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Telefolio Recommendation – Esab India

October 18, 2007

Esab India is the latest recommendation from Capital Market Telefolio. Esab is a MNC with 56% stake held by UK parent. The parent company had come out with an Open Offer to more than double its holding by acquiring 37.69% stake in the company at Rs 505 per share. However, the Parent company failed to gather the entire 37.69% shares, through the Open Offer and managed to get only 18.25% shares. However, this took the Parent’s stake in the company to 55.56% from 37.3%.

The company is focused on equipments for infrastructure projects. Electrodes and welding/cutting equipment are integral requirement for any kind of fabrication required in engineering and construction. With major investments expected in steel, oil & gas pipelines and ship building industries (which are the key driving force for the welding industry) along with strong capex in power and construction sectors, welding industry has strong growth prospects ahead.

For the Half year ended Jun’07, sales of consumables division increased 27% to Rs 121.29 crore and PBIT rose by 30% to Rs 33.80 crore. This division accounted for almost 72% of the total sales and 80% of total PBIT.

For the Half year ended Jun’07, the PBIT of the equipment division recorded 98% growth to Rs 8.70 crore (contributing to 20% of the total PBIT) on segment sales of Rs 47.19 crore (up by 48%) and contributing to 28% of total sales.

For the FY2007[Dec-07], the company reported an EPS of Rs 37. The share price trades at Rs 468, P/E works out to just 12.6 [trailing EPS]. Investors can take exposure to the stock for handsome returns.

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