An order backlog at an all-time high of Rs 16.3 billion. Exports growing 30.6% year-on-year. EBITDA margin expanding 142 basis points.
The capital goods sector in India has been among the better-performing segments through 2026, but the gains have been concentrated in the usual large-cap names — L&T, Siemens, ABB. Behind those headline stocks, a specific category of mid-sized engineering companies has been quietly building export order books and margin profiles that the broader market has not fully noticed.
One of those names is Elecon Engineering (NSE: ELCN). The stock trades at ₹493, down from the 52-week high of ₹580 but up 19.2 per cent over the past month after the company delivered a Q2 FY27 print that beat on margins and lifted its order backlog to a record level.
The company is a specialist in transmission equipment and material handling equipment (MHE) — industrial segments where the India capex cycle and global export opportunities are converging.
The Quarter
The Q2 FY27 print was built on margin expansion rather than headline revenue growth. Revenue came in at ₹6.4 billion, up 10.5 per cent year-on-year — in line with Emkay’s estimate and driven by healthy export growth of 30.6 per cent year-on-year against steady 5 per cent year-on-year growth in the domestic business.
The operational beat was at the EBITDA line. EBITDA grew 17.7 per cent year-on-year to ₹1.5 billion, well above the brokerage’s estimate of ₹1.3 billion. EBITDA margin expanded by 142 basis points year-on-year to 23.1 per cent, against Emkay’s forecast of 20.5 per cent.
The margin lift came from a specific source — gross margin expanded by 296 basis points year-on-year to 53.9 per cent, driven by favourable product mix and lower raw material costs. For a capital goods company, a 296 basis point gross margin move in a single quarter is a meaningful operational signal.
Order inflows for the quarter grew 8.4 per cent year-on-year to ₹7.5 billion, taking the overall order backlog to a record ₹16.3 billion — up 33 per cent year-on-year.
Emkay Research has upgraded the stock from ADD to BUY and raised its target price to ₹600 from ₹550 — a 9 per cent target revision implying 22 per cent upside from current levels. “We upgrade the stock to BUY from Add, while revising up our TP by 9.1% to Rs600 from Rs550, at 24x Sep-28E EPS,” an Emkay Research note states.
The Transmission Equipment
Elecon’s larger division — Transmission Equipment — delivered healthy revenue growth of 10.6 per cent year-on-year to ₹4.9 billion in Q2 FY27, in line with brokerage estimates. The division’s EBIT margin expanded 289 basis points year-on-year to 22.1 per cent, beating estimates on favourable product mix and lower raw material costs.
Order inflows for the division were broadly stable at ₹4.9 billion during the quarter. First-half FY27 order intake grew 8.8 per cent year-on-year to ₹10.63 billion. The division’s order backlog now stands at ₹10.56 billion — up 37 per cent year-on-year — providing meaningful revenue visibility for the second half.
The MHE Division
The Material Handling Equipment division’s Q2 FY27 was a mixed picture. Revenue grew 10.4 per cent year-on-year to ₹1.6 billion as the division regained momentum through the quarter.
However, EBIT margin declined by 554 basis points year-on-year to 20.2 per cent — impacted by an unfavourable product mix, higher input costs, and operating deleverage from delays in project clearances. That is the one weak spot in the quarterly print worth noting.
The forward view, however, is constructive. “Management indicated that enquiry levels remain strong across the power, steel, and cement industries – this, coupled with a healthy order backlog of Rs 5.8bn, provides confidence in the division’s growth trajectory, with a potential scale-up in performance from FY28,” the Emkay Research note states.
The division also secured export orders worth $9 million in the first half of FY27 — supporting the broader export narrative that is becoming central to the Elecon thesis.
The FY30 Revenue Target
Beyond the quarterly print, the specific forward signal from management is the explicit FY30 revenue target. The company has reiterated a goal of ₹50 billion in revenue by FY30, with exports expected to contribute approximately 50 per cent of the total.
For context, FY26 revenue was ₹23.4 billion. A path to ₹50 billion by FY30 implies a revenue compound annual growth rate of roughly 20 per cent — well above the mid-double-digit guidance management has set for the second half of FY27 specifically.
The export share goal is the structural lever. Exports currently contribute a smaller share of total revenue than 50 per cent, meaning the forward growth is weighted toward international markets rather than domestic.
