MTAR Technologies – A wager on innovation meeting economies of scale

@nalamada , you are right to point out that energy storage systems are primarily battery packs, which can raise questions about the degree of value addition that MTAR can provide over here.

While the battery space might feel somewhat commoditized, there are advancements in terms of the materials being used, as well as overall increases in the energy density of cells. I am no expert, but I am seeing a concerted effort around reducing the use of lithium with graphene sodium-ion, and graphene aluminum-ion batteries, for example.

MTAR is great at two things in the clean energy space:

• Creating a culture of continuous improvement in manufacturing processes

• Manufacturing at scale (seen with fuel cells, electrolyzers to follow)

I think that MTAR’s R&D and operations teams would be key contributors in terms of figuring out and optimizing the manufacturing processes using new materials in ESS/battery packs, which would make them key partners for any ESS provider. Not to mention the fact that ESS could prove to be a cash cow for the company, with positive free cash flows then being used to fund the company’s other endeavours.

@JR_R , the revenue contribution from Bloom speaks to MTAR’s ability to produce fuel cell modules for them cost-effectively and at scale. I am hopeful that this ability will extend over to electrolyzers as well. I want to take a look at MTAR’s FY23 Annual Report before commenting on how it’s managing cash. In FY22, a lot of funds went into capex, working capital, and the like, and I am curious to see how things are managed in FY23.

You had a question around competition, and for a company like MTAR, doing work in multiple domains, there’s bound to be a lot of competition from other precision engineering goods manufacturers. I will not worry about competitors so long as the company’s margin profile is intact, the number of clients grow, and the number of products that the company produces at scale increases.

There is also a lot of hype in the electrolyzer/green H2 domain, with large companies making bold plans. At this stage, the market potential is immense, and there’s room for multiple players. In addition, while bold plans are one thing, I wish to see progress on execution before commenting further. In terms of actual mass manufacturing, Ohmium is leading the pack in India with a 2 GW facility. In my initial note, I highlighted that MTAR’s new COO, Raja Sheker Bollampally used to work at Ohmium, which is interesting to say the least.

In addition, you might like the following article:

@vnktshb , the long working capital cycle appears to be par for the course in this industry, considering the things that MTAR is manufacturing. I want to see how close management gets to their goal of 220 for working capital days. As manufacturing scales up (especially for clean energy), I expect working capital days to reduce further.