Ador Fontech - Rs.83.00

Ador Fontech, an associate company of Ador Welding and belonging to well known Ador Group formerly Advani Oerlikon was incorporated in August 1974 as Cosmics Fontech but subsequently changed its name to Ador Fontech. In 1992, it acquired Fist India (P) Ltd and Kostech India Pvt Ltd, which were later merged with the company as a division. Today, Ador Fontech is a leading organisation dedicated to reclamation, welding and thermal coating solutions. The company focuses on maintenance welding, which is a niche segment requiring specialised skills and offers products and solutions for reclamation welding and recycling of vital machinery components. The company’s product basket includes filler wires, welding equipment / accessories, wire feeders, wear plates and cladded pipes. Apart from manufacturing these products, Ador Fontech also acts as a value-added reseller for Alloy Steel International of Australia, Berco of Germany, CEA of Italy, Cepro of Holland, Degussa of Germany, Euromate of Holland, Gasflux of USA, Protector of Australia and Sulzer Metco of USA for their products in India. It also offers a high temperature process for maintenance products from Aremco of USA.

Ador Fontech supplies products and services to almost all core sectors and several engineering industries. The focus of its activities is to provide metal joining, reclamation welding and surfacing solutions. Its major customer base includes mining industries, steel and other metallurgical complexes, power plants, railways, road transport workshops, ship building & repairs, sugar mills, cement plants, fertilizer & chemical plants, oil drilling and refining sectors, defence units and numerous engineering industries. Almost all its customers have optimistic growth plans today. Higher productivity in welding processes such as semiautomatic and automatic welding systems are increasingly in demand, which augurs well for the company. The other opportunities are in the field of high productivity welding and cutting systems, welding fume extraction systems, specialised surfacing and hard-facing alloys and deposition equipment.

Fundamentally also the company is quite strong and has a handsome dividend payout ratio of more than 50%. Recently, it came out with very impressive numbers for the March’05 quarter. Its topline grew by 43% to Rs.17.50 cr. and NP increased by 60% to Rs.1.44 cr. excluding extraordinary items. For FY05, it sales was Rs.55 cr. up 35% and NP stood at Rs.2.80 cr. excluding extraordinary adjustment leading to an EPS of Rs.8 on a very small equity of Rs.3.50 cr. Due to the industrial uptrend and the expansion drive undertaken by leading companies in all sectors, Ador Fontech may close FY06 with a revenue of Rs.65 cr. and NP of Rs.3.5 cr. leading to an EPS of Rs.10 and the company may declare 50% dividend for FY06. Investors can buy the scrip at declines with a price target of Rs.120 in 12~15 months.