Company Note Industrial Goods and Services │ India │ June 12, 2024

India
MTAR Technologies Limited
ADD (Initiating coverage)
Consensus ratings*: Buy 4 Hold 1 Sell 1 Dawn of the fuel cell revolution
Current price: Rs1,781
■ MTAR Technologies is a precision machining company with exposure across
Target price: Rs2,644
niche sectors like fuel cells (for Bloom Energy), nuclear, defence and space.
Previous target: NA
Up/downside: 48.5% ■ Rising power costs in the US due to grid problems, coupled with rising cost
EIP Research / Consensus: 48.5% competitiveness of Bloom Energy, will result in significant tailwinds for MTAR.
■ We value the stock at 45x FY26F EPS to arrive at our target price of Rs2,644.
Reuters:
Initiate coverage on it with an ADD rating.
Bloomberg: MTARTECH IN
Market cap: US$656m
Rs54,783m
Renewables (solar/wind) is not the solution – it’s fuel cells & nuclear
Renewable energy like solar and wind are intermittent and spiky i.e. they can come and go
Average daily turnover: US$8.2m
Rs682.7m
suddenly. This messes up with the grid, as while grid demands change slowly, the wind
Current shares o/s: 30.8m starts blowing and dies down with comparative suddenness. Batteries are a possible
Free float: 63.0% solution, but even the biggest utility battery packs are not really grid-scale. In fact, providing
*Source: Bloomberg 100 hours of back-up for a single massive (1,000MW) coal plant would require 32,000t of
lithium. In 2023, the global production of lithium stood at 180,000t. The only possible
solution for this is fuel cells and nuclear. They both can store energy on-site and hence,
are reliable. As long as you have natural gas/hydrogen powering a fuel cell or uranium
powering a nuclear reactor, they will continue delivering power. Bloom Energy (the world’s
only commercial scale fuel cell manufacturer) and nuclear energy accounted for 70% of
MTAR Technologies’ (MTAR) FY24 revenue and this will be the biggest tailwind for the
latter in the coming years.

MTAR’s unique machining capabilities separates it from its peers

MTAR is one of the few machining companies (apart from Bharat Forge) having capabilities
Source: Bloomberg
in both conventional and non-conventional machining. In non-conventional machining, the
Price performance 1M 3M 12M materials are removed using various techniques that do not require a sharp tool to carve
Absolute (%) (0.5) 2.6 (7.8) out the design. MTAR, apart from conventional machining, has expertise in EDM
Relative (%) (5.7) (1.3) (24.5)
(electronic discharge machining), which utilizes electrical energy to carve out metals from
Major shareholders % held a workpiece. EDM is important for MTAR as it does ceramic machining for Bloom Energy’s
Promoter Group 37.0 fuel cells, which can’t be machined by conventional machining methods. This also allows
Nippon Life 5.4
MTAR to have a moat and expand into other difficult-to-machine materials.
ABSL 2.3
We value MTAR at 45x FY26F EPS; initiate coverage with ADD rating
MTAR is likely to register a 41% topline growth over FY24-26F, with improvement in
margins by roughly 500bp due to operating leverage kicking in. Moreover, going ahead,
even if Bloom Energy (MTAR’s largest client) misses its consensus revenue estimates for
CY26F by 5%, it will only have a 10% negative PAT impact on MTAR, owing to its ramp-
up in other revenue segments, thus providing a reasonable margin of safety. We expect
MTAR to register an 80% PAT CAGR over FY24-26F and value the stock at 45x FY26F
EPS of Rs59 to arrive at a target price of Rs2,644. Key downside risks include exposure
to a single client (Bloom Energy) for almost 60% of its revenue.

Financial Summary Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F

Revenue (Rsm) 5,738 5,808 7,724 11,586 18,480
Operating EBITDA (Rsm) 1,540 1,127 1,694 2,855 4,546
Net Profit (Rsm) 1,034 561 963 1,810 3,059
Core EPS (Rs) 33.6 18.2 31.3 58.8 99.3
Core EPS Growth 69.9% (45.7%) 71.6% 88.0% 69.0%
FD Core P/E (x) 52.69 97.10 56.60 30.10 17.81
DPS (Rs) 0.0 0.0 0.0 0.0 0.0
Research Analyst(s) Dividend Yield 0.00% 0.00% 0.00% 0.00% 0.00%
EV/EBITDA (x) 36.12 49.