Notes from Ador fontech AGM:( request others to share any missing points. I may have misinterpreted few things while preparing notes)
Macroeconomic challenges: Industrial slow down particularly auto…other industry like cement, steel are not as bad as auto ind slowdown. Continue to see demand for electrodes which are consumables but certainly it’s not robust as last year. When industry utilisation goes down customers will cut down on maintenance activity which impacts Ador.
Tracking IIP data is good indicator about Ador performance with a lag of around 1.5 months. Overall market size is 600 -700 cr +add yearly IIP growth.
Unorganised players serving the industry are still present-around 25% market share. They do simple service business. some of them have become organised . GST had impacted them a lot. Unorganised sector is not concern for us.
Micro-challenges for Ador is to repeat the same amount and complexity of work done for client at one factory at another location. Need people with capabilities to do it repeatedly for benefit of client. We have to go to customer ad convince them about their existing assets which Ador can repair, metalise ,reuse rather than buying new assets.
Main industries in order of revenue cement, thermal power, auto, railways…etc
Electrodes : coated electrodes are main drivers. LH -alloy sales are driving growth and margins. Reasonable demand from end industries as its consumable product.
Robotic wielding : semi automated trolley using which we metalize the wear and tear happens railway tracks crossings…last year good orders…this year is flat.
Wielding protective components: Not a focus area, selling only few products.
We want to maintain ratio of our brand products and traded goods at ratio of 75:25%.
Hypertherm is good brand which we try to push. Most of the sales happen through dealers (65%) where receivables are better.
Competition: closed gap with competitor. Ador has grown better last year. Not sure of becoming no1 in near term. We have gained around 2-3% of market share in last year.
Capex plan: current capacity we can do another 40%. Existing plant has slowly become residential area and we may monetise later. Plan of moving to new facility is build more capabilities and consolidate operations and cut cost. May add new service centre or move our service business from Nagpur plant to new facility. We may add training facility for trainees.
Total capex of 20-25 cr…existing machines + new lines and machines will be added. will take another 2-2.5 years to complete.
ERP system implementation in progress which may impact in near term but long term benefits will play out in 3 -4 quarters.
3D future tech: consumer healthcare business. we have to give time…it may take another 2 years to breakeven. We are at 40% of sales to breakeven. Board will review and take appropriate action if it continues to burn cash. We are open to include private player. At this point we can take 2.5Cr loss from 3D per year.
vision 2025: to take business further …?looking to reach 500Cr by 2025. We will outline our plan for next year by next AGM. On track to achieve present target of vision2020.
Discl: invested.
