Nuvama On Ador Welding

Nuvama Wealth Research
Ador Welding Ltd.
SushilHimanshu
Sharma Yadav
Research Analyst
Research Analyst
himanshu.yadav@edelweissfin.com Date: December 27, 2022
sushilk.sharma @nuvama.com
Long Term Recommendation
Ador Welding Ltd.
Play on capex upcycle
Ador Welding Ltd (AWL) established in 1951, formerly Advani-Oerlikon, is one of the leading
welding companies in India, manufacturing high-quality welding equipment, consumables, and
CMP INR: 792
welding automation solutions. We believe AWL will be one of the major beneficiaries of current
capex upcycle and internal changes positions it for strong growth going ahead. Rating: Tactical BUY
• AWL operates through 3 segments – Consumables, Equipments, and Flares & Process equipment Target Price INR: 1,050
division (FPED). AWL is expanding capacity to meet demand growth; and product mix change is Upside: 33%
helping margins. FPED segment is on a recovery path after cleanup & has won major order
recently from ONGC. Date: December 27, 2022
• We estimate AWL to deliver 15.2% revenue CAGR over FY22-25E with 14%/10%/48% CAGR in
Consumables/Equipment/FPED segments. Expect overall EBITDA margins to expand to 11.4% in
FY25E (from 8.8% in FY22) leading to 20.4% PAT CAGR over FY22-25E. Bloomberg: AWL:IN
• Considering AWL a strong play on the industrial consumables demand cycle, we assign ‘Tactical 52-week
BUY’ with a TP of INR 1050 (using 12.4x FY25 EV/EBITDA) implying an upside of 33%. 586/ 1038
range (INR):
Capex cycle to drive industrial consumables space Share in issue (crore): 1.36
Multiple data suggest towards accelerating capex upcycle which will sustain industrial consumables
demand. Cumulative order book/sales (TTM) of capital goods companies in 2QFY23 are nearing to / M-cap (INR cr): 1,077
surpassed pre-Pandemic peak. Steel demand projection for India (unlike other regions) remains
Promoter holding (%) 56.90
robust and welding consumable is directly correlated to steel usage.
AWL is a credible play within welding materials segment

AWL has ~15%/~9% market share in the welding consumables/equipment space and, along with ESAB 300
India (CMP INR 4,021, INR 6189 cr), is a strong play on capex cycle driven welding material demand. 250
Additionally, AWL is revamping its distributor network (drives ~65% of consumable sales), 200
Indexed
strengthening direct sales channel (in India as well as exports market), cleaned up Flares & Process 150
equipment division (FPED) & won major order recently from ONGC (worth INR 145 cr), and regularly 100
introducing new products to plug offering gaps verses competitors. 50
0
Jan-19
Jan-20
Jan-21
Jan-22
Apr-19
Jul-19
Apr-20
Jul-20
Apr-21
Jul-21
Apr-22
Jul-22
Oct-19
Oct-20
Oct-21
Oct-22
Healthy balance sheet and margin expansion potential
AWL is generating operating cash and able to fund capex without resorting to long term leverage.
Now, AWL is undertaking capex to strengthen its IT system and also to expand capacity. Currently Sensex Ador
capacity utilization is running at 65-90% depending on consumables products and 60-65% for
equipment products. We believe overall margins will also improve based on a) demand upcycle, b)
gradual product mix change in favor of higher value items, and c) recovery in Equipment + FPED from
6% segmental margins in 1HFY23 (v/s 13% for consumables) to high single-digit (9.3% b FY25E).
Merger with Ador Fontech Ltd (AFL) to expand addressable market

AWL is in the process of merging Ador Fontech Ltd (AFL, a group company) and share ratio is fixed at
5 AWL shares for 46 AFL shares. AFL is engaged in repair & refurbishment market which is ~10% of
overall welding market and integrated entity will be able to target project-based larger market
through direct sales. Post-merger, promoter shareholding will be 53% in the merged entity.
Assign ‘Tactical BUY’ rating with target price of INR 1050

We are using EV/EBITDA multiple for valuation instead of P/E multiple as past EPS trend is highly
volatile (due to effect of exceptional items from one large EPC contract). At CMP, the stock is trading
at 11x 1-yr fwd EV/EBITDA, marginally higher than the last 10 years average of 10.8x. In our view,
industrial consumable stocks tend to trade at premium to their historical average in early upcycle,
hence we are assigning +0.5 stdev premium to the 10-year average to arrive at target EV/EBITDA of
12.4x and assign target price of INR 1050 (12.4x FY25E EBITDA).
Year to March FY21 FY22 FY23E FY24E FY25E

Revenues 448 661 792 921 1,011
EBITDA 20 58 74 103 116
Margins % 4% 9% 9% 11% 11%
PAT (10) 45 50 71 79
EPS (INR/sh) (8) 33 37 52 58
P/E (x) -103.8 23.8 21.5 15.2 13.7
RoCE 4% 16% 19% 22% 21%
Nuvama Group has two independent equity research groups: Institutional Equities and Professional Clients Group. This report h as been prepared by the Professional Clients Group. 1
Ador Welding Ltd.
Table of Contents
Business Structure ................................................................................................................................................... 3
Focus Charts ............................................................................................................................................................. 4
Investment Rationale
I. Capex upcycle in progress, to drive industrial consumables growth cycle ........................................................... 6
II. Ador welding a credible play on welding space ................................................................................................... 8
III. Growth oriented Capex and expanding addressable market ............................................................................. 11
IV. Capex upcycle and product expansion to drive growth...................................................................................... 13
V. Margin expansion from changing business mix ................................................................................................... 15
VI. Healthy balance sheet and capital efficiency ratio ............................................................................................. 16
Outlook and Valuation ............................................................................................................................................ 18
Company Description… ............................................................................................................................................ 19
Management Profile ................................................................................................................................................ 22
Financials.................................................................................................................................................................. 25
Ador Welding Ltd.
Business Structure
Ador welding Ltd (AWL)

