Ador Fontech - Rs.110.00

Ador Fontech Ltd. (AFL), an associate company of Ador Welding and belonging to the well- known Ador Group (formerly Advani-Oerlikon Ltd.) was incorporated in August 1974 as Cosmics Fontech and 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, AFL is a leading organisation dedicated to reclamation, welding and thermal coating solutions. It 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 portfolio consists of low heat input welding alloys, solid and flux-cored wires, welding and cutting equipment, fume extraction products, in-situ machining systems, thermal spray products, wear plates, cladded pipes and hands-on rebuilding and reclamation services. In addition to the in-house manufacturing programme, AFL exclusively represents internationally well-known brand names like Gasflux of USA, Alloy Steel International of Australia, Deloro Stellite of Canada, Cepro of Holland, Sulzer Metco of USA, Euromate of Holland, CEA of Italy etc for their products in India.

AFL 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 customer base spans across all industries which include mining, steel, power plants, railways, road transport, workshops, shipping, sugar mills, cement plants, fertilizer and chemical plants, oil drilling, refining, defence and other engineering industries. Almost all its customers have optimistic growth plans today. Higher productivity in welding processes such as semi-automatic 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.

Recently, it came out with splendid March’06 Quarter results with sales rising 30% to Rs.22 cr. whereas its net profit doubled to Rs.2.07 cr. posting an EPS of nearly Rs.6 for the quarter. Its full year figures are also quite encouraging with total revenue registering a gain of 26% to Rs.69 cr. and net profit grew 135% to Rs.4.45 cr. i.e. EPS of Rs.13 on its tiny equity of Rs.3.50 cr. AFL has a very good track record of liberal dividends and this year was no exception. Management has announced 40% dividend for FY06, which means a payout ratio of around 30%. The scrip is trading cum dividend giving a current yield of nearly 4%. For FY07, it may clock a turnover of Rs.90 cr. and net profit of Rs.6 cr., which translates into an EPS of Rs.17. At a reasonable discounting of 12 times, the scrip has the potential to cross Rs.200 mark in 9-12 months. A strong buy.