As the head of the company has said, the seal sale is secondary to to the flow of maintenance contracts. If the notification had told us what the number of seals were and the complexity that they are expected to solve, we would better relieved. I assume we are only supplying the mechanical seals. I got the below from an internet search:
Thermal power plants use a variety of seals, including:
Oil seals
These rubber seals prevent dirt and fluids from leaking in, and create a thin layer of oil to prevent oil from leaking past the sealing lip. They can be made from materials such as Nitrile Buna Rubber (NBR), Polyetrafluorethylene (PTFE), and silicones.
Mechanical seals
These seals are used in pumps and consist of a stationary primary element and a rotating mating element. The two elements are pressed together to minimize leakage.
Leaf seals
These seals are made up of many thin plates that are laminated to form a ring-shaped segment. When the rotor rotates, a thin film of fluid forms between the leaf and the rotor, which lifts the leaf slightly to create a non-contact seal.
Seal oil systems
These systems use radial oil films to seal the shaft exits of a generator. The seal rings are lined with low-melting Babbitt metal and supplied with pressurized seal oil to prevent hydrogen gas from escaping the generator shaft.
Similar high talking announcement like previous ones without specifics. Without value being called out or even an estimate provided, it is difficult to judge the runway for Sealmatic from this engagement. Hope to see some specifics released.
Sealmatic has announced that it has partnered with Saudi Thalate General Manufacturing Industrial Co Ltd (STG), thus; marking a significant step in the companyâs expansion into the Kingdom of Saudi Arabia (KSA).
The relationship between KSA and India has grown stronger in recent years, particularly in areas such as trade, energy, investment and strategic partnerships. Thus, exploring the investment opportunities in both countries, focusing on sectors such as infrastructure, mining, renewable energy, agriculture and so on. India, being the worldâs third largest consumer of crude oil, depends heavily on KSA to power its economy. 826eeebb-24e6-4822-b73e-17a094dc3dff.pdf (850.3 KB)
Why would be so much on increase in inventory even though they combine orders in last 2 months and that too for every year? The inventories are almost ~50% of their annual sales and ~40% of the balance sheet.
As per various reports availble on the market size of the mechanical seals: the total market as of 2023 is ~3.3Billion USD and is expected to grow 4.3% GACR to reach ~5B USD in next 10 yrs.
The largest market is APAC while the fastest growing is US. By next 10 yrs, US will be be 23% of total market size.
FLowserve, JohnCrane and SKF are global market leaders:
Flowserveâs division that produces the pumps/pump systems, mechanical seals, auxiliary systems, replacement parts and upgrades and related aftermarket services, the sales for this division for 2023 and 2022 has been 3.0Bill and 2.5Bill USD respectively. I am not sure what is the share of the mechnical seals in this but seems the market size is huge.
John Crane, which is in production of mechanical seals, seal support systems, power transmission couplings and specialised filtration systems; the 2023 revenur has been 1.0Bill Euros.
SKF has indian subsidiary that produces the seals alongwith other products such as bearings, lubrication and lubrication systems, maintenance products, mechatronics products, power transmission products, etc.
Below are some points from Flowserve latest AR.
*âThe pump and mechanical seal industry is highly fragmented, with thousands of competitors globally. We compete, however, primarily with a limited number of large companies operating on a global scale. There are also a number of smaller, newer entrants in some of our emerging markets. Competition among our closest competitors is generally driven by delivery times, application knowledge, experience, expertise, price, breadth of product offerings, contractual terms, previous installation history and reputation for quality. Some of our largest industry competitors include: Sulzer Pumps; Ebara Corp.; Eagle Burgmann, which is a joint venture of two traditional global seal manufacturers, John Crane Inc., a unit of Smiths Group Plc; Weir Group Plc.; ITT Industries; and KSB SE & Co. KGaA.â
*âThe pump and mechanical seal industry continues to undergo consolidation, which is primarily driven by (i) the need to lower costs through reduction of excess capacity and (ii) customersâ preference to align with global full service suppliers to simplify their supplier base. Despite the consolidation activity, the market remains highly competitive.â
Need to see how Sealmatic can maintain the high margins they have now given that customers tenc to prefer the OEMs that gives the integrated solution rather than OEM that sells only seals. Hopefully they can protect the margins.
Sealmatic has come out with good results, topline has reached to 45 crores. Margins are better, and cash flow position has improved though still in negative. Sealmatic H1result.pdf (1.8 MB)
The company is issuing 3,93,000 Equity Shares to Aegis Investment Fund PCC Niveza at Issue Price of Rs. 636/- per Equity Share amounting to Rs. 24,99,48,000/- on preferential basis. The issue price is at slight premium to the current market price. 34600d2a-b12f-404b-9e62-ae13e5fd0b6e.pdf (636.9 KB)
The company has not specifically declared any purpose.
Still, the company is in investment mode. New manufacturing facility has been started. In the last 2 years, they have taken numerous certifications, which I am sure is costly and time-consuming.
As can be seen from the balance sheet, working capital requirement has gone up.
Still, when an institutional investor enters into a micro cap company, one feel good. Let us see how the management deploys the capital.
Sealmatic India Limited (further referred as âSealmaticâ) proudly announces that it has acquired Abu Dhabi Economic License (CN-5595547) for its joint venture with High Technology FZ-LLC (further referred as âHiTechâ) for incorporation of SEALTECH SEALS REPAIRS AND MAINTENANCE - L.L.C (further referred as âSealTech LLCâ) a dedicated state of the art service center in Abu Dhabi. This 50:50 Joint Venture of Sealmatic with HiTech marks a significant milestone to cater to the ever-increasing demand for mechanical seals in the UAE region. 9425eec3-b0c1-4633-96b2-636dcc64d90d.pdf (843.7 KB)
Sealmatic obtaining approvals in series from several Middle East Oil and Gas giants, formed JV, enetring sales and service partnership in Oil & Gas rich countries and Promoter group buying shares at these levels make it looks like valuation bottoming out.
There is no mention of what kind of approval this is and what does it exactly mean for Sealmatic. This announcement seems very high level, not sure why company is not willing to give details.
The Kuwait Petroleum Company (KPC) approves companies and products for use in the oil and gas industry. KPCâs approval process helps ensure that companies and products used in the oil and gas industry meet certain standards. KPCâs strategy includes increasing oil production and gas production.
So, one can interpret as Sealmatic got license to do business in Kuwait. without this, company may not sell their items in Kuwait.
A seal on an avg. is priced between 3-4 lakhs. Iâd have to double check though. I had this back of the envelope math based on info provided by management.
