Result Analysis – MTAR Ltd.

Result Highlight: 

• Revenue from Operations stood at Rs. 91.30 crore as against Rs. 73.29 crore in Q2FY21, 24.57% increase YoY, 68.97% increase QOQ.

• EBITDA reported at Rs 29.44 crore as compared to Rs. 24.08 crore in Q2FY21, 22.26% increase YoY

• Profit Before Tax stands at Rs 27.11 crore as against Rs. 19.76 crore in Q2FY21, 37.15% increase YoY

• Profit after Tax reported was at Rs. 19.05 crore as against Rs. 13.89 crore in Q2FY21, 37.23% increase.

• The gross non-performing loans as at September 30, 2021 stood at ₹ 10,341 crore. This is equivalent to 2.00% of the loan portfolio.

• Revenue from Exports is increased by 32.34% in comparison with Q2 FY 21.

• Order book as on 30 Sept 2021 stands at 535.64 Crores in comparison with 288.09 Crores as on 30 Sept 2020.

• The company has received a rating of A-(Positive) from ICRA and A-/Stable from CRISIL for FY 22.

• During the quarter company has reported negative cash flow from operation at ₹ 13.3 crore.

• Net working capital of the company has increased to 198 days in March 2021 from 120 days in March 2020.

• Around 50% of the revenue come from clean energy.

• Debt of the company has increased from 7.1 crore in March FY21 to 19.6 crore in September 2021.

Management commentary: 

• Parvat Srinivas Reddy, Managing Director & Promoter, MTAR Technologies, said, “We have witnessed an impressive growth in terms of revenue and order inflow in Q2 FY22. MTAR has clocked a solid revenue growth of 24.57%.and a net profit of Rs. 19.05 Crore with a YoY growth of 37.23%.

• Company have received largest single order worth Rs. 220 Crore from Bloom in Q2; anticipate an accelerated order inflow from domestic and exports in Q3 and Q4. Company is confident of continuing this growth momentum backed by a robust order book over the coming quarters as the Indian manufacturing is at an inflection point amidst push by government on Atmanirbhar Bharat initiative

• The company has also initiated the development of electromechanical actuators, which find application in Space and Defense sectors for this company have received initial order worth 1.3 Crores from Defense.

• Company is building an exclusive specialized fabrication facility at Adibatla to take up high end fabrication jobs that shall enhance existing capabilities it is expected to be functional by end of FY22. The company will be initially catering to ISRO and Bloom Energy.

• Management said that out of the order book of 535 core management expect a sizeable order execution to be done in Q3 and Q4 of FY22.

• Management clarified that the increase in working capital is due to higher raw material procurement because of very high order book and rise in material cost because of rise in commodity prices.

• MTAR is developing products in collaboration with Bloom to expand its product portfolio in clean energy sector: Hydrogen boxes these boxes use Hydrogen to generate power and Electrolyzes which generate green hydrogen from water that shall be used in power units to generate power with zero carbon emissions.

OUTLOOK: 

MTAR LTD reported a strong set of number in Q2 FY22 where revenue came in at ₹ 91.29 crore registering a growth of 25% Y-o-Y, EBITDA saw a growth of 22% in this quarter compared to last year and profit increase by 37% Y-o-Y, around 50% of revenue came from clean energy and export formed around 50% of their revenue. Company has a very strong order book of ₹ 535 crore of which around 53% is from clean energy. Company this year has received largest single order of ₹ 220 crore for export of Yuma hot boxes, company in their concall said they expect a strong pickup in order execution in Q3 and Q4. Company is expanding their capacity with an investment of 30-35 crore which is expected to complete by next year. MTAR has ability to provide exceptional quality products as per customer specifications, lays special emphasis on research and development of their manufacturing processes as it allows them to evolve their own process technologies, company is making investment in space technologies and expect trial order in Q3 while some of the negatives in this quarter was the rise in debt and increase in working capital requirement of the company which is due to rise in material cost, company has good order book but execution is going to be key in coming quarter.

