Esab India

Main Products Main Customer Industries
Welding Consumables, Reclamation Consumables, Arc Equipment, Industrial Gas Equipment, Environment Products, Cutting Systems Shipbuilding, Petrochemical, Construction, Transport, Offshore and Energy Industries
Bullish Arguments Bearish Arguments
Technology and Market leadership position in Welding Equipment industry Low liquidity stock - higher impact cost in case of larger trades - entry & exit becomes difficult
Products command a premium due to higher value-add Industrial slowdown & lack of capital investments could impact prospects
Parent, Esab Holdings UK, is one of the top two globally in welding technology -12% market share Competition from unorganised sector, cheaper imports and international competitors setting up base in India
Strong Balance Sheet together with its technology leadership puts it in a better competitive position to face adverse business cycles Volatility in raw material prices -raw materials constitute 60% of sales
Debt-free, Consistently RoA and RoE >40% , Free Cash flow/Sales >7%
Barriers to Entry Interesting Viewpoints
Brand - Esab is the strongest welding brand Consumables demand has good correlation with Steel consumption. Industrial and Infrastructure activity pickup are key triggers.
Customer relationships - Long term relations built on trust and customised optimal solutions for each client Wind Energy sector growth @ 25% plus - wind tower manufacture requires extensive use of welding equipment and recurring welding consumables expenditure. Each MW of wind power consumes 700 Kg of weld metal and 600 kg of weld flux
Disincentive to change supplier - welding consumables generally constitute 2% of fabrication costs but a weld failure can be catastrophic After-market business segment comprises more than 30% of sales . Strong focus to build this segment rapidly
Technology - Esab has industry leading expertise & products -esp in critical applications

This sector looks lucrative now. Anyone tracking this?

yes, it looks lucrative and market leader in fabrication technology.

Anyone tracking this company lately, it has been on a significant run for some time now, while its peers haven’t performed that well.