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MTAR Technologies IPO analysis!

MTAR Technologies IPO analysis!

Last updated: 03 Mar, 2021 | 08:39 am

MTAR Technologies IPO analysis!

MTAR Technologies is set to raise up to Rs 560 crore via IPO which opened today. Here are the details:

About MTAR Technologies

  • MTAR Technologies Ltd is a leading precision engineering solutions company. It manufactures mission critical precision components to serve projects of high national importance. 
  • The company primarily serves customers in the Clean Energy, Nuclear and Space & Defence sectors. Currently, MTAR has seven manufacturing facilities in Hyderabad that undertake precision machining, assembly, specialized fabrication, brazing and heat treatment, testing and quality control and other specialized processes. 
  • It currently has a wide-range of product portfolios meeting the requirements of India’s nuclear, defence and space sector. ISRO, NPCIL, DRDO, Bloom Energy, Rafael and Elbit are some of its clients. 
  • The company's aggregate order book as on December 2020 was Rs 336.19 crore. Out of this, order book in the clean energy sector was Rs 80.18 crore, the nuclear sector was around Rs 93.18 crore and the defence sector was Rs 160.61 crore.

Peers

  • According to the DRHP, the company does not have any listed peers. However, there are a few listed players in the same broad industry such as SKF India and Schaeffler India.  
  • MTAR Technologies faces competition from certain unlisted players such as Alpha Design Tech, Mahindra Defence, Godrej & Boyce etc. Here’s a list of other players in the same industry. 
  • L&T and Godrej & Boyce are diversified businesses with several other business units as well. The financials mentioned in the table represent all the business units under the company.
  • MTAR Technologies ranks better in terms of margins as compared to most other industry players.

Financials

  • The company has seen steady growth in topline over the last 3 years, with revenue from operations increasing from Rs 159 cr in FY18 to ~Rs 214 cr in FY20. 
  • While revenue recorded 16% CAGR through FY18-FY20, EBITDA and net profit clocked 38% and 141% CAGR, respectively during the same period. A sharp improvement in earnings is primarily on account for over 860bps jump in EBITDA margin over FY18-FY20
  • PAT margins have also improved to ~16% in the Apr-Dec 20 period. According to management, due to more Capex and IAS provisioning methods, it has posted a lower net profit for FY18. The company has more than 50% export earnings with higher margins.
  • The financials have not been significantly impacted due to Covid-19.
  • The company has paid a dividend for the last three fiscals including the ongoing one. For FY19 it paid 30% for FY20 50% and for FY21 30% till filing of RHP. The company is confident of maintaining a prudent dividend policy going forward.

About the issue

Issue open: 3rd Mar - 5th Mar 2021

Price band: Rs 574 - Rs 575 per share

Issue Size: Rs 596.40 crore (Gross)

Issue Size: The public issue consists of a fresh issue of Rs 124 crore by the company and an offer for sale of Rs 473 crore by promoters and investors. 

Reservation for QIB - 50% , Retail - 35%, Non institutional Investors -15%. 

Bid lot: 26 shares, and in multiples of 26 shares

Post issue market cap: Rs 1,766 cr- Rs 1,769 cr

INDmoney Recommendation

At the higher end of the price band, MTAR Technologies IPO is priced at a PE ratio of ~ 56.5x and 47.4 times EPS of FY20 and FY21 respectively. While this looks to be aggressively priced, the company has shown strong CAGR growth in its topline and bottomline over the last three years. Further, its margins and return ratios are also better as compared to the industry.

Going forward, the management is confident of healthy double-digit growth in upcoming financial years, on the back of opportunity in the clean energy and defence segment. MTAR has developed strong expertise in the clean energy segment. Given these positives, the valuations are likely to sustain.

Given the company’s steady topline growth, robust margins, good return ratios, competitive advantage in clean energy, entry barriers in the industry and strong growth outlook, we remain positive on the prospects of the issue.

We are a SEBI registered investement advisor