Recommendation: Buy
Price target: Rs 575
Result highlights:
- For Q4CY2007, ESAB India reported a growth of 11.5% in the net sales to Rs 87.7 crore, which was below our expectation. The consumables division reported a growth of 14.3% yoy to Rs 62.6 crore. The PBIT for the division grew by 37.8% to Rs 16.5 crore. The equipment division reported a dismal performance with revenues growing by only 5.2% to Rs 25.1 crore, while the PBIT for the division grew by 13.2% to Rs 4.7 crore.
- The operating profit for the company grew by 33.2% to Rs 19.2 crore. The operating performance of the company continues to be healthy and the margin reported an improvement of 350 basis points yoy to 21.9%. The other income grew by 8.1% to Rs 2.5 crore.
- The interest cost declined by 22.2% to Rs 20 lakhs, while the depreciation charge rose by 13% to Rs 1.6 crore. Consequently, the net profit grew by 31.4% to Rs 13.3 crore. For the full year, ESAB India reported a growth of 19.4% to Rs 342.9 crore in the revenues. The operating profit grew by 23% to Rs 80 crore resulting in an improvement of 70 basis points in the operating profit margin (OPM) to 23.3%. however, the net profit for the year grew by 25.1% to Rs 53.4 crore against our full year estimates of Rs 57.4 crore.
- The demand for welding products would continue to be buoyant due to the planned investments in core infrastructure sectors like roads, ports, airports, construction and the other industrial sectors in
- At the current market price, the stock trades at 10.3x its CY2008 EPS and 5.2x EV/EBIDTA. I Buy recommendation with a price target of Rs 575 over next 3 months.
