Scripscan:Ador Fontech Ltd
code:530431
cmp:270
Story:-Indian manufacturing and construction sectors have bounced back after the hiccups of late 2008 and early 2009; suppliers to these sectors are enjoying the ride. One product that is commonly needed in manufacturing and construction is welding electrodes. There are two companies dominating the organised segment of this business—Esab and Ador Fontech. Ador owns five plants—three of which are for welding consumables and the other two are for equipment—with an installed capacity of 26,000 tonnes of arc electrodes. Ador also focuses on maintenance welding—a niche segment requiring specialised skills. It offers products and solutions for reclamation welding and recycling of vital machinery components. The idea is to increase the life of the machinery components through value-added reclamation, fusion, surfacing and coating solutions. It is also in the process of increasing the ratio of manufactured products to traded goods—which is expected to increase its margins. The main customer base includes mining industries, steel and other metallurgical complexes, power plants, railways and road transport. The size of welding consumables and equipment market in India is approximately Rs2,400 crore. Consumables account for roughly 70% and equipment for 30% of the market.Ador has 20% market share of organised players.Steel is the major raw material and rising steel prices is a cause for concern. In FY09-09, steel cost as a percentage of total raw material cost increased to 47% from 38% a year ago. Depressed steel prices until 2009 helped the company to keep its raw material costs under control. However, with the rise in excise duty and other input costs going up, steel prices are set to rise again which will be a concern for Ador. The five-quarter average sales and operating profit growth are 4% and 17%, respectively. The average operating margin is 16%. The stock is cheap. Its market-cap is 0.54 and 3.34 times its sales and operating profit, respectively.Looks to be a good buy at dips
Source:Moneylife
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