Established in 1951, Ador (formerly, Advani-Oerlikon) is one of the leading welding companies in India, manufacturing high-
quality welding equipment, consumables and welding automation solutions. Additionally, Ador has been in the Flares & Process
Equipment Division for more than 30+ years. We believe AWL will be one of the beneficiary of capex upcycle and under new leadership of
Mr. AT Malkani (took over as managing director from Sept-2020) growth trajectory is likely to improve materially. We estimate 15.2%
Revenue and 20.4% PAT CAGR over FY22-25E.
Consumables Segment Equipment & Automation segment Flares & Process Equipment Division
(81% of revenues in FY22) (15% of revenues ) (FPED) (4% of revenues)
AWL is strong player in the welding AWL has ~9% market share in welding FPED has been volatile causing most of the
consumables market with ~15% market equipment and automation market. negative exceptional items impacting
share. • AWL is constantly introducting improved earnings growth. AWL has completely
 AWL clocked ~50.1 thousand MT of products in the market to fill gaps and cleaned up the business and restructured it
welding consumables volume in FY22 unlike most other players, AWL for better growth & profitability:
which is likley to grow at 12% CAGR manufactures equipments in india rather • Recently AWL won INR 145 cr (including
than importing it. 18% GST) order from ONGC ltd for
over FY22-25E.
• Equipments segment clocked volume of demountable flare project. Execution
 Majority of consumables sales (~65%) is
10,300 units in FY22 and we expect timeline is 30 months and revenue flow
through distributor network and to start from 4QFY23.
voulmes to grow at 6.3% CAGR over
remaing through direct sales. The FY22-25E. • Based on strong order intake and
company is gradually changing product • We estimate 10% revenue CAGR in execution time we expect FPED segment
mix away from commoditized equipments segments with material revenue contribution to increase to 11%
consumables and expanding capacity as improvement in segment margins to 9% in FY24E.
well to cater to higher value products. in FY25 from 4.7% in 1HFY23. • We estimate FPED to deliver 48%
 We estimate, 14% revenue CAGR from revenue CAGR over FY22-25E.
Consumables segment over FY22-25E.
AWL is likely to be a one of the major

Capex cycle driven industry tailwind,
beneficiaries from capex upcycle within
business restructuring Including (Ador We are positive on industrial consumables
the Industrial consumable space. The
Fontech merger), revamp of sales and space and consider AWL along with ESAB
company was always a strong player in
distributor network and changing India as a good story to play capex
consumables space and now it has
product mix will help drive growth and upcycle. AWL may also benefit
cleaned up its EPC (FPED) business and
improve margins (from low base in additionally from business restructuring
renewed focus on Equipment segment
Equipments + FPED and from changing and margin expansion.
as well.
mix in consumables).
FY25E EBITDA Target

INR cr FY22 FY23E FY24E FY25E INR cr FY22 FY23E FY24E FY25E EV/EBITDA
(INR Cr) price
Revenue 661 792 921 1,011 Adj. RoE 16.0 15.1 17.5 16.3 12.4x 116 1,050
EBITDA 58 74 103 116 FCF (10.4) 8.1 6.3 25.3

Margin % 8.8 9.4 11.2 11.4 D/E ratio 0.0 0.1 0.0 0.0
PAT 45 50 71 79
Currently, the stock is trading at

FY22-25E EBITDA/PAT CAGR of 26%/20% + FY24/25 RoCE of 22%/21% + FY24E/FY25E PE of 15.2x/13.7x
Upside: 33%
Ador Welding Ltd.
Focus Charts
Exhibit 01: Capital goods order book recovering fast Exhibit 02: AWL market share
1,650 Ador welding Market share
1,600 16%
1,550 14%
1,500 12%
INR Bn
1,450 10%
8%
1,400
6%
1,350
4%
1,300 2%
1,250 0%
FY19
FY22
FY16
FY17
FY18
FY20
FY21
H1FY23
Consumables segment Equipments &
automation segment
Exhibit 03: AWL growth trend and revenue split between consumables, equipment and FPED.
1,200 60%
50%
1,000 92
103 40%
133
800 53 124 30%
27 112
600 99 20%
33 48
- 61 85 74 25 10%
400 - 71 788
132 158 85 696
627 0%
535
200 386 404 352
275 282 311 -10%
- -20%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
FPED revenues (INR cr) Equipment revenues (INR cr)

Consumables Revenue (INR cr) Total revenue growth (%, RHS)
Exhibit 04: AWL margin trend - expect margin expansion over FY23/24
14%
11% 11%
12%
10%
9%
10% 9% 9%
7% 8%
7% 10% 10%
8%
6% 8%
7% 4% 7%
7%
4% 6%
5%
4%
2%
2%
0%
EBITDA margins (%) EBIT margins (%)
Source: Company, Nuvama Wealth Research
Ador Welding Ltd.
Exhibit 05: Stable operating cash generating company to fund capex needs.
100
80
60
40
20
0
-20
-40
-60
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E
Operating Cash Flow (INR cr) Free Cash Flow (INR cr)
Exhibit 06: 1-year fwd EV/EBITDA(x) trend

