Dynamatic Technologies – Can it be Dynamite

Dynametic Technology

Profits are already past peak profits- price is yet to catch up.
What is changing –

• Aero and defense transition (reducing share of low margin auto biz) ,

• Balance sheet deleverage(via land sale and subsidiaries exit/restructure)

  

• Strong hands entering – Abacuss, HDFC(been there)

• Major wins with global aerospace opening up

  

• Global subsidiaries restructuring –

  

• Key capabilities – for a small cap their clientele is very impressive with all whos who of Aero, Defense, Tractors. Pricing power is quite visible(standalone entity margins have been 20%+). Critical components and sole supplier in many parts. Supplier approval and registration is a lengthy process for these global biggies, and not easy to replace – esp if one is design to delivery and has backward integration.

Engineering play with critical component as sole supplier to marquee global names(Major tractor OEMs with 34% global market share in Hydraulics, aero & defense -Boeing, Airbus, Bell helicopter, HAL, BEL etc). Recently won a multiyear contract with spirit – Belgium. Have been a supplier of Tejas-LCA etc and working on number of projects in defense sector(AR has more details).

• Here is the conversation between mgmt and Abacuss – Sunil Singhania.

https://www.youtube.com/embed/rUNR7FrHBeI

• AR 22 is a good read – some snippets

The Dynamatic-Oldland Aerospace® (DOA) Research & Development is engaged state-of-the-art 3D designs using software such as CATIA V5 and Unigraphics NX, Mastercam for their design and development activities meeting to global OEM standards. The Company has been successful in bringing value addition in reducing cycle time, concession reduction, technology absorption and indigenisation of technological products and developing special manufacturing processes. Indigenisation of Foldable Strut for HAL ALH DHRUV Helicopter developed a foldable strut mechanism for opening and closing of the helicopter door during rugged environmental conditions and is single source supplier for this product to HAL . The sub-assembly has been developed with various specialized aerospace alloys and is manufactured and tested in accordance to the aerospace standards to meet CEMILAC approval for series production. DOA team has also received a patent for the development of the foldable strut. Development of complex machined beams and frames for Bharat Electronics Limited: Designed and developed a high precision solution for complex machined beams and test rig for high pressure leak and pressure testing. This engagement is a key milestone for DOA towards ‘make in India’ and indigenisation efforts undertaken by Indian Companies.

Potential for some rerating and growth based upside exists, mgmt. intent is visible, execution stays key – steps in right direction so far. Standalone margins are 20%+ and with deleverage bottom line can significantly move up.

Risks to watch for – Shifting focus areas, subsidiaries restructuring & deleveraging – not a small step and takes its own time.

Initial positions & studying