Have a target price of 130 on Elecon Engineering: Avinash Gorakshekar, Anagram Capital Ltd

Avinash Gorakshekar, Head of Research, Anagram Capital Ltd, in a chat with ET Now talks about Elecon Engineering.

What is your take on Elecon Engineering?

Actually Elecon Engineering is a niche player in the material handling space. The company is a very large player in that space and in fact it enjoys market leadership here. The company’s order book as of date is roughly about 1400 crores and with a pick up in the industrial production and with the pick up in the capex activity, our sense is that Elecon is going to be one of the few companies which is going to benefit significantly from the capex spend as well as the IIP kind of growth numbers.

We believe that already the company has given a guidance of fresh incremental orders of roughly about 800 crores by December this year and they have already bagged - in the first 2.5 months - fresh orders to the tune of almost 200 crores.

So we believe that there is lot of value at the current price of Rs 79 and we expect an earning of roughly about Rs 11 to Rs 12 for FY12. Mind you, this company used to enjoy multiple of close to 14 to 15 times at one time. It was basically battered last year because of the slowdown in corporate activity and the slowdown in the economy but looking at the kind of traction we have seen in the new order book and the kind of margin expansion we see from the new orders, we feel the stock can be bought at the current level. We have a target price of 130.