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.

Sales grew 8% and PBT jumps 55% in December 2014 quarter

In the quarter ended December 2014, sales grew 8% to Rs 142.79 crore.

OPM improved 180 basis points to 9.5% which saw OP growing 32% to Rs 13.63 crore.

Other income fell 18% to Rs 1.27 crore.

Interest cost was nil as the company is a debt free company.

As depreciation grew just 2% to Rs 6.68 crore (against Rs 6.56 crore) PBT grew 55% to Rs 8.22 crore.

EO loss was nil against Rs 10.10 crore. Thus PBT after EO stood at Rs 8.22 crore against a loss of Res 4.78 crore.

Provision for taxation stood at Rs 2.22 crore against a write back of Rs 1.86 crore after which PAT grew to Rs 6.00 crore against a loss of Rs 2.92 crore.

Six months sales grew 8% and PBT jumps 46%

During the six months ended December 2014, sales grew 8% to Rs 284.03 crore.

OPM improved 140 basis points to 9.5% which saw OP growing 28% to Rs 27.05 crore.

Other income fell 7% to Rs 3.55 crore.

Interest cost was nil as the company is a debt free company.

As depreciation grew just 1% to Rs 13.36 crore (against Rs 13.17 crore) PBT grew 46% to Rs 17.24 crore.

EO loss was nil against Rs 10.10 crore. Thus PBT after EO stood at Rs 17.24 crore, up 897%.

Provision for taxation stood at Rs 4.71 crore against Rs 18 lakh after which PAT grew to Rs 12.53 crore against Rs 1.552 crore, up 708%.

Implementation of its dual brand strategy of Kennametal and WIDIA is now complete

Implementation of its dual brand strategy of Kennametal and WIDIA is complete with 100% separation of customers and distributors.

Kennametal would serve the customers both directly and indirectly backed by component specific and other high end solutions to the customers where as WIDIA would serve the customers through distributors, focusing on standards and simple specials through enhanced reach.

As part of the strategy new distributors have been brought on board under both Kennametal and WIDIA brands to make sure that each brand is adequately represented across the country. Some of the initiatives such as productivity optimization services, tools management services have met good success both in terms of obtaining new business as well as retaining the existing business.

Product transfer and localization initiatives started in FY13 gained momentum and contributed for the growth in FY14.

Prospects have changed for the better

After years of sluggish and negative growth rates, automobile industry is posting gradual recovery in the current year ending March 2015. Falling fuel prices and expected fall in interest rates and pick up in economy augur well for strengthening of this recovery in FY 2016. M&HCVs segment of the auto industry is also likely to post healthy growth rates.

With entry of more foreign players and a slew of new launches being lined up by major OEMs, the auto industry is bound to grow in the country.

Focused business initiatives like Extrude Hone and Conforma Clad are expected to do better in forthcoming years.

The company continues to aggressively pursue the localization efforts and also use India as a low cost production location for exporting to other markets in the world particularly Asia. This effort besides improving the capacity utilization should help the Company in Forex risk mitigation.

Company's outlook

With the new Government taking charge with a clear mandate from the electorate, the investor sentiment has improved. The new Government has also initiated the process of clearing the massive backlog of stalled investment projects. With several initiatives and reforms for economic growth expected in the upcoming budget session of the parliament, there is optimism in the coming days for the Indian economy.

Till the time the benefits of the recovery in the economy start accruing to the company, it will continue to focus on special initiatives to grow the sales (as in FY14).

The Tungsten Materials Business (TMB) and Emura acquisitions globally by Kennametal Inc. would long benefit the company with accessibility to high quality raw materials and the best carbide recycling technologies. The TMB acquisition has brought in the Stellram product portfolio to KIL which would benefit the company to get better market share in the energy and aerospace sectors. The company has been engaged in moving up the value chain in the infrastructure side of the business by focusing on more value added products and phasing out commodity products with lower profitability.

Export to Asian markets had seen impressive growth in FY14 and the management of the company believes that this market will further expand to grow the hard metals exports business.

The company also expects to benefit from the government's Make in India Initiative.

Besides the hard metal products there is a good opportunity to grow its Machine Tools Business in South Asian markets. This initiative started off in FY14 and will be developed further to sustain the growth rates delivered by the Machining Solutions Group (MSG) business over a period of four years.

Valuation

The share price trades at Rs 874.