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Sowmya Sundar

FRESH exposures can be considered in Elgi Equipments at Rs 24. Good export prospects, aggressive approach against its MNC counterparts in the domestic market and foray into value-added products are some of the strategies that might aid the 20 per cent topline growth projected by the company. Benefits of a debt-free status and staff rationalisation would also start showing up in the bottomline in the next few quarters.

As a compressor manufacturer, it is yet another engineering company banking on exports for future growth. Overseas sales have jumped substantially in the last couple of years and now contribute eight per cent of the turnover, which is poised to go up in the future. It has already received repeat orders from original equipment manufactures in West and East Asian markets.

Value-added equipment or solutions for critical applications in the infrastructure segment, railways and the automobile sector are expected to contribute one-fourth of its turnover in the current year. Last year, these products contributed less than one-tenth of its turnover.

In its traditional area of business (compressors), it recorded a 13 per cent growth in 2002-03. It ranks as the country's largest producer of air compressors, both in volume and value terms. New product launches for applications in new generation locomotives are expected to pep up revenues.

On the domestic front, Elgi has fared well against MNC competitors like Atlas Copco. In order to cater to the increasing demand for screw compressors, Elgi is expanding its capacity by 15 to 20 per cent. Its second line of business, automotive equipments too is showing signs of a pickup with orders from original equipment majors both in India and abroad. At Rs 24, the stock trades at seven times its sustainable earnings per share and holds potential for appreciation.

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