1yr Fwd EV/EBITDA (x) Average EV/EBITDA (x) STD - 1 STD +1
24
20
16
12
0
02-Apr-12 02-Apr-13 02-Apr-14 02-Apr-15 02-Apr-16 02-Apr-17 02-Apr-18 02-Apr-19 02-Apr-20 02-Apr-21 02-Apr-22
Exhibit 07: Historical CAGR trend

10yr CAGR 5yr CAGR 3yr CAGR
Revenue 7% 8% 9%
EBITDA 4% 14% 10%
PAT 8% 20% 23%
Average gross Margin 31% 29% 29%
Average EBITDA Margin 8% 7% 7%
Average Working capital days 82 98 78
Average ROCE (%) 13% 13% 13%
Average D/E ratio 0.1 0.1 0.1
Ador Welding Ltd.
Investment Rationale
I. Capex upcycle in progress, to drive industrial consumables growth cycle

Welding materials is directly correlated with steel consumption and capex cycle. Heavy engineering and automotive are the
biggest user of welding materials. Multiple data points suggest, India is in the initial stages of accelerating capex cycle over next
couple years atleast. Capital goods companies’ revenues has fully recovered from Pandemic lows and has now surpassed pre-
Pandemic level. Similarly order book accretion is quite strong and now stand at ~INR 1.59 lakh Cr (vs INR 1.39 Lakh Cr in FY21 and
slightly lower than pre-Pandemic peak of ~INR 1.63 lakh Cr in FY18)
Exhibit 08: Capital goods sales surpass pre-Pandemic level.
TTM Sales (INR Bn)

1,500
1,400
1,300
1,200
1,100
1,000
900
800
Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22 Sep-22
Source: Companies, Nuvama Wealth Research
Ador Welding Ltd.
Exhibit 09: Capital goods Order book nearing Pre-Pandemic peak
Capital goods order book inching towards pre-covid levels

1,650
1,600
1,550
1,500
INR Bn
1,450
1,400
1,350
1,300
1,250
FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23
Source: Companies, Nuvama Wealth Research
Exhibit 10: India’s steel demand to be strongest among major economic regions, feeding to welding demand
Source: World steel association (Short range outlook, Oct 2022), IFGL, Nuvama wealth research
Ador Welding Ltd.
II. Ador welding a credible play on welding space
AWL has strong market share of ~15% in welding consumables segment and around 9% in equipment & automation segment.
Exhibit 11: AWL market share in the welding segments Exhibit 12: AWL revenue distribution across segments
Ador welding Market share

16% 4%
14%
15% Consumables
12%
10%
8% Equipment &
Automation
6%
4% Flares & Process
81%
2% Equipment
0%
Consumables segment Equipments & automation
segment
Source: Company, Nuvama Wealth Research, media reports
Exhibit 13: AWL market share in the welding segments Exhibit 14: AWL revenue distribution across segments
Competitive Landscape Major User Industries - Welding
Consumable Segment Equipment Segment Industry group Share (approximate)
ESAB India ESAB Heavy Engineering 32%
Ador Welding / Ador Fontech Ador Welding Automotive 21%
D&H Scheron Kemppi Construction 13%
Lincoln Electric Lincoln Electric Railways 8%
mailam Fronius Shipbuilding 4%
G-Weld Panasonic Others 22%
Malu Electrodes Importers
Source: Company, Nuvama Wealth Research, media reports
AWL sales happens through distributor network and direct sales channel. AWL has over the years built strong relationships in
India as well as internationally. ~65% of revenues is through distributor channel while rest of the ~35% revenues if from direct
sales.
Ador Welding Ltd.
Exhibit 15: Indicative list of AWL customers in India.
AWL also has presence in the export market, especially in the Middle east (ME) region. After FY17, exports market suffered as
Kuwait project faced unexpected headwinds. Now exports market is again under renewed focus and AWL has a) set up a new
sales team & restructured distribution network, b) opened office in Jebel Ali Free trade zone (UAE), and c) entered in Brazil
market.
Exports delivered INR 31 cr revenues in FY22 and company target is to achieve ~50% growth and reach ~INR 100 cr exports
revenue in few years (possible by FY25/26).
Exhibit 16: AWL revenues from exports market

25%
22% Exports share in Revenues (%)
21%
20%
15%
10%
9%
10%
7%
5%
5% 3%
0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22
Ador Welding Ltd.
Exhibit 17: AWL existing strong customer in exports market provides stable base for growth
Ador Welding Ltd.
III. Growth oriented Capex and expanding addressable market
AWL is undertaking capex to expand consumables capacity from currently ~71,000 MT to ~76,000 MT. Not only capacity is
expanding but product mix is shifting towards higher value items (from comparatively commodized products). Currently, capacity
utilisation is ~65% for commoditised consumables products while ~90% for higher value consumables. Capacity utilisation for
welding equipment is roughly at 60-65%.
Exhibit 18: AWL consistently investing in capacity, internal processes and new product development.
Capex (actual incurred in 1HFY23 vs Planned in 2HFY23)
Segment Purpose 1HFY23 2HFY23 FY23
Technology upgradation and capacity
Welding Business 2.5 10 12.5
enhancement
Technology upgradation and capacity
FPED 1.2 2.5 3.7
enhancement
Corporate/ Others General / IT 2 5 7
Total 5.7 17.5 23.2
Exhibit 19: AWL consistently investing in capacity, internal processes and new product development.
25 22 23
19
20
15
14 13
15 12
10
6
5
-
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E
CAPEX (INR cr)

