Elecon Engg.Co (ELECON)

FairStock Score: 64/100 — STEADY

Score breakdown: P/E: 1/3 · ROCE: 2/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• High profitability with ROE 24.10% and ROCE 28.46%
• Very low leverage: Debt/Equity 0.09
• Promoter holding 59.27% aligns interests
• Healthy financial health scores: Piotroski F-Score 7/9 and Altman Z-Score 4.33
• Consistent growth: sales +21.26%, profit +29.38%

Concerns

• Valuation is stretched: P/E 22.56 and P/B 5.76 against Graham Number ₹207.43, implying negative margin of safety
• DCF intrinsic value of ₹8.02 and negative EV/EBITDA raise red flags about underlying valuation and cash-flow quality
• Dividend yield is low at 0.48%, so returns depend almost entirely on future price appreciation
• Heavy electrical equipment is cyclical; current high profit growth (29.38%) may not be sustainable

AI Analysis

At ₹512.75, I must first admit I don't buy what I cannot value. This is a profitable, conservatively financed business: ROE of 24.10%, ROCE of 28.46%, debt-equity of only 0.09, and free cash flow of ₹117 Cr. Promoter holding of 59.27% also aligns owners with minority shareholders. Sales grew 21.26% and profit grew 29.38%; the latest quarter shows ₹552 Cr sales and ₹72 Cr net profit. That looks like a quality compounder with a niche in heavy electrical equipment. But Buffett's first rule is price. The P/E of 22.56 and P/B of 5.76 already pay for much optimism. Graham's conservative value is ₹207.43, so today's price carries a margin of safety of -100.48%. However strong the business, there is no margin of safety. The stated DCF value of ₹8.02 is so far from the market price that I either distrust the assumptions or conclude the price embeds perfection. The negative EV/EBITDA also tempers my enthusiasm — I would dig into cash-flow distortions before paying a premium. Piotroski F-Score of 7/9 and Altman Z-Score of 4.33 indicate solid financial health, but those are checkpoints, not valuation. Would I call this a Stalwart? Yes — a steady operator with high returns, moderate growth, and a conservative balance sheet. But a stalwart must be bought at a sensible price. At 5.76 times book and 22.56 times earnings, the market is offering no margin of safety. In a cyclical industry, today's growth could reverse, and paying 22 times a 29% profit increase may prove dangerous. I would wait for a deeper discount nearer to a Graham-type valuation, or let earnings grow into the price over years. Discipline matters more than FOMO.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer