Today's Top Gainer
Note:Top Gainer - Nifty 50 More
ECONOMIC AND BUSINESS ENVIRONMENT
The Indian economy started the fiscal year 2018-19 with a healthy 8.2 percent growth in the first quarter due to strong economic resilience. The growth rate thereafter plummeted to 7.3 percent in the second quarter due to rising financial volatility, standardised monetary policy in advanced economies and re-routing of investments. Further, the rising crude prices caused weak rupee position and faster outflow of investment from the country.
Despite a faint growth rate, the Indian economy remains one of the fastest growing economies and has sustained a GDP rate of 7.2 percent during the fiscal year 2018-19. It has out-shined France as the sixth largest economy in the world and is expected to become the fifth-largest economy in the upcoming fiscal year.
INDUSTRY STRUCTURE AND DEVELOPMENT
Welding is a precise, reliable, cost-effective and high-tech method for joining materials in manufacturing industries. It is broadly divided in to fabrication and maintenance/ repair welding. The industry contributes significantly to the gross domestic product (GDP) in several ways, such as support to welding intensive industries, auxiliary products, complimentary goods, employment etc. While the Indian welding industry has been dominated by low technology and very rare technological innovations, in recent years however, the demand for automatic and semi-automatic welding production systems and unconventional methods are rising. The future of welding holds greater promise as methods are devised for joining dissimilar and non-metallic materials, coupled with innovations like Nano and 3D technology for metal printing, which may per-se-dominate the repair market and facilitate quick replacement of parts, thereby reducing down time in case of breakdown and facilitate preventive maintenance in general.
CURRENT YEAR OUTLOOK
The current years outlook is positive. An analysis of market segment in terms of (i) Heavy engineering (ii) Railways (iii) Construction (iv) Ship Building (v) Cement and (vi) Steel, reflect buoyancy, given the initiatives of the Government like Make in India, Cluster development, SME support programmes, Concept of SMART manufacturing etc. The repair welding segment which is sub-servient to fabrication is expected to thrive on increased utilisation capacities necessitated by the maintenance of equipment, parts and components.
While there is a window of opportunities, the most essential are:
Rapid growth in robotic welding: The global robotic welding market is expected to reach US$5.96 billion by 2023 growing at a compounded annual growth of 8.91% per annum. Asia Pacific is anticipated to be the largest market for robotic welding in the coming years. Incidentally, the best supporter for robotic welding is the Indian Railways, which needs to keep its tracks running and maintained all across the sub-continent.
Welder safety requirements: The increasing knowledge about the health hazards associated with breathing harmful levels of welding fumes and gases is driving companies to invest more in occupational safety. The air purifying systems and use of respiratory protection equipment provides safe breathing environment, that allows the shop floor personnel to work in a peaceful and homogeneous environment.
RISK, THREATS & CONCERNS
Lack of standardised specifications and tedious approval process has resulted in the growth of unorganised sector, which presently occupies 50-55% of the market share. Furthermore, one of the biggest challenges faced is considerable imports, which has negatively impacted the market share of local participants in various industries like cement, steel, power, ship building, automotive and transportation. Other challenges or concerns include (i) Lack of knowledge of end users in the application of welding techniques and cost economies (ii) Inadequate testing facilities and (iii) Low thrust on Research and Development.
When performed effectively, a weld repair can ensure that the product can over perform its design requirements and even extend the lifetime of any structure.
The real imperative need & value addition devolves primarily in establishing the need for repair. The work predominantly starts from the scrap yard and shop floor to analyse:
The strength of Ador Fontech Limited lies in:
Providing a complete range of products and services for reclamation and surfacing solutions.
Presence of Application Engineering Specialists at almost all important industrial locations, all over India.
Existence of customer focused Authorised Dealer network.
Partnership with world class agencies and technologies.