AWL is introducing new products to plug gaps in its offerings compared to competitors.
Exhibit 20: Some of the products of AWL

Ador welding - Few of the new products introduced in last 3-4 years
Welding Equipment Welding Consumables Flares & Process Equipment
Champ 400 X Tenalloy 15, 90 D3 Sonic Flare System
Champ T400 Supabase X Plus S Segmented Air
Multistep Diode based Mig/Mag welder Tenalloy Z Plus S , 70CL Assisted Flare
Sile Challenger 2x 301 Striker 308L Flare Gas recovery system
Champ Pulse 500 King Steel - 18/8 Duplex piping spools
Champ MIG 300 / 400 Cromoten G High definition CNC plasma & fume
OmniMIG 250, Automig 70S 6N
Champ TIG 300SP / 400P Auto melt ES1
Tricycle Welding Head Stainless Steel Strips
Ador Welding Ltd.
Group companies merger - Ador Welding Ltd (AWL) and Ador Fontech Ltd (AFL) – are merging for better scale. Ador fontech is
specializing in the repair and refurbishment market within the welding space. The merger will help fill offering gaps and achieve
scale vis-à-vis competitors and also leverage existing distribution and sales channel. Shareholders of AFL will be issued 5 shares
of AWL (of face value INR 10/sh) for every 46 shares of AFL (of face value INR 2/sh).
Exhibit 21: AWL growth trend and revenue split

based on FY22 Ador Welding Ador Fontech Remarks
Revenues (INR Cr) 661 210 AWL is 3x of AFL
EBITDA margin 9% 13% AFL has higher margins because of specialised work
PAT (INR Cr) 45 18
Revenue segments
Welding/Cutting 96% 84% High overlap in Welding business, but AFL specialises in
repair & refurbishment which is ~10% of overall market
Other wear products 0% 16%
Flares & Process Equipment 4% 0%
Share SWAP ratio 5 46 5 AWL shares for every 46 AFL shares
Post-merger, Promoter shareholding the merged company would be 53% compared to 57% in AWL and 39% in AFL.
Ador Welding Ltd.
IV. Capex upcycle and product expansion to drive growth
We believe, growth and volume surge in FY22 is a function of start of a capex cycle and is likely to sustain in medium term. The
AWL management is also confident of sustained growth in FY23 and is guiding of strong volume growth.
Exhibit 22: AWL growth trend and revenue split between consumables and equipment & FPED.
1,200 60%
50%
1,000
92
103 40%
133
800 53 124 30%
27 112
600 99 20%
33 48
- 61 85 74 25 10%
400 - 71 788
132 158 85 696
627 0%
535
200 386 404 352
275 282 311 -10%
- -20%
FPED revenues (INR cr) Equipment revenues (INR cr)

Consumables Revenue (INR cr) Total revenue growth (%, RHS)
Consumable segment is the biggest revenue segment and we expected this segment to deliver stable growth over FY22-25E at
14% revenue CAGR led by 12.3% volume CAGR.
Exhibit 23: AWL consumables volume growth to sustain at 20% in FY23/24.

80 40%
Consumables Voume (MT, 000's) Volume growth (%, RHS)
70
30%
60
20%
50
40 10%
30
0%
20
-10%
10
- -20%
Ador Welding Ltd.
Exhibit 24: AWL consumables (~80% of revenues) growth trend – volume and value wise split
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
Consumable Volume growth (%) Consumable Value growth (%) Consumable revenue growth (%)
We estimate strong growth in the FPED segment at 48% revenue CAGR over FY22-25E due to ONGC project (worth INR 134 cr to
be executed over 30 months). Equipment segment to deliver revenue CAGR of 10% over FY22-25E based on new products and
plugging of few product gaps.
Exhibit 25: AWL equipment volume growth to see an uptick.

14.0 40%
12.0 30%
20%
10.0
10%
8.0
0%
6.0
-10%
4.0
-20%
2.0 -30%
0.0 -40%
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Equipments volume (000's) Equipments revenue growth (%, RHS)
Ador Welding Ltd.
V. Margin expansion from changing business mix
AWL capacity utilization is running around 65-90% for consumables and 60-65% for equipment’s capacity. We believe, given the
strong demand in the upcycle and some pricing led growth will lead to gradual margin improvement to ~11.2% by FY24E. Though
the company is targeting higher margins similar to competitors (like ESAB India), which is likely to play out over longer period, if
demand upcycle sustains after FY24 (i.e. once general election in later part of FY24 is over).
Exhibit 26: AWL margin trend - expect margin expansion over FY23/24
14%
11% 11%
12% 10%
9%
10% 9% 9% 10% 10%
7% 8%
8% 7% 8%
7% 7% 7%
6% 6% 4%
5%
4% 4%
2% 2%
0%
EBITDA margins (%) EBIT margins (%)
Segmental margin shows that there is large headroom for margin improvement in Equipment as well as FPED segment and some
headroom in the consumables segment.
Exhibit 27: Segmental margin (before exceptional items) – Consumables operating below peak margins (of 16.4% in FY19),
Equipment’s segment margins are well below consumables segment while FPED is dragging down overall margins.
Improvement in Equipment and FPED will lift overall margins over FY22-25E.
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
Consumable margins (%) Equipments margin (%) FPED margins (%)
Ador Welding Ltd.
VI. Healthy balance sheet and capital efficiency ratio
AWL is consistently generating operating cash and is able to fund capex without resorting to long term leverage. FY17/18
operating cash flow was impacted due to one large EPC contract in export market (Kuwait) which did not go as per expectation
leading to write-offs later. We believe, the company has learned lessons from such episode and has put strong project
management practices in place to recurrence. The company has already announced ~INR23 cr capex in FY23, we believe FY24
will also see elevated capex on account of restructuring after Ador Fontech (AFL) integration.
Exhibit 28: Stable operating cash generating company to fund capex needs.
100
80
60
40
20
0
-20
-40
-60
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E
Operating Cash Flow (INR cr) Free Cash Flow (INR cr)
AFL inventory and receivable days is also manageable (though not as good as ESAB India) at 50 and 51 respectively for FY22. We
expect it stay largely around similar number going ahead as higher growth in FPED and higher reliance on distributor network
does not offer much scope to reduce it without impacting growth.
Exhibit 29: Working capital requirement in largely stable within a range

