in Q2 FY26. The EBIT margins for MHE improved significantly to 25.7%, up from 25.4% in Q2 FY25, driven by a better product mix and robust after-market business. The company's strategic focus on product supply and expanding after-market services is clearly yielding positive results, with a healthy order book largely from power, cement, mining, and port sectors.

Strategic Vision and Outlook

Elecon Engineering is steadfast in its long-term growth strategy, aiming to generate 50% of its consolidated revenue from international markets by FY30. This global ambition is supported by strong R&D, product innovation, and strategic tie-ups with global OEMs. The company's advanced manufacturing capabilities, upgraded with the latest machines over the past three years, provide a competitive edge in delivering custom-engineered solutions with optimized lead times.

Management expressed confidence in achieving its annual guidance of INR 2,650 crores in consolidated revenue and a 24% EBITDA margin for FY26. They anticipate margin normalization in H2 FY26 as volumes increase and operating leverage comes into play. A capex budget of INR 400 crores has been allocated for FY26-FY28, aimed at enhancing capacity, improving quality, and boosting productivity, funded partly by internal accruals and operating leases.

Commitment to Sustainability and Stakeholder Value

Elecon's commitment extends beyond financial performance to include environmental, social, and governance (ESG) initiatives. The company has received approval for NEAR-TERM SCIENCE-BASED TARGETS from SBTi, committing to reduce absolute scope 1 and 2 GHG emissions by 54.6% by FY33 from a FY23 base year. Additionally, 81.4% of its suppliers are committed to having science-based targets by FY28. The company also focuses on promoting procurements from MSMEs and conducting training programs for customers, fostering sustainable supply chains.

Elecon's robust balance sheet, strong order book, and strategic initiatives position it well for sustained growth. The management's focus on consistent execution, prudent capital allocation, and expanding into high-growth segments reinforces investor confidence. The company continues to deliver value to its stakeholders through a combination of financial performance, strategic growth, and responsible corporate practices.