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Kennametal India (75% controlled by Kennametal USA) specializes in developing and manufacturing sophisticated hard material cutting and wear protection solutions ranging from specialized cutting tools, indexable inserts and carbide rods to new types of carbide wear-resistant engineered components and coatings using a specialized type of powder metallurgy and providing innovative wear resistant solutions across diverse sectors like transportation, earthworks, energy, infrastructure and aerospace.
Metalworking tools are made of cemented tungsten carbides, ceramics, cermets and super-hard materials.
Its product offering includes a wide selection of standard and customized technologies for metalworking, such as sophisticated metal cutting tools, tooling systems and services, as well as advanced, high-performance materials, such as cemented tungsten carbide products, super alloys, coatings and investment castings to address customer demands. It offers these products through a variety of channels to meet customer- specified needs.
The company also manufactures and markets a complete line of tool holders, tool-holding systems and rotary-cutting tools by machining and fabricating steel bars and other metal alloys.
In addition, it produces specialized compacts and metallurgical powders, as well as products made from tungsten carbide or other hard materials that are used for custom-engineered and challenging applications, including mining and highway construction, among others
It seeks to provide a competitive edge to its customers through a wide variety of standard high quality products as well as items customized to their requirements such as special purpose machines, metalworking tools, customized tooling solutions and engineered products.
The company's business can be bifurcated in to Hard Metals and Hard Metals Products and Machining Solution.
Quarter results
For the quarter, sales jumped 18% to Rs 234.60 crore. OPM fell 220 basis points to 13.7% which saw OP grow 2% to Rs 32.22 crore.
Other income grew 214% to Rs 4.40 crore. Interest cost was Rs 20 lakh against nil.
As depreciation rose 9% to Rs 7.00 crore, PBT grew 11% to Rs 29.42 crore.
EO loss was Rs 4.82 crore against NIL. Thus PBT after EO fell 8% to Rs 24.60 crore.
During the quarter, the company recognized an additional cost of Rs 4.82 crore as a result of change in the leave encashment policy of certain employees.
Provision for tax grew 6% to Rs 10.90 crore (tax incidence grew from 38.7% to 44.3%) after which PAT fell 16% to Rs 13.70 crore.
Nine months results
For the nine months, sales jumped 23% to Rs 695.10 crore. OPM improved 380 basis points to 16.3% which saw OP jump 60% to Rs 113.62 crore.
Other income grew 32% to Rs 8.70 crore. Interest cost was Rs 30 lakh against nil.
As depreciation stagnated at Rs 21.00 crore, PBT soared 79% to Rs 101.02 crore.
EO loss was Rs 4.82 crore against Rs4.70 crore. Thus PBT after EO grew 86% to Rs 96.20 crore.
During the quarter, the company recognized an additional cost of Rs 4.82 crore as a result of change in the leave encashment policy of certain employees.
Provision for tax grew 105% to Rs 38.90 crore (tax incidence grew from 36.8% to 40.4%) after which PAT soared 76% to Rs 57.30 crore.
Prior period tax (PPT) credit was Rs 11.50 crore against NIL. Thus net profit (after PPT adjustment) grew 111% to Rs 68.80 crore.
While the company clubbed PPT along with the normal tax for the period, we have deducted PPT from normal tax for the period and shown separately below PAT.
Segment results
For the quarter, sales from the Machining Solutions division jumped 48% to Rs 37.90 crore and accounted for 18% of sales. PBIT fell 55% to Rs 1.40 crore and accounted for 5% of total.
For the quarter, sales from the Hard Metals and Hard Metals Products fell 2% to Rs 169.70 crore and accounted for 82% of sales. PBIT from the same grew 5% to Rs 27.60 crore and accounted for 95% of total.
For the nine months, sales from the Machining Solutions division grew 36% to Rs 97.10 crore and accounted for 14% of sales. PBIT from the same grew 177% to Rs 13.00 crore and accounted for 11% of total.
For the nine months, sales from the Hard Metals and Hard Metals Products grew 21% to Rs 598.00 crore and accounted for 86% of sales. PBIT from the same grew 46% to Rs 100.60 crore and accounted for 89% of total.
Markets served
The company serves markets like Automobile (2W, PV, LCV and MHCV) tractors, Aerospace, Defence and railways.
Other segments served are steel, capital investments in manufacturing (including greenfield activities), Oil & Gas Energy and Mining.
Strategy
Going forward the company hopes to consolidate and grow its core business and enhance its market reach by expanding distribution channel.
It also plans to diversify and has increased focus in aerospace, defence, railways segments.
It is also exploring exports of its Machining Solutions Group (MSG) products.
The company has taken special initiatives to grow the WIDIA business.
It will continue to modernize and upgrade its manufacturing facilities.
Valuation
The scrip trades around Rs 1078.
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