250 90
80
200 70
60
150
50
40
100
30
50 20
10
- -
FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Payable days Inventory days Receivable days Working Capital days (RHS)
Ador Welding Ltd.
Exhibit 30: capital efficiency ratios to improve led by growth recovery and margin improvement in underperforming
segments (Equipments and FPED)
25% 22%
21%
19%
20% 16%
13%
15% 12% 18%
16% 16%
15%
10%
10% 11% 4%
5%
0%
-5%
-4%
-10%
FY19 FY20 FY21 FY22 FY23E FY24E FY25E
RoCE (%) RoE (%)
Ador Welding Ltd.
Outlook and Valuation

We are using EV/EBITDA multiple for valuation as EPS in the past was very volatile due to impact of large exceptional items
(positively as well as negatively). These exceptional items has led to negative PAT (i.e. loss) in few of last 10 years distorting
calculation of PE multiple.
At CMP, the stock is trading at 11x 1-yr fwd EV/EBITDA, which is marginally higher than the last 10 years average fwd
EV/EBITDA of 10.8x. In the early phase of (capex) upcycle the industrial consumable stock tends to trade at premium to
historical average, and hence we are assigning +0.5 stdev premium to the 10 year average to arrive at target EV/EBITDA
multiple of 12.4x and assign target price of INR 1050 (12.4xFY25E EBITDA), an upside of 33%.
Exhibit 31: 1-year fwd EV/EBITDA(x) trend

1yr Fwd EV/EBITDA (x) Average EV/EBITDA (x) STD - 1 STD +1
24
20
16
12
0
Exhibit 32: AWL - Peer valuation comparison

CMP* MCAP Revenue (INR Cr) EBITDA margins, % EPS (INR/sh) P/E (x) FY22
INR INR cr FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23 FY24 RoCE, % RoE, %
RHI Magnesita 810 13,041 1,986 2,374 3,055 19.3% 17.6% 17.6% 17 19 24 48.5 42.5 34.2 37 29
Solar Industries 4,120 37,282 3,948 6,027 6,714 18.9% 19.4% 20.6% 49 82 101 84.5 50.5 41.0 25 25
Carborundum
881 16,721 3,290 4,535 5,148 16.3% 14.6% 15.9% 18 20 26 50.1 43.6 33.6 20 15
Universal
GMM faudler 1,520 6,834 2,520 3,102 3,547 11.3% 13.8% 14.5% 19 43 61 78.4 35.6 25.1 14 16
IFGL refractories 249 897 1,239 1,426 1,573 11.4% 11.1% 13.2% 22 23 36 11.6 10.9 6.9 11 8
ESAB India 3,949 6,047 893 13.1% 55 72.1 45 33
Ador welding 780 1,061 661 792 921 8.8% 9.4% 11.2% 33 37 52 23.5 21.2 15.0 16 16
*prices as on 23rd Dec, 2022 Source: Company, Nuvama Wealth Research
Exhibit 33: 1-year fwd PE(x) trend for reference purpose (calculated by excluding Exceptional items)
50.0
40.0
30.0
20.0
10.0
-
1yr Fwd P/E (x) Average P/E(x) STD - 1 STD +1
Ador Welding Ltd.
Company Description
Established in 1951, Ador (formerly, Advani-Oerlikon) is one of the leading welding companies in India, manufacturing high-
quality welding equipment, consumables, and welding automation solutions. Additionally, Ador has been in the Flares & Process
Equipment Division for more than 30+ years. With a presence across 40+ countries in the Middle East, Africa, and Southeast Asia,
Ador maintains a robust sales and distribution network across the globe and provides solutions to a wide spectrum of industries
including defense, shipbuilding, oil and gas, railways, infrastructure, nuclear energy, power and automotive sectors.
Exhibit 34: Ador welding – Timeline of evolution
Exhibit 35: Geographical spread across india and manufacturing plant locations
Business Segment, Types of products & services
a) Consumables
Electrodes, wires, agency items related to consumables
from Silvassa, Raipur and Chennai plant.
b) Equipment and automation
Equipment, spares, cutting products and agency items
related to equipment, cutting products etc. from
Chinchwad plant.
c) Flares & Process Equipment Division
Flares & Process Equipment Division (FPED) is a multi-
disciplined SBU that provides services like design,
manufacture, erection & commissioning, mechanical,
electrical and instrumentation of process packages,
process equipment, flare system & components and
EPC contracts from Chinchwad plant.
Ador Welding Ltd.
Exhibit 36: Business overview – Markets served by Ador welding
Exhibit 37: Ador welding products
Ador Welding Ltd.
Exhibit 38: Geographical presence
Ador Welding Ltd.
Management Profile and Board of Directors