The Numbers
| Metric (INR Mn) | FY25A | FY26A | FY27E | FY28E | FY29E |
|---|---|---|---|---|---|
| Revenue | 22,270 | 23,411 | 26,521 | 31,268 | 37,833 |
| EBITDA | 5,228 | 4,981 | 5,799 | 7,107 | 8,808 |
| EBITDA Margin (%) | 23.5 | 21.3 | 21.9 | 22.7 | 23.3 |
| EBITDA Growth (%) | 10.2 | -4.7 | 16.4 | 22.6 | 23.9 |
| Adj. PAT | 3,901 | 3,275 | 3,843 | 4,845 | 6,137 |
| Adj. EPS (Rs) | 17.4 | 14.6 | 17.1 | 21.6 | 27.3 |
| ROE (%) | 21.7 | 15.2 | 15.6 | 17.2 | 18.8 |
| ROIC (%) | 33.0 | 24.1 | 26.6 | 33.1 | 38.4 |
| EV/EBITDA (x) | 20.2 | 21.2 | 18.2 | 14.9 | 12.0 |
| P/E (x) | 28.4 | 36.1 | 28.8 | 22.8 | 18.0 |
Revenue is projected to grow from ₹23.4 billion in FY26 to ₹37.8 billion by FY29 — a trajectory that is actually below the company’s own FY30 target of ₹50 billion, suggesting the brokerage estimates leave headroom if execution hits management’s benchmark.
Return on invested capital stays at an unusually healthy 24 to 38 per cent through the forecast period — a signal that the capex intensity of the business does not compress the quality of the earnings.
Scorecard
Emkay Research has upgraded Elecon Engineering from ADD to BUY and raised its target price to ₹600 from ₹550, based on 24x September 2028 estimated EPS. The implied upside from the current price of ₹493 is approximately 22 per cent.
| Rating & Valuation | Value |
|---|---|
| Current Market Price | ₹493 |
| Target Price | ₹600 (raised from ₹550) |
| Upside | +21.7% |
| Previous Rating | ADD |
| Current Rating | BUY (Upgraded) |
| Valuation Basis | 24x Sep-28E EPS |
| Market Cap | ₹111 bn |
| 52-week Range | ₹580 / ₹352 |
| Free Float | 40.7% |
| 1-month Price Performance | +19.2% |
| 3-month Price Performance | +3.1% |
| 12-month Price Performance | -9.1% |
| Order Backlog (all-time high) | ₹16.3 bn (+33% YoY) |
| FY30 Revenue Target | ₹50 bn |
| FY30 Export Mix Target | ~50% |
“Factoring in the strong order backlog and healthy demand across industries, we expect the management to deliver a mid-double-digit growth in 2HFY27. We roll forward our valuation to Sep-28E and assign target PER of 24x, resulting in our target price increasing to Rs600 from Rs550 (by >9%). Accordingly, we upgrade the stock to BUY from Add,” the Emkay Research note states.
Management Guidance
Management has guided to a specific acceleration in the second half of FY27. “Management expects revenue growth to accelerate to a mid-double digit (~15%) in 2HFY27, while EBITDA margin is expected to broadly track FY26 levels,” the Emkay Research note observes.
A 15 per cent revenue growth rate in the second half — against the 10.5 per cent delivered in Q2 FY27 — implies a meaningful step-up in execution over the next six months. The brokerage’s base-case numbers assume this guidance is delivered.
The specific operational catalyst behind the second-half acceleration is the ₹16.3 billion order backlog itself. Even assuming a steady book-to-bill, the record backlog is enough to drive the mid-double-digit growth management has guided to without requiring any further acceleration in order inflows.
The Key Risks
The order inflow momentum needs to continue, especially in the Transmission Equipment division where the first-half growth was 8.8 per cent year-on-year. The MHE division needs to recover margins from the current 20.2 per cent print toward the earlier trajectory as project clearances resume. And the export opportunity needs to actually scale to the 50 per cent share management has targeted for FY30.
A slowdown in domestic power, steel or cement capex — the three MHE end-markets — would delay the division’s expected FY28 scale-up. Any sustained raw material cost pressure would compress the gross margin expansion that drove the Q2 FY27 beat.