At the CMP of ₹1740, MTAR is trading at PE multiple of 70x. Valuing the company at 55x FY23E EPS, we recommend buy on MTAR Ltd on dips with the Target Price of ₹ 1950.

Disclosure in pursuance of Section 19 of SEBI (RA) Regulation 2014

Elite Wealth Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only information in making their investment decision and must exercise their own judgment before making any investment decision.
For analyst certification and other important disclosures, see the Disclosure Appendix, or go to www.elitewealth.in. Analysts employed by Elite Wealth Limited are registered/qualified as research analysts with SEBI in India.( SEBI Registration No.: INH100002300)
Disclosure Appendix
Analyst Certification (For Reports)
Israil Khan, Elite Wealth Limited, suhail@elitewealth.in
The analyst(s) certify that all of the views expressed in this report accurately reflect my/our personal views about the subject company or companies and its or their securities. I/We also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Elite Wealth Limited.
As to each individual report referenced herein, the primary research analyst(s) named within the report individually certify, with respect to each security or issuer that the analyst covered in the report, that:
(1) all of the views expressed in the report accurately reflect his or her personal views about any and all of the subject securities or issuers; and
(2) no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in the report.
For individual analyst certifications, please refer to the disclosure section at the end of the attached individual notes.
Research Excerpts
This note may include excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please visit www.elitewealth.in.
Company-Specific Disclosures
Important disclosures, including price charts, are available and all Elite Wealth Limited covered companies by visiting https://www.elitewealth.in, or emailing research@elitestock.com with your request. Elite Wealth Limited may screen companies based on Strategy, Technical, and Quantitative Research. For important disclosures for these companies, please e-mail research@elitestock.com.
Options related research:
If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the risk disclosure documents, please contact your Broker’s Representative or visit the OCC’s website at https://www.elitewealth.in
Other Disclosures
All research reports made available to clients are simultaneously available on our client websites. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your respective broker’s sales person.
Ownership and material conflicts of interest Disclosure
Elite Wealth Limited policy prohibits its analysts, professionals reporting to analysts from owning securities of any company in the analyst’s area of coverage. Analyst compensation: Analysts are salary based permanent employees of Elite Wealth Limited. Analyst as officer or director: Elite Wealth Limited policy prohibits its analysts, persons reporting to analysts from serving as an officer, director, board member or employee of any company in the analyst’s area of coverage.
Country Specific Disclosures
India – For private circulation only, not for sale.
Legal Entities Disclosures
Mr. Ravinder Parkash Seth is the Managing Director of Elite Wealth Ltd (EWL, henceforth), having its registered office at Casa Picasso, Golf Course Extension, Near Rajesh Pilot Chowk, Radha Swami, Sector-61, Gurgaon-122001 Haryana, is a SEBI registered Research Analyst and is regulated by Securities and Exchange Board of India. Telephone:011-43035555, Facsimile: 011-22795783 and Website: www.elitewealth.in
EWL discloses all material information about itself including its business activity, disciplinary history, the terms and conditions on which it offers research report, details of associates and such other information as is necessary to take an investment decision, including the following:
1. Reports
a) EWL or his associate or his relative has no financial interest in the subject company and the nature of such financial interest;
(b) EWL or its associates or relatives, have no actual/beneficial ownership of one per cent. or more in the securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance;
(c) EWL or its associate or his relative, has no other material conflict of interest at the time of publication of the research report or at the time of public appearance;
2. Compensation
(a) EWL or its associates have not received any compensation from the subject company in the past twelve months;
(b) EWL or its associates have not managed or co-managed public offering of securities for the subject company in the past twelve months;
(c) EWL or its associates have not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months;
(d) EWL or its associates have not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months;
(e) EWL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report.
3 In respect of Public Appearances
(a) EWL or its associates have not received any compensation from the subject company in the past twelve months;
(b) The subject company is not now or never a client during twelve months preceding the date of distribution of the research report and the types of services provided by EWL