Unimech Aerospace
IPO Size: Rs. 500 cr
- Fresh Issue of Rs. 250 cr for (i) capex Rs. 80 cr, till FY26E (ii) working capital Rs. 70 cr (iii) debt repayment Rs. 40 cr, of Rs. 75 cr gross debt
- Offer for sale (OFS) of Rs. 250 cr by the promoter (92% to drop to 80% post IPO)
Price band: Rs. 745-785 per share
M cap: Rs. 3,992 cr, implying 12.5% dilution
IPO Date: Mon 23rd Dec to Thu 26th Dec 2024, Listing Tue 31st Dec 2024
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Aerospace Products Exporter
Unimech Aerospace is a Bengaluru based, manufacturer of critical components for aerospace, defence, semi-conductor and energy sectors, such as aero tooling, ground support equipment, electro-mechanical sub-assemblies and precision engineered components. 95% of Rs. 200 cr revenue is derived from exports to US and Germany, while aero tooling accounts for over 95% revenue.
Growing Capacity
Operating at 95% capacity utilisation level, company is looking to quadruple capacity by FY26E, to 1.78 lakh hours, from 0.43 lakh hours at present. The brownfield expansion is already underway, with CWIP up by Rs. 22 cr in H1FY25, which is seen substantial, given net fixed assets stood at Rs. 62 cr, as of 30.9.24.
High Margin Business
FY24 revenue stood at Rs. 209 cr, which was at Rs. 121 cr in H1FY25. Since company manufactures high mix-low volume products, its margins are extremely rich – 79% gross, 44% EBITDA and 32% net. PAT was at Rs. 58 cr and Rs. 39 cr respectively. It clocked 54% RoE in FY24, which contracted to 10% (non-annualised) for H1FY25, as company raised Rs. 250 cr through a pre-IPO placement on 19th Jul 2024, expanding equity to Rs. 24 cr, of FV Rs. 5 each.
Attractively Valued
H1FY25 EPS stood at Rs. 8.49, against Rs. 13.2 for FY24. Estimating FY26E EPS at Rs. 24, IPO is priced at a one year forward PE multiple of 33x, which is seen attractive for the high growth visibility, coupled with industry-leading margins. Even though size of company’s operations is still small (similar with other listed defence and aerospace peers) and client concentration (due to end-user industry structure), business fundamentals are seen strong.
Peers with around Rs. 50-60 cr PAT in FY24 like MTAR and Azad are ruling at m cap of Rs. 5,000 cr and Rs. 9,800 cr respectively. Unimech’ Rs. 4,000 cr value is much lower, especially for its superior margin (H1FY25 EBITDA margin of 27% and 34% of MTAR and Azad vis-à-vis 44% for Unimech). Even other peers like Paras Defence, Data Patterns and Dynamatic Technologies are trading at PE multiples of over 50x. In this backdrop, the pre-IPO price of Rs. 682 per share implying a 15% premium in 5 months is justified.
20th Dec 2024 at 10:30 pm