United Drilling Tools Ltd (UDTL) is a leading oil drilling equipment manufacturer in India. UDTL has manufactures conductor and surface connectors and service equipment's such as wire line winches, gas lift equipment and down hole tools. It has four plants and 5 key manufacturing departments which are machine shop with CNC, Milling machines, drilling machines, cylindrical grinders and special purpose laths; Design and research development; quality assurance; fabrication, assembly and testing facilities includes compression, tension, bending and variety of testing machines. UDTL manufactures high quality products that are used in upstream oil and gas exploration. It has excellent track record of supplying products with most reliable designs and staying consistent with competitive prices.
Constant demand for the product: The company’s product lifecycle is One -two year only and they need to be replaced by clients on regular basis. As most of the products are used for continued drilling operations also apart from New Exploration also (only 20% of business), so demand for the products are not going to see any dip even oil prices crashed also.
Outlook :As per discussion with the management, company can do topline of INR 500 crores and EBIDTA of INR 200 crores on large exports opportunity. We believe this can generate PAT of INR 130 crores which translate into EPS of INR 64 for the company. Even if take valuation of 10x, stock has a potential to touch INR 640 in next two years. The stock can be added in trenches between INR 250- INR 350 post this rally.
Tags: Fundamental
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