Ador Welding Ltd. share price target

Ador Welding (AWL) reported decent financial performance in Q2FY26, with slight ~4% growth YoY in revenue, on the back of improved realizations, but the volumes stayed put. The current margins are expected to be the baseline level and sustainable in the future. The ONGC Uran Flares project is expected to be completed this quarter and hence we expect no further surprises going ahead. FY27 should see the start of improved profitability reflecting only core business performance with minimal impact of the project business. Ador is gearing up to tap opportunities in the domestic capex upcycle from industries such as defense...

Ador Welding (AWL) reported poor financial performance in Q1FY26 primarily impacted by write offs pertaining to the ONGC Uran Flares Project. Although the Rs 279 mn of provision related to the ONGC project is a significant negative, we expect this to factor in the major operating loss for the said project in FY26. We fine tune our estimates downwards to factor in the same.FY27 should see the start of improved profitability reflecting only core business performance without any impact of the project business. Valuations at 14xFY27 expected earnings are attractive and we believe the company is gearing up to tap the...

Earnings robust; growth trajectory intact

Earnings mixed; growth trajectory intact

Turnaround on track

Play on capex upcycle

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While projects business revenue declined 19.2% to | 13.1 crore, it is EBIT positive with 7.8% margin (vs. | 8.2 crore EBIT loss in Q3FY21) indicating a turnaround. In FY21, this segment reported revenue at | 24.7 crore, down 47.4%, YoY badly affected by project headwinds. However, we expect projects business focus to be on project closures of legacy projects and focus only on profitable projects in flares and process equipment, going forward. AWL has provided | 15.5 crore as provision for doubtful debt and bad debt written off in projects business as one-time clean-up of books. The...

AWL reported a consistent performance in the consumables segment while equipment business rebounded with a margin improvement and projects business registered positive EBIT indicating a better performance, going ahead. Debt, working capital position improved further. We believe better sales volumes in consumables, rebound in equipment sales and projects business turnaround would drive growth and profitability in coming years. We value AWL on 16x FY23E EPS and arrive at a revised target price of...

Equipment and project & engineering business revenue fell 10.5% YoY to | 34 crore while it reported loss of | 1.7 crore at EBIT level (vs. | 7.1 crore EBIT loss in Q4FY19). For FY20, this segment reported revenue at | 122.9 crore, down 3.7%, YoY. Within this segment, equipment business fell ~4.7%, YoY and project engineering business (PEB) grew 18% YoY backed by decent execution for FY20. For FY20, PEB business reported PBT level loss of ~| 17 crore while equipment business reported PBT level profit of ~| 3.5 crore. We expect PEB losses to reduce further in next two years with focus on...

We met with the management of Ador Welding Ltd (Ador) to take stock of capex recovery and sustenance of growth trend shown in past 6 quarters. While the management indicated strong demand scenario for Welding Consumable and Equipments, it also guided a volume growth of 10-15% for FY20 based on rising demand from Oil & Gas sector (especially from refinery upgradation program to comply with euro VI norms), Heavy Engineering, Power, Railways (large wagon orders), Defense, Gas Cylinders (Ujjwala Yojana) etc. The company was at par with its competitors in-terms of new...

Tepid Growth & Slow Margin Expansion: Q2FY19 results came below our estimates. YoY revenue grew by a meagre 3.0% due to lower volumes. Margin performance has disappointed, EBITDA margin is recorded at 7.9% vs our estimate of 8.7% owing to pressure from higher materialcosts (64%).

Low base effect, margins under pressure: Q1FY19 results came below our estimates. YoY revenue grew by 17.8% on the back of low base effect. However, Margin performance has disappointed, EBITDA margin is recorded at 7.3% vs our estimate of 10.4% owing to pressure from higher material costs (73.7%).

Mixed results, margins under pressure: FY18 full year earnings grew by a meager 3% backed by a 3.6% revenue growth coupled with an EBITDA margin expansion of 60 bps. EBITDA margin has been recorded at 7.4% along with a net profit margin of 4.0% for FY18.

Steady Growth, Improving Margins but Rich Valuations; We assess Q3FY18 results as disappointing due to its meager YoY growth and margin contraction. YoY revenue growth of 1.1% is negated by higher finance costs & an EBITDA contraction of 86 bps to 6.5% and the EPS de-grew by 10.6%.