MTAR Technologies – is trading at a market capitalization of INR 6,600 CRORE at a P/E ratio of 64 times (approx). This is after a recent correction in the stock – however the stock still looks expensive for an entry point.
After reading the latest Q2FY24 earnings call transcript, here’s my summary:
Cons
- Revenue guidance was reduced from INR 860 Cr to INR 700 Cr for FY24, due to deferral of shipments to Bloom Energy. This just goes on to highlight how dependent the company is on ONE customer. Any adverse impact in the business of Bloom, will directly impact the topline / bottomline of MTAR
- EBITDA guidance has been reduced from 29% to 28% to 26% (+/- 1%) now for FY24
- Borrowings have increased by INR 108 crore, no commentary from the management in the Q2 call on ^
- Cash flow from Operations were negative, due to significant decrease in payables.
Pros
- Expecting domestic sales to be 3x in H2FY24. In H1, domestic sales was INR 50 Cr, expected to be INR 150 Cr in H2 with higher margins
- Expecting Order book to close at INR 1,500 Cr for FY24 end
- Received order from NPCIL (defence business), revenues of which should flow from FY26 onwards
- In the pre-qualification stage for SSLV technology – would be interesting to see if any revenue drivers can emerge from this
- Added more companies in the Clean Energy space, but didn’t reveal any names. It is imperative for the company to de-leverage from Bloom Energy to built a robust business model
- Could capitalize on import substitution opportunity for ball screws, roller screws, actuators. No additional Capex would be required for this.
I’ve written a DETAILED article on MTAR – Betting on Space [Part 2]: Centum Electronics and MTAR Technologies
Disclosure – Tracking, not invested. Waiting to see defence / space revenue drivers to kick in.
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