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ELCN delivered a robust 2QFY27 performance, with a margin-led beat on operational performance. Revenue stood at Rs6.4bn (up by 10.5% yoy), in line with our estimate, driven by healthy export growth of 30.6% yoy; the domestic business registered a steady 5% yoy growth. EBITDA grew 17.7% yoy to Rs1.5bn, above our estimate of Rs1.3bn, with EBITDA margin expanding by 142bps yoy to 23.1% (vs Emkay’s 20.5%). The margin expansion was primarily driven by 296bps yoy improvement in gross margin to 53.9%. The demand environment remained healthy, with order inflows increasing 8.4% yoy to Rs7.5bn, taking the order backlog to an all-time high of Rs16.3bn (up by 33% yoy). Supported by the strong backlog, Management expects revenue growth to accelerate to a mid-double digit (~15%) in 2HFY27, while EBITDA margin is expected to broadly track FY26 levels. Management also reiterated its FY30 revenue target of Rs50bn, with exports expected to contribute ~50% of total revenue. 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.

Transmission Equipment – Strong backlog enhances revenue visibility for 2H The Transmission Equipment division reported healthy revenue growth of 10.6% yoy to Rs4.9bn, in line with our estimates, supported by disciplined execution. EBIT margin expanded by 289bps yoy to 22.1%, beating our estimates and driven by a favorable product mix and lower raw material costs. Order inflows were broadly stable at Rs4.9bn during the quarter (flat yoy), while 1HFY27 order intake grew 8.8% yoy to Rs10.63bn. Consequently, the division’s order backlog stood at a robust Rs10.56bn (up by 37% yoy), providing strong revenue visibility and supporting the growth outlook for 2HFY27.

MHE – 2QFY27 gains momentum; project clearances to support growth recovery The MHE division regained momentum in 2QFY27, with revenue growing 10.4% yoy to Rs1.6bn. However, EBIT margin declined by 554bps yoy to 20.2%, impacted by an unfavorable product mix, higher input costs, and operating deleverage arising from delays in project clearances. Management indicated that enquiry levels remain strong across the power, steel, and cement industries – this, coupled with a healthy order backlog of Rs5.8bn, provides confidence in the division’s growth trajectory, with a potential scale-up in performance from FY28. Export prospects also remain encouraging, with the division securing export orders worth $9mn in 1HFY27, supporting the company’s growth outlook

Our view and valuation

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.

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