Skimmed through AR22-23. Very strong and coherent narrative. My notes and take aways from AR 22-23:
- Clean Energy will remain the main driver for revenue in near to medium term. MTAR is targeting entire spectrum of Clean Energy (Bloom business, Nuclear, Fuel Cells, Battery Storage, Hydro power, Green Hydrogen etc.). In addition, Aerospace vertical is also a major focus area for growth
- While Bloom business is truly well established and reached alarming proportion for MTAR, contribution from other businesses such as Nuclear is on slow lane due to delays in decision making
- Commercial Space launches are at least 4-5 years away if not more
- Defense and import substitution (roller screws etc.) opportunities are also going to be very small in comparison to Clean Energy
- Sheet metal fabrication business, Cable harness business and specialized fabrication (especially for Hydro segment) can become good contributors going forward. Specialised fabrication vertical shall be operational in a full fledged way from Q2 FY 2023-24
- MTAR is working on the development of cable harnessing assemblies for Clean Energy – Fuel Cells sector and expects qualification process to be completed by H1 FY23-24 Cable harness Batch Production expected to commence from H2 FY 2023-24
- MTAR is in final stages for getting defense license from GOI. They claim post the license they can approach various MNC companies for collaboration to fulfill obligations under Make in India
- While MTAR has developed capabilities of manufacturing Electrolyser (Dispatched 138 units of electrolysers in FY 2022-23), this seems to be slow growth business in near term as Bloom is still demonstrating the enhanced performance of its machines through pilot installations. For green hydrogen to go main stream for Bloom, scale is very important which will bring down the cost of electrolyser significantly as well. Importantly, MTAR is trying to do some back ward integration in this area by Initiating development of Heaters that are used in electrolysers (Currently, heaters are imported; Indigenisation of heaters will enable MTAR to save the costs incurred for manufacture of electrolysers)
- As per MTAR “Our Company does not have dedicated production lines to manufacture identified products and our facilities are fungile across all the sectors that gives us a greater flexibility in terms of utilization of our capacity.”
- In Clean Energy – Fuel Cells sector, majority of raw materials are procured from customer directed sources and the company will entering into price contracts with vendor an year ahead; any subsequent increase in price is a pass through. In certain instances, specifically in Space sector raw materials are directly procured and supplied by our customers. The Company doesn’t have any long-term contracts with any of our raw material suppliers, however, we have maintained long term relationships with our major suppliers that enable us to obtain good quality raw materials within the prescribed timelines (is this the reason for excess inventory???)
- The company is in final stages of discussions with Fluence Energy that is into battery storage systems for supplying enclosures to their batteries. It has potential to generate Rs. 150 – 200 Crs over the next couple of years, once the discussions are materialized. Looks like it will be a slow ramp up with Fluence as current focus is only on battery enclosures
Narrative is indeed very strong and management is making all right noise in AR. Let us see if execution turns out to be equally strong.
Management promises to track over near to medium term:
- Reduction in WC from 230 to 200 days (end of FY23-24) and eventually to 170 days (2-3 years later)
- Growth in Aerospace vertical – MTAR is guiding overall 40% YoY growth (15-20% from ISRO and 45% – 50% YoY growth in revenues from Aerospace vertical from MNC customers)
- Up to 500Cr worth of orders from civil Nuclear Energy (timeline is not clear)
- The company targets to execute around Rs. 120 – Rs. 130 Cr orders in products category ( ball screws, roller screws, water lubricated bearings, ASP assemblies etc…) in FY 2023-24
- Quantum of revenue growth from Sheet Metal, Specialized Fabricated Structures and Cable Harness business
- EBITDA of 28% +/- 100 bps.
- closing order book of at least Rs. 15,00 Cr by end FY 2023-24
- Revenue growth from new customers like GE Power, Collins Aerospace, Thales, GKN Aerospace, Fluence etc. over next 2-3 years. This is critical to reduce the massive dependence on Bloom
- Growing topline to 3000 Cr over 5 years
Just my 2 cents to aid understanding of MTAR business
Disclaimer: Invested, biased and could be susceptible to willful blindness. No investment advice. Please do your own due diligence.
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