Reviews

In this edition, we have reviewed Esab India and Fairchem Speciality. We suggest our reader-investors to HOLD Esab India and Fairchem Speciality

ESAB INDIA 

Esab India was recommended under our ‘Choice Scrip' Section in volume 32, issue no. 24 dated Oct 30—Nov 12, 2017. The scrip was then trading at Rs.865 and was recommended based on the company's positive outlook, its growth in the quarterly profits and the projects undertaken to restructure for better utility. ESAB India is engaged in the business of welding consumables like welding electrodes, copper-coated wires, flux-cored wires and welding fluxes, and of welding equipment, etc. The company operates through two segments: consumables and equipments. The consumables include welding electrodes, copper coated wires, flux cored wires and welding fluxes, including related services, while equipments includes welding machines and cutting equipments. It caters to both domestic and international markets. 

On the financial front, the company has posted over 25 per cent jump YoY in its net sales to Rs.171.67 crore in Q1FY19 as against Rs.136.66 crore in the same quarter of the previous year. The PBDT of the company has increased by 63 per cent in Q1FY19 to Rs.25.58 crore versus Rs.15.60 crore in Q1FY18. The net profit also expanded to Rs.15.39 crore in Q1FY19 as against Rs.9.07 crore in Q1FY18, showing a growth in net profit by 69 per cent YoY.

On an annual basis, the net sales have increased by 14.74 per cent to Rs.543.56 crore in FY18 as against Rs.473.72 crore in FY17. The PBDT has grown as well by 34 per cent to Rs.62.73 crore versus Rs.46.64 crore in FY17. The net profit has risen by 42.88 per cent at Rs.37.15 crore in FY18 as against Rs.26 crore in FY17. The stock price has fallen by approximately 4 per cent since our recommendation and is trading at Rs.828. The financials of the company look positive, therefore, we would recommend our reader-investors to HOLD the stock.

FAIRCHEM SPECIALITY 

Fairchem Speciality was recommended in vol 33, issue no. 2 dated Dec 25—Jan 7 under ‘Cover Story'. The recommendation was based on the strong financial performance, its strong R&D capabilities and its expansion plans.

Fairchem Speciality Limited is engaged in manufacturing of specialty chemicals. The company manufactures oleo chemicals and intermediate neutraceuticals. It manufactures products, such as linoleic acid, dimer acid and monomer acid, natural mixed tocopherol concentrate and concentrated sterols. It is also engaged in processing byproducts or waste products of the vegetable oil refineries. The company's oleo chemicals are used in various industries, such as paints, inks, soaps, amines and adhesives.

On the financial front, the company's net sales has slipped by 5 per cent to Rs.62.88 crore in Q1FY19 as against Rs.66 crore in Q1FY18. But the PBDT has increased by 13 per cent YoY to Rs.7.72 crore in Q1FY19 versus Rs.6.82 crore. The net profit of the company has also risen by 23 per cent to Rs.4.56 crore in Q1FY19 as against Rs.3.70 crore in the same quarter of the previous year.

On an annual basis, the company's net sales have increased by 30 per cent to Rs.242.84 crore in FY18 as against Rs.185 crore in FY17. The PBDT has grown by over 68 per cent to Rs.30.77 crore in FY18 as against Rs.18.25 crore in FY17. The net profit has jumped to Rs.19.40 crore in FY18 from Rs.8.46 crore in FY17.

The stock is currently trading at Rs.390 per share, down by approximately 20 per cent since our recommendation at Rs.491. But looking at the financial numbers, we would suggest a HOLD as the company is on a growth momentum.

(Closing price as on Aug 28, 2018)