Elgi Equipments Ltd (ELGi) has revised its revenue target upwards under its strategic business plan (SBP) based on double-digit growth in FY23 and favourable growth outlook in this fiscal.

The company reviews its revenue, EBITDA and ROCE targets under SBP FY26 every year based on prior results and macroeconomic conditions.

“In FY23, we delivered sales and profitability as per the annual business plan (ABP) goals and we are well placed to achieve the committed results set forth in our five-year strategic business plan, the company said in its latest annual report.

The Coimbatore-headquartered leading air compressor manufacturer has now increased the consolidated revenue target from ₹3,375 crore to ₹3,750 crore to be achieved by FY26, while it is sticking to EBITDA margin and ROCE targets of 16 per cent and 30 per cent respectively for FY26. For FY23, it reported a consolidated revenue of ₹3,041 crore and a net profit of ₹371 crore.

Strong results

The company’s India business maintained its momentum from FY22. Government policies supported infrastructure and manufacturing investments which translated to growth across its business segments. Price increases from Q2 to Q4 of FY23 helped maintain margins. The company kept its fixed costs below the plan to deliver strong EBITDA.

ELGi said its direct-to-market initiatives in the Middle East delivered strong results. Margin expansion by driving aftermarket and reducing our operational costs helped drive the Middle East’s bottom line, it said.

North America, where it has 10 years of operations, exceeded its sales forecast and significantly improved its profitability in FY23. Demand remains strong across our businesses despite recession concerns. We drove margins across our businesses with price increases, but higher one-time fixed costs related to systems and IT lowered the profit, it said.

While the sale of the Pattons facility in the US helped reduce our long- and short-term debt, our cash generation has not kept up with our sales growth. We intend to reduce inventory and our receivables to drive cash in FY24, it added.

Profit goals

In Europe, brand awareness and distribution ramp-up helped the company achieve its revenue and profit goals in FY23. Record inflation softened demand across sectors and high energy costs softened demand in energy-intense sectors such as steel. “We anticipate continued supply chain uncertainty owing to the Ukraine war and will invest in inventory accordingly,” it said.

In Australia, ELGi grew its sales and profitability relative to FY22 but fell short of the annual plan. Indonesia met its plan, but the company didn’t progress much in other key markets such as Malaysia, Thailand, and Vietnam.

Meanwhile, ELGi has introduced assembly lines with a 100 per cent female workforce at its Air Center in Coimbatore. Twenty young women are managing operations at the airend assembly line, encapsulated airend assembly line, and the ELGi new generation compressor top block assembly line, delivering over 150 airends and top blocks daily. These young women have graduated from the ELGi Vocational Training School (EVTS), completing a three-year technical training programme.