Top 4 Mining Equipment Stocks in India

India's mining sector grew by 7.5% in FY24, with production of iron ore and limestone recording high growth during the year.

This momentum is expected to continue even in the financial year 2025, driven by growth across all key sectors, including the automotive, construction, power generation, and steel industries.

In India, the primary metals sector accounts for about 8.1% of the entire manufacturing segment, forming a vital source for crucial input materials.

One industry that follows the growth pattern of the mining industry is the mining equipment industry.

Just like auto ancillary players that enjoy tailwinds of the auto sector, mining equipment stocks are considered as back-door plays to cash in on India's mining supercycle.

Market speculation is that the government is likely to come up with a Production Linked Incentive (PLI) scheme in the upcoming budget for underground mining equipment and heavy earth-moving machinery to be implemented by 2025-26.

The scheme could be implemented over a period of five years and would be designed to bolster the largely unexplored under-ground coal mining in the country.

Currently, India imports high-capacity equipment such as electric rope shovels, hydraulic shovels, dumpers, crawler dozers, drills, motor graders, and front-end loaders wheel dozers to conduct its mining operations.

In this article, we will look at the top stocks that manufacture mining equipment's in India and can benefit from the PLI scheme.

Read on...

#1 BEML

BEML manufactures a wide range of heavy earthmoving equipment catering to the mining and construction industry, vehicles for defence forces, and coaches for the metro rails.

The company is a leading mining & construction equipment manufacturer in India and offers a comprehensive and diverse range of mining machinery for both opencast and underground mines.

Its portfolio includes hydraulic excavators, bulldozers, wheel loaders, wheel dozers, dump trucks, motor graders, tyre handlers, etc.

The company derives 50% of its revenues from the mining and construction segment, 27% revenues from railways and metro systems and balance 23% revenues from defence and aerospace segments.

BEML has a wide marketing network comprising of 12 regional offices, 15 district offices, 2 defence spares division, and 7 activity centres.

Coming to the financials, BEML reported a 4% revenue growth in FY24 with operating profit growing at 24.8% and margins coming in at 10.9%.

Going forward, management has guided for ramping up its orderbook to 2-3X from the current levels. Currently orderbook stands at Rs. 119 bn.

BEML is also aspiring to increase its market share in the rail & metro sector to 60%. It also sees significant growth in aerospace sector with opportunity size of anywhere between Rs 80-90 bn.

The stock is up 211% in the last one year due to the strong operational performance.

#2 Elecon Engineering Company Ltd (ELEG)

Elecon Engineering Company, incorporated in 1960, manufactures and sells power transmission and material handling equipment in India and internationally.

In addition, it engages in the steel and non-ferrous foundry business.

The company was one of the first to introduce mechanised bulk material handling equipment in India.

Since then, the company has grown to become the single largest company having a composite range of almost all types of bulk material handling equipment and products to choose from.

Elecon derives 13% of its revenue from the material handling equipment solutions. The balance 87% revenues are derived from power transmission services.

The company holds a leadership position with 39% market share in the organised sector in India.

Coming to the financials, Elecon reported a 26.7% growth in revenue and 44.5% growth in EBITDA for financial year 2024. EBITDA margins also improved to 24.5% during the year.

Going ahead, the management has a focused on expanding into the overseas market.

However, the company has a conservative growth guidance for FY25 on the back of geopolitical tensions.

ELEG stock is up 99.7% in the last one year on the back of a strong financial performance.

#3 Tega Industries Ltd (TEGA)

Established in 1976, Tega Industries is a leading manufacturer and distributor of specialised, critical, and recurring consumable products for the global mineral beneficiation, mining, and bulk solids handling industry.

Tega derives 86% of its revenues from the consumables segment in FY24.

The company also manufactures and markets crushing, screening, grinding, material handling, and mineral processing equipment with integrated customer support and after-sales service.

It derived 14% revenues from the equipment segment in FY24 vs 3% in FY23 which clearly shows company's focus on pivoting towards mining equipment's business.

Tega is the world's second-largest producer of polymer-based mill liners (used for grinding and sizing mineral ores) by revenue.

The company is present in over 70 countries, with 85-90% of its revenues from outside India.

Tega has 10 manufacturing plants across the world, with seven located in India and three in major mining locations in Chile, South Africa, and Australia.

Coming to the financials, Tega reported a robust 22.9% growth in its consolidated revenues and 16.8% jump in EBITDA for FY24. EBITDA margins deteriorated slightly to 21.2%.

Going ahead, management has guided for 15% revenue growth for FY25. The management further guided for EBITDA margins for the consumables business at 20-22% and for the equipment business at 10-11%.

Shares of Tega Industries are up 73.6% in the last year. Also, the stock is up 8.3% in the past 1 month.

#4 Foseco India Ltd (FSCI)

Foseco India is engaged in the manufacture of products used in the metallurgical industry. These are in the nature of additives and consumables that improve the physical properties and performance of castings.

Foseco is a leading supplier of consumable products, solutions, and associated services in various areas of the foundry process.

The company's key products and services include industrial dry powders, coating products, resin products, ceramic filters, and exothermic sleeves.

Foseco has state of the art manufacturing facilities in Pune and Puducherry. It also imports products from its group manufacturing locations in other parts of the world.

The company services the needs of automotive, railway and heavy transport, construction and mining, general engineering, petro-chemicals, and power.

Foseco derives about 91% of its revenues from the domestic market and the balance 9% revenues from exports.

Coming to the financials, Foseco reported 17.4% growth in standalone revenues and 29.8% growth in EBITDA for calendar year ended 31 December 2023. EBITDA margins came in slightly lower compared to the previous year at 14.6%.

Shares of Foseco India are up 64.8% in the last year. Also, the stock is up 19.1% in the past one month.

Conclusion

A PLI scheme for this sector would be a positive development if implemented. It can potentially lower the purchase costs given the fact that currently mining equipment is being imported in India with heavy custom duties.

India's mining industry is set to grow robustly as demand for metals such as copper and silver will remain strong. These metals are the need of the hour to transition towards a cleaner and greener energy energy going ahead.

Mining equipment makers can prove to be a proxy play to the rising demand of metals for green energy and the PLI scheme if implemented can benefit these companies on the bottomline.

Investors should have these stocks on their watchlist.

Remember the challenges before diving headfirst. Investing in mining equipment stocks can be risky as the base industry of metals and mining is subject to business cycles and it is difficult to estimate when the cycles turn.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...