ESAB India Ltd. reported its Q1FY20 results. The company disappointed on the topline, however surprised us with EBITDA margins.

ESAB India Ltd. reported its Q4FY19 and FY19 results. The company exceeded our expectations on all fronts.

By virtue of being leading player in the domestic market, ESAB India has been able to manage volatility and its impact arising from its major raw material (steel). With ability to produce consistent positive cash flows, stable profitability, mingled with healthy asset turnover ratio, huge cash & investments balance enables it to price competitively to gain market share going forward. Therefore, the company has plenty of headroom to grow. Apart from the welding business, ESAB India provides its support service activities out of India in the areas of R&D; and shared services for other subsidiaries of Colfax around the world. Looking ahead,...

Higher Valuations & Subdued Margins: ESAB reported Q2FY19 results above our estimates. Q2FY19 earnings have witnessed a 49.6% YoY growth on the back of YoY revenue growth of 31.1%supported by an EBITDA growth of 35.9%.

Improved growth & Healthy Margins: ESAB reported Q1 results above ourestimates. Q1FY19 earnings have witnessed a 61.5% YoY growth on the back of YoY revenue growth of 36.5% supported by an EBITDA growth of 65.4%.

Moderate revenue growth and slight improvement in profitability: FY18full year adjusted earnings grew by 8.6% mainly on account of revenue growth of 16.5% owing to improved volumes. EBITDA margin has witnessed a minor improvement (30 bps) to reach 9.7% for FY18. We expect the revenue to grow at a decent 5.5% CAGR along with an EBITDA expansion of 80 bps to reach 10.5% by FY20E.

Muted revenue growth, profitability to improve: We assess the Q3FY18 results to be positive. YoY EPS grew by 58% aided by mainly an EBITDA expansion of 480 bps coupled with 14.2% revenue growth. We expect the margins to grow consistently in near future reaching 12.4% EBITDA margin along with 8.9% net profit margin by FY20E. However, in view of higher valuations we retain HOLD rating with a target price of Rs. 850 with an upside potential of 7%.

Moderate growth, however improved profitability for QFY18: ESAB hasrecorded a turnover growth of 1.7% sequentially & 8.7% growth YoY for Q1FY17 owing to pressurized macro conditions and lower off-take from customer end. EBITDA, EBIT & Adj. PAT margins have recorded an expansion by 309 bps, 352 bps& 27 bps QoQ to reach 9.8%, 8.0% & 7.3% respectively.

Strategic Decisions to Lead the Way: Moderate growth recorded for Q4FY17 - ESAB has recorded a turnover growth of 8.9% sequentially & a similar 7.3% growth YoY for Q4FY17 owing topressurized macro conditions and lower off-take from customer end. EBITDA, EBIT & adjusted PAT margins have recorded a slight expansion by 84 bps, 54 bps & 128 bps QoQ to reach 6.8%, 4.5% & 7.0% respectively. Full year FY17 performance has been quite sluggish with a revenue growth of 4.5% along with EBITDA & EBIT margin contraction of 103 bps & 109 bps to reach 8.3% & 6.3% respectively

Disappointing Q3FY17 Results; Future Looks Optimistic: ESAB has recorded a turnover decline of 6.7% sequentially & a marginal 1.2% growth YoY for Q3FY17 owing to pressurized macro conditions and lower off-takefrom customer end. EBITDA, EBIT & PAT margins have also shrunk by 472 bps, 478 bps & 181 bps QoQ to reach 5.9%, 3.9% & 5.7% respectively. 9 months YTD performance has been quite optimistic with a revenue growth of 3.6% along withEBITDA margin contraction of 4 bps and EBIT & PAT margins expansion of 2 bps & 73 bps to reach 8.8%, 7.0% & 6.7% respectively compared to 9MFY16.

Overall Positive Performance for Q2FY17, Equipments Segment Performance Back in Line: Overall positive performance for Q2FY17 - ESAB has recorded a turnovergrowth of 4.1% sequentially & 3.3% YoY growth for Q2FY17 owing to improved volumes. H1FY17 turnover has recorded a 14.1% growth compared to YoY. EBITDA margin has expanded by 80 bps QoQ and 110 bps YoY mainly due to softening ofraw material and other expenses. Also H1FY17 EBITDA margin has expanded by 30 bps YoY on the same note.