ICICI Direct Bets On This Electrodes Stock For Aggressive 32% Upside, Revenue Up 23.6% YoY

ICICI Direct, the reputed brokerage firm has put a 'buy' call to Ador Welding Ltd for a Target Price of Rs 890 for a 12 to 18 month period. Welding consumables contributed ~81% of revenue in FY22 for the company. Ador Welding is expected to continue a strong RoCE, and positive free cash flow trajectory in consumables in the coming years despite a challenging environment. The company aims to reduce legacy costs in the projects business to improve return ratios.

ICICI Direct Bets On This Electrodes Stock For Aggressive 32% Upside, Revenue Up 23.6% YoY

The Current Market Price (CMP) of the Ador Welding is Rs 681.35/share. The brokerage has estimated a target price of Rs890/share. The 52 week high of the stock is Rs 880.20/share, while, the 52 week low is Rs 539.45/share.

The stock has performed well in the last 3 months, however, in the last 6 months, it has given negative returns. In the last 1 year and 5 years, it has given a positive return of 17.59% and 74.78%, respectively. The P/E ratio of the stock is 20.48, while the sector P/E ratio is 35.85.

According to the ICICI Direct, the stock has the potential to gain 32% in the 12 months to 18 month investment period.

Q4FY22 Results

According to the brokerage's report, the Ador Welding reported decent Q4FY22 results. Revenues came in at Rs 199.8 crore, up 23.6% YoY, 14.6% QoQ. EBITDA came in at Rs 17.7 crore up 13.3% YoY, aided by reduced losses in flares & process equipment business. Consequently, adjusted PAT was at Rs 12 crore, up 20.8% YoY.

 

Key triggers for future price performance

Ador Welding aims to focus on core welding business, reduce legacy costs while streamlining projects business to regain growth and improve profitability. Domestic welding & automation business to focus on improving margins and realisations with cost rationalisation, enhance advanced product portfolio, improving strike ratio of order wins and optimised product mix. Overall, we expect revenue CAGR of 13.5% in FY22-24E with margins rebounding to 11% levels.

Buy for a target price of Rs 890/share

The brokerage said, "Going forward, better consumables volumes, rebound in equipment sales and projects business turnaround to drive growth, profitability. Considering strong growth outlook, margin revival, we maintain BUY rating. We value Ador Welding at Rs 890 i.e. 18x P/E on FY24E EPS."

About - Ador Welding Ltd

Established in 1951, Ador Welding Ltd is a leading player in the welding consumables welding equipment, automation and projects business with 19% market share. It is a welding company engaged in manufacturing high-quality welding equipment, consumables, and welding automation solutions. Additionally, Ador has been in the Flares & Process Equipment Division for more than 30+ years.
Ador has played a significant role during the post-independence industrialization in India and takes immense pride in its heritage. Ador has a presence across 40+ countries in the Middle East, Africa, and Southeast Asia, Ador maintains a robust sales and distribution network across the globe and provides solutions to a wide spectrum of industries including defence, shipbuilding, oil and gas, railways, infrastructure, nuclear energy, power and automotive sectors.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.