The Company will remain focussed on its core areas of business operations, both in the short and long term.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY
The Company has an effective system of internal controls reviewed by the Management and Auditors periodically. The Company will move its operations in to a new ERM (Enterprise Resource Management) in order to upgrade its operational processes and work systems. The Board and Management of the Company have provided immense efforts during the design stage to ensure adequate internal checks, controls and compliances.
HUMAN RESOURCE DEVELOPMENT
The Company believes that Human Resource plays a pivotal role in its growth prospects. There were 204 employees on the muster roll of the Company as at March 31, 2019. The Company also deploys workers in its shop floor both at the Peenya and Nagpur factories, in addition to administrative/office upkeep functions. The Company promotes just and fair HR practices, employee-friendly approach, both for its regular and contractual workers by ensuring on time credit of salaries/wages, contribution to retiral funds, besides medical support for self and family. The Company emphasises on carrying out a people- oriented attitude towards its employees and ensures highest level of work ethics across the organisation.
Further, through the aegis of DOTES (Documentation, Training and Educational Services)-a center of learning at Ador Fontech Limited, the Company provides in-depth training to its employees in the areas of technical and soft skills development.
(i) Balance sheet analysis
Overall the Balance Sheet of the Company remained healthy as at March 31,2019. The salient features include:
Improved working capital management.
Continuation of debt free status.
Funding of capex through internal accruals.
(ii) Income statement analysis
In comparison to the previous year:
Total revenue of the Company went up by 21%
The profit before tax had risen by 50%.
In view of lower tax rate at 25%, the profit after tax also registered an increase of 58%.
(iii) Material event(s) which may have an impact on the Company
The growth of the Country in terms of GDP, performance of core sector industries & leverage from the fabrication sector are factors that will have to be reckoned.
SAFE HARBOR AND DISCLAIMER STATEMENT
Any statement(s) forming part of this document that are not statement(s) of historical facts should be considered as forward looking statement(s). There are a number of important factors that could cause the Companys actual results to differ materially from those indicated by the forward looking statements. Ador Fontech Limited disclaims any obligation to update any forward looking statements to reflect future events or circumstances unless required to do so by law.
FINANCIALS AND RATIO ANALYSIS
|Revenue from operations||18,443||18,643||15,084||15,204|
|Earnings before interest, depreciation and tax (EBIDAT)||2,283||1,972||1,728||1,534|
|Earnings before interest, exceptional items and taxes (EBIT)||2,007||1,644||1,426||1,188|
|Profit/(loss) before tax||2,007||1,629||1,342||1,089|
|Profit/(loss) after tax||1,382||1,099||898||695|
|Total comprehensive income||1,440||1,158||943||740|
|Equity dividend (percent)||175%||-||150%||-|
|Reserves and surplus||10,865||10,103||10,055||9,577|
|Gross property (Plant, equipment and intangible assets)||3,795||4,146||3,734||4,018|
|Net property (Plant, equipment and intangible assets)||1,674||1,874||1,865||2,051|
|Working capital turnover ratio||2.3||2.4||2.0||2.1|
|Debtors turnover ratio||7.5||7.5||5.4||5.4|
|Interest coverage ratio||-||109.6||-||79.2|
|Inventory turnover ratio||5.6||5.2||4.5||4.2|
|Earnings per share||7.9||6.3||5.1||4.0|
|Gross profit margin percent||35.1%||35.3%||34.6%||34.7%|
|Net profit margin percent||7%||6%||6%||4%|
|Return on capital employed||18%||16%||13%||12%|
|(i) Average debtors||2,459||2,476||2,813||2,822|
|(ii) Average capital employed||11,177||10,384||10,579||10,025|
|(iii) Working capital||8,194||7,827||7,462||7,262|
|(v) Gross profit||6,478||6,590||5,212||5,274|
|(vi) Cost of goods sold||11,965||12,053||9,872||9,930|
|(vii) Average inventory||2,155||2,326||2,173||2,338|