CRISIL Research has assigned fundamental grade of 3/5 to Technofab Engineering. The grade indicates that the company’s fundamentals are ‘good’ relative to other listed equity securities in India.
The assigned fundamental grade factors in Technofab’s strong order book of Rs 10.20 crore, which is 2.8x of TTM revenue and provides visibility for the next 24-30 months. The order book is well diversified across geographies - 50% domestic and 50% overseas - and across clients with no single client contributing more than 15% of the order book.
The grade also factors in the management’s strong execution capabilities (more than 130 projects executed so far), which has translated into repeat orders from clients like NTPC, BHEL and Nuclear Power Corporation of India and SAIL. A strong balance sheet further supports the grade.
The grade is, however, constrained by Technofab’s high exposure to overseas markets. Some of the company’s orders are in politically volatile Bangladesh and Southeast and West Africa, which subjects the company to political and logistic challenges; and secondly, the orders are exposed to the risk of foreign exchange fluctuations. Further, the grade is moderated by the fact that 15% of total orders, amounting to Rs 140 crore are either moving slowly or not moving at all due to lack of environmental clearance and fuel supply in the underlying power projects.