Exhibit 39: Ador welding management team
Management Team
Mr. A.T. Malkani Managing Director
Mr. Suryakant Sethia Chief Financial Officer
Mr. Vinayak M. Bhide Head - HR, Admin, IA, Legal & Company Secretary
Mr. Mustafa Faizullabhoy Head – International Operations
Mr. Vineet Bansal Head - India Welding Business & Customer Success
Mr. Sunanda Kumar Palit Head - Strategy & Customer Experience
Mr. Sachin H. Dobhada Head - Research, Development & Quality
Mr. Rakesh Choudhary Head - Welding Automation Products & Services
Exhibit 40: Board of Directors and Profile

• MBA, with specialisation in Finance from Imperial College, UK
• B.Sc. in Business & Economics from Lehigh University, PA, USA
• Formerly associated with Alliance Capital Asset Management in New York, USA
• Over 25 years of experience in Financial Management of Ador Welding Limited
and Ador Group of Companies
• Previously Chairman of Ador Fontech Ltd and Chairman of M/s. J. B. Advani & Co.
Private Limited (Parent Company of Ador Group)
• Currently, Executive Chairman of Ador Welding Ltd w.e.f. 19th November, 2019
• Member of Young Presidents’ Organisation (YPO) & Entrepreneurs Organisation
(EO)
• Pursued B.A. (Economics) from Oberlin College (Ohio, USA) and MBA from Indian
School of Business (ISB, Hyderabad)
• Prior experience in Marketing & Finance functions of MNCs in FMCG industry
• Involved across varied functions ranging from corporate marketing & exports to
strategic planning & new business initiatives across Ador Group of Companies
• A Commerce Graduate with distinction in Marketing & Advertising and Masters in

commerce with specialisation in Accounting; pursued MBA from Manchester
Business School, UK and did courses at London School of Economics, UK
• Formerly associated with Langham Capital, London, DHL, Europe and various
NGOs
• Awarded an honorary Doctorate in the year 2019
• 19 years hands on experience across reputed National and International firms
• Involved across various functions within Ador Group including strategising at Ador
Welding Academy, New business ideas and e-commerce initiatives at the group
level Currently Chairman of the Group’s holding company, M/s. J. B. Advani & Co
Pvt. Ltd. as well as leading the Group’s skincare businesses and start-up, Sublime
Life
Ador Welding Ltd.
• Has a Masters Degree in Business Administration (MBA) from the Queensland

University of Technology, Brisbane, Australia
• Has worked directly in over 7 countries in Industries including industrial gas,
telecom, defence, energy and decarbonized mobility (electric & hydrogen
mobility)
• Has previously led the SE Asia operations of Origin Energy Australia, as well as
been the Managing Director of Cryolor Asia Pacific
• Presently, he is the Chairperson of Ador Powertron Ltd., Ador Digatron Pvt Ltd &
Acusensus Australia and is a part of the leadership team of these Companies
• Graduated with a B.Sc. in Human Psychology from Aston University, Birmingham,

UK
• Completed her MBA with concentration in Marketing from London Business
School
• Has further qualifications in Business Analysis from the British Computing Society,
Business Strategy from INSEAD, Marketing from Kellogg School of Management
and Business Intelligence reporting from IBM
• Started her career as a Business Consultant at IBM in London, where she
specialized in Big Data and Analytics. She then joined Ador Group in Mumbai as
part of their founding team for 3D Future Technologies, where she specialized in
IT & marketing
• Post-MBA, Ms. Tanya returned to London as a Senior Technology Strategy
Consultant at Accenture where she led innovation projects for both Accenture
internally as well as for it's external clients
• Has worked both as an attorney in private practice and as an in-house counsel with
MNCs, while working with O'Melveny & Myers LLP, UTStarcom Inc., and UnitedLex
Corporation
• Most recently was the CEO of Yumchek, an F&B data analytics Company. Currently,
he is a Director at MaxMax Chambers of Conciliation, Mediation & Arbitration
• Has significant experience in managing affairs of Companies in various capacities,
from structuring and negotiating various types of transactions (trading, licensing,
outsourcing, RFPs), to conducting due diligence and executing M&As and to
effectively managing outside counsel for dispute resolution; in addition to other
routine corporate governance, data protection, regulatory and compliance work
• Over the course of his career, he has lived and worked in the US and Asia, and has
advised clients across geographies from the US, UK, Latin America, EMEA, SEA,
South Asia, China, Korea to Japan, including Credit Suisse, Lockheed Martin, Hilton
Hotels, Mantas, SRI, AkzoNobel, Marriott International, Ogilvy & Mather, Apollo
Global Management, Insight Partners, AtoS, British Telecom, Anglo-American, CSC,
• and Bristol-Myers-Squibb
• Holds degrees in Mathematics and Law from Delhi University and Harvard Law
School, USA
Ador Welding Ltd.
• B. Com (Hons.), BBA and MBA

• Commenced his career as a banker in 1985 and worked with HSBC for over 10 years
before joining GE Capital, where he was internally transferred to another GE JV
Company, IGE India, as CEO
• Four years stint in the television and broadcasting sector with Companies like GE
(CNBC), SAB TV, Reliance Entertainment
• Was with EIH Limited (Oberoi Group of Hotels) as CEO for the Group's travel related
business, Mercury Travels Ltd., for over three years
• Spent 8 Years in Executive Search in Hong Kong and India with The Executive Access
Group looking at Recruitment for Leadership Roles
• In 2014, Co- founded Executive Mantra Search Services Pvt. Limited, a firm focused
on Senior & Middle Management Recruitment, and is the Managing Partner of the
firm
• Responsible for leading global content marketing for GSK

• He is expert in setting up and running global teams across geographies and
capabilities including; strategy, creative, media data and technology
• Partnered Unilever, P&G, J&J, Kimberly Clark and Government accounts including
Central Provident Fund (CPF), the Housing and Development Board (HDB), and
Singapore Tourism Board, amongst others
• Has won multiple awards ranging from Cannes, Effiesand has been listed as 40
under 40 in Campaign Asia's 2017 list. Mr. Gaurav also sits on the board of two
public listed companies in India
• Founder of Kae Capital, an early stage Venture Capital Fund, where she is Director
of Finance & Legal
• Previously President of Indo Pacific Polyfibers Limited (IPPL), a Dempo Group
Company where she was part of the Promoter group
• After IPPL, she worked as an Equity Analyst in JM Financial and HDFC Securities
• An Active Angel Investor in fast growing start-ups like In Mobi, Innovcare, Squadrun
and iGenetics
• Completed her M.Sc. (Econ) with specialisation in Analysis Design Management of
an Information System & B.Sc. (Econ) Accounting & Finance from the London
School of Economics and B.A. (Econ) from St. Xaviers College of Arts, Mumbai
Ador Welding Ltd.
Financials
Income Statement (INR Cr)
Year to March FY20 FY21 FY22 FY23E FY24E FY25E
Income from operations 526 448 661 792 921 1011
Total operating expenses 486 428 603 718 818 895
EBITDA 41 20 58 74 103 116
Depreciation and amortisation 11 11 11 11 13 14
EBIT 30 9 47 63 91 101
Interest expenses 9 6 4 2 2 2
Other income 9 7 5 7 7 7
Profit before tax 31 10 49 68 96 106
Provision for tax 4 -4 13 17 25 28
Core profit 26 14 36 51 71 79
Extraordinary items 0 -24 9 -1 0 0
Profit after tax 26 -10 45 50 71 79
Adjusted net profit 26 -10 45 50 71 79
Equity shares outstanding (Cr) 1.36 1.36 1.36 1.36 1.36 1.36
EPS (INR) basic 19 -8 33 37 52 58
Diluted shares (Cr) 1.36 1.36 1.36 1.36 1.36 1.36
EPS (INR) fully diluted 19 -8 33 37 52 58
Dividend per share 7 0 13 0 0 0
Dividend payout (%) 34 0 38 0 0 0
Common size metrics- as % of net revenues

Operating expenses 92.2 95.5 91.2 90.6 88.8 88.6
Depreciation 2.0 2.5 1.6 1.4 1.4 1.4
Interest expenditure 1.6 1.4 0.6 0.2 0.2 0.2
EBITDA margins 8 4 9 9 11 11
Net profit margins 5.0 (2.3) 6.8 6.3 7.7 7.8
Growth metrics (%)

Revenues 2.5 (14.9) 47.8 19.8 16.3 9.7
EBITDA (6.9) (50.8) 190.4 27.3 39.0 11.9
PBT (14.0) (67.5) 396.8 38.2 40.6 11.3
Net profit 6.4 (139.7) (535.1) 10.7 41.5 11.3
EPS 6.4 (139.7) (535.1) 10.7 41.5 11.3
Ador Welding Ltd.
Balance sheet (INR Cr)

As on 31st March FY20 FY21 FY22 FY23E FY24E FY25E
Equity share capital 14 14 14 14 14 14
Preference Share Capital 0 0 0 0 0 0
Reserves & surplus 234 224 268 318 390 470
Shareholders funds 247 238 282 332 404 484
Total Debt 82 28 1 20 16 16
Other Long Term Liabilities 5 5 6 7 7 7
Deferred Tax Liabilities 4 0 0 0 0 0
Minority Interest 0 0 0 0 0 0
Sources of funds 339 271 289 359 427 506
Net block 118 110 110 120 145 165
Capital work in progress 0 3 7 7 7 7
Total fixed assets 118 113 117 127 152 172
Other non-current assets 48 48 43 45 48 50
Investments 4 11 20 21 25 30
Inventories 62 62 90 119 139 158
Sundry debtors 130 105 93 117 144 163
Cash and equivalents 7 18 8 19 26 51
Loans and advances 2 1 0 0 0 0
Other current assets 67 15 19 16 14 13
Total current assets 268 202 210 272 323 386
Sundry creditors and others 94 100 97 105 119 129
Provisions 5 5 7 6 6 6
Total CL & provisions 98 105 104 111 125 135
Net current assets 169 98 106 161 198 251
Net Deferred tax 0 1 3 4 4 4
Misc expenditure 0 0 0 0 0 0
Uses of funds 339 271 289 358 427 506
Book value per share (INR) 181.9 174.7 207.4 244.2 297.0 355.7
Cash flow statement (INR Cr)

Net profit 26 -10 45 50 71 79
Add: Depreciation 11 11 11 11 13 14
Add: Misc expenses written off 0 0 0 0 0 0
Add: Deferred tax Liability 4 -1 -3 -4 -4 -4
Gross cash flow 41 -0 53 58 80 90
Less: Changes in W. C. -31 42 -22 -46 -32 -29
Operating cash flow 72 -42 75 104 112 118
Less: Capex 22 9 17 20 38 34
Free cash flow 50 -51 58 84 74 84
Ador Welding Ltd.
Ratios
ROAE (%) 11% -4% 16% 15% 18% 16%
ROACE (%) 12% 4% 16% 19% 22% 21%
Debtors (days) 90.0 86.0 51.4 54.0 57.0 59.0
Current ratio 1.5 1.6 2.2 2.3 2.5 2.8
Debt/Equity 0.3 0.1 0.0 0.1 0.0 0.0
Inventory (days) 43.1 50.9 49.6 55.0 55.0 57.0
Payable (days) 50.5 60.3 42.8 41.0 41.0 41.0
Cash conversion cycle (days) 82.6 76.6 58.3 68.0 71.0 75.0
Debt/EBITDA 2.0 1.4 0.0 0.3 0.2 0.1
Adjusted debt/Equity 0.3 0.1 0.0 0.1 0.0 0.0
Valuation parameters
Diluted EPS (INR) 19.2 -7.6 33.2 36.8 52.0 57.9
Y-o-Y growth (%) 6.4 -139.7 -535.1 10.7 41.5 11.3
CEPS (INR) 10.0 58.1 19.4 11.7 39.6 48.9
Diluted P/E (x) 41.2 -103.8 23.8 21.5 15.2 13.7
Price/BV(x) 4.5 4.5 3.8 3.2 2.7 2.2
EV/Sales (x) 2.0 2.4 1.6 1.4 1.2 1.1
EV/EBITDA (x) 26.4 53.6 18.5 14.5 10.4 9.3
Diluted shares O/S 1.4 1.4 1.4 1.4 1.4 1.4
Basic EPS 19.2 -7.6 33.2 36.8 52.0 57.9
Basic PE (x) 41.2 -103.8 23.8 21.5 15.2 13.7
Dividend yield (%) 0.0 0.0 1.6 0.0 0.0 0.0
Nuvama Wealth and Investment Limited, Edelweiss House, Windsor Ln, Kolivery Village, MMRDA Area, Kalina, Santacruz East,
Mumbai, Maharashtra 400098
Vinay Khattar
Head Research
VINAY Digitally signed by
VINAY KHATTAR
vinay.khattar@nuvama.com KHATTAR Date: 2022.12.27

19:01:58 +05'30'
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Nuvama On Ador Welding

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Nuvama Wealth Research

Ador Welding Ltd.

AWL is a credible play within welding materials segment

Merger with Ador Fontech Ltd (AFL) to expand addressable market

Assign ‘Tactical BUY’ rating with target price of INR 1050

Year to March FY21 FY22 FY23E FY24E FY25E

Business Structure ................................................................................................................................................... 3

Focus Charts ............................................................................................................................................................. 4

I. Capex upcycle in progress, to drive industrial consumables growth cycle ........................................................... 6

II. Ador welding a credible play on welding space ................................................................................................... 8

III. Growth oriented Capex and expanding addressable market ............................................................................. 11

IV. Capex upcycle and product expansion to drive growth...................................................................................... 13

V. Margin expansion from changing business mix ................................................................................................... 15

VI. Healthy balance sheet and capital efficiency ratio ............................................................................................. 16

Outlook and Valuation ............................................................................................................................................ 18

Company Description… ............................................................................................................................................ 19

Management Profile ................................................................................................................................................ 22

Ador welding Ltd (AWL)

AWL is likely to be a one of the major

FY25E EBITDA Target

EBITDA 58 74 103 116 FCF (10.4) 8.1 6.3 25.3

Currently, the stock is trading at

FPED revenues (INR cr) Equipment revenues (INR cr)

EBITDA margins (%) EBIT margins (%)

Source: Company, Nuvama Wealth Research

Exhibit 06: 1-year fwd EV/EBITDA(x) trend

Source: Company, Nuvama Wealth Research

Exhibit 07: Historical CAGR trend

I. Capex upcycle in progress, to drive industrial consumables growth cycle

Exhibit 08: Capital goods sales surpass pre-Pandemic level.

TTM Sales (INR Bn)

Source: Companies, Nuvama Wealth Research

Exhibit 09: Capital goods Order book nearing Pre-Pandemic peak

Capital goods order book inching towards pre-covid levels

Source: Companies, Nuvama Wealth Research

II. Ador welding a credible play on welding space

Ador welding Market share

Exhibit 15: Indicative list of AWL customers in India.

Source: Company, Nuvama Wealth Research

Exhibit 16: AWL revenues from exports market

Source: Company, Nuvama Wealth Research

Source: Company, Nuvama Wealth Research

III. Growth oriented Capex and expanding addressable market

CAPEX (INR cr)

Exhibit 20: Some of the products of AWL

Exhibit 21: AWL growth trend and revenue split

IV. Capex upcycle and product expansion to drive growth

FPED revenues (INR cr) Equipment revenues (INR cr)

Exhibit 23: AWL consumables volume growth to sustain at 20% in FY23/24.

Source: Company, Nuvama Wealth Research

Source: Company, Nuvama Wealth Research

Exhibit 25: AWL equipment volume growth to see an uptick.

Equipments volume (000's) Equipments revenue growth (%, RHS)

Source: Company, Nuvama Wealth Research

V. Margin expansion from changing business mix

EBITDA margins (%) EBIT margins (%)

Source: Company, Nuvama Wealth Research

Source: Company, Nuvama Wealth Research