Elecon Engineering at Multi-Year Range Breakout

Our next Stock is Elecon. This has given 0 return in last 10years. For the last 10 years, it has been sideways and moving in a range of 110 to 25.

It has made its all-time of 343.30in 2017 since then it has never looked back and made the low of 16 in 2020.

While in the consolidation phase we have seen a huge buying volume. These high volumes are the indication of the accumulation with the expectation of an increase in the earning.

For the last 5 years, every time when the market goes up the volumes also spike up which stipulates that the investors are more interested in buying the stock even in the range market.

After covid lockdown, this stock has rallied very strongly with a higher high and higher low formation with strong volume.

Now come to the monthly chart. This stock has given a strong breakout of multiyear resistance that has been forming for the last 10 years with very strong volumes. It has broken the high of 2009, 2010, 2015, and 2017.

The breakout of this multi-year resistance is evidence of starting a new phase of the stock.

The rising OBV is also signaling that the stock has been in a very strong accumulation phase till now. When a stock comes out of the accumulation phase it seems to be the fundamental of the stock has got change or is going to be changed as we are expecting.

Technically this stock is looking very strong for the short to long term.

Fundamentally it is looking good also.

It was established in 1951. This company is going to be restructured. It is one of the largest manufacturers of material handling equipment and industrial gears and power transmission product in India.

Some of the highlights are given below.

1. Company is focusing on reducing the debt and we are observing that it has decreased its debt by almost 50% in the last 3 years.

2. Planning to be debt-free in the company in 1 year.

3. The revenues for last 3 quarter has been increasing

4. Net Profit has been increasing for last 3 quarter.

5. Company has been more focused on decreasing its cost. As has successfully managed to decrease its cost by 21% in last 3 year.

6. Strong cash-generating ability from core business - Improving Cash Flow from operation for last 2 years.

7. Company able to generate Net Cash - Improving Net Cash Flow for last 2 years

8. Company with decreasing Promoter pledge

9. Book Value of the Company has been improving for the last 2 years. The book value of the company is standing at 77. The stock is trading at 124. The P/B ratio (1.5x) is also good.

10. Current PE is 24 that is higher than the Industry PE this indicates the investors are ready to pay a high price for its earnings irrespective of the industry because they are confident about its future earning and growth. But the current PE is less than its 3,5 and 10 year PE.

11. The market cap to sales ratio is 1.2x

These are some fundamental highlights of the company.

I am looking at 200 in short term and 330 in long term in this stock.

This is my view on this stock and I am very much confident about this stock. You can do your analysis on this company also.