MTAR, whose client list includes ISRO, DRDO, Rafael, NPCIL and Bloom Energy, is looking to sell 1.037 crore shares, a mix of fresh issue and an offer for sale, in the price band of Rs 574-575. In this price band, the issue would be available at a P/E of 47.3 times FY21 EPS of Rs 12.20 on an annualised basis.
LKP Securities, which attended the company’s analysts meet, has following takeaways for investors:
Order book at
1.6 times of FY20 revenue
MTAR’s order book stood at Rs 350 crore as of December 2020, which was 1.6 times of the FY20 revenue. It provides healthy revenue visibility in the near-term. The space and defence segment accounted for 48 per cent of market share in its order book, followed by the nuclear sector at 28 per cent and clean energy at 24 per cent. The company’s order book clocked 31 per cent CAGR over FY18-20.
Capability to manuf
acture complex products
MTAR manufactures precision indigenous components, subsystems and assemblies having components with close tolerance of 5-10 microns. The capabilities of MTAR supported by an extensive and stringent testing and quality control mechanism. MTAR leveraged the adaptability and manufacturing agility by continued investment in R&D. Its business is broadly divided into three segments: clean energy (49 per cent of FY21 revenues so far); nuclear (27 per cent) and space and defence (21 per cent).
Banking on “Bloom
Energy”
MTAR was a sole supplier from India to US-based Bloom Energy Inc in FY20. It has been associated with BE since
last nine years. For the clean energy segment, it manufactures power units (specifically hot boxes), hydrogen boxes and electrolysers to serve BE. While hot boxes use methane to generate power, hydrogen boxes use methane to generate hydrogen, which is used to generate power. In addition, electrolysers produce methane-free hydrogen, which is used to produce power.
The opportunities in clean energy remain healthy with the government’s strong focus, higher budgetary allocation and incentives.
Strong opportuni
ties for nuclear segment
The opportunities in the nuclear segment remain strong, as India plans to double its nuclear capacity from 6.26GW to 11.5GW in the near-term.
The government has sanctioned 10 fleet reactors with combined generation capacity of 7,000MW. MTAR has been servicing the nuclear sector for over 35 years and has established relationships with the Nuclear Power Corporation of India (NPCIL), which controls all the reactors in India.
MTAR has been servicing NPCIL for over 16 years. It manufactures and supplies specialised products such as fuel machining head, drive mechanisms, bridge and column and coolant channel assemblies for new pressurised
heavy water nuclear reactors and refurbishment of the existing reactors. It has also supplied critical products such as grid plate, control plug and inclined fuel transfer machine for the prototype fast breeder reactor.
Long standing relationship with ISRO, DRDO
MTAR is a key supplier of mission critical assemblies and components to customers within the space and defence sectors. Through a longstanding relationship of over three decades with the customers like ISRO and the DRDO, it has developed specialised products to the Indian space programme and the Indian missile programme, respectively. For ISRO it offers a wide variety of mission critical components and critical assemblies such as liquid propulsion engines, components and assemblies for cryogenic engines, specifically turbo pumps, booster pumps, gas generators and injector heads for such engines and electro-pneumatic modules to serve its space launch vehicles.
The opportunities in space remain strong, as ISRO plans 321 satellite missions in the next 2 years. The mission includes Chandarayn-3, Gangayan and Aditya-1 (proposed mission to study the Sun). Over the next 5 years the private sector will receive 70 per cent of all upcoming space mission orders.
What analysts recommended
For FY18-20, revenue for the company grew at a compounded annual growth rate of 17 per cent, while PAT grew at 140 per cent during the same period. As on December 31, 54 per cent of the company’s revenue, amounting to Rs 94 crore was generated from customers located outside India.
Geojit finds the IPO aggressively priced. But “With no listed peers and a positive sentiment in the space & defence sector due to Make in India and Atmanirbhar Bharat, with limited competition for the products that MTAR manufactures, we assign a Subscribe rating, with a long term perspective,” Geojit said.
LKP Securities said that the government’s policy to construct 10 units of nuclear reactors as a single project will increase opportunities for domestic suppliers like MTAR.
“Large refurbishment and maintenance market is expected to increase by 1.6 times. Meanwhile, over the next five years, the private sector will receive the mandate for 70 per cent of all the upcoming space missions of ISRO, which is positive for MTAR,” it said.
