Buy Esab; target Rs 575: Sharekhan

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Buy Esab; target Rs 575: Sharekhan

Sharekhan is bullish on Esab and has maintained buy rating on the stock with a target price of Rs 575.

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Sharekhan is bullish on Esab and has maintained buy rating on the stock with a target price of Rs 575.

Sharekahn research report on Esab

ESAB India's revenues grew by 35% to Rs87.3 crore in the Q2CY2007, which is ahead of our expectation.

The operating profit grew by 36.8% to Rs21.7 crore in Q2CY2007 as against Rs15.8 crore in Q2CY2006. Consequently, the operating profit margin (OPM) also expanded by 30 basis points year on year (yoy) to 24.8%. The raw materials costto- sales increased by 130 basis points, while the staff cost-to-sales ratio increased by 290 basis points.

The commissioning of a new plant at Chennai and capacity additions in its existing plants lead to an increased top line in Q2CY2007. The equipment division registered a whopping 65.5% growth in its revenues and the revenues from the consumables increased by 25.6%. 

The depreciation cost for the quarter increased by 26.7% as the company has commissioned its new plant.  Elexvia group India B.V. along with Charter plc and ESAB Holding Ltd have made an open offer to the shareholder of ESAB India to acquire 30.78 lac shares (Fully paid up equity share of Rs10 each) at Rs426 per share.

These represent 20% of the total fully paid up capital. For the first half of CY2007 the net sales grew by 32.1% to Rs168.5 crore and the bottom line grew by 36.4% to Rs26.4 crore, subsequently generating an earnings per share (EPS) of Rs17.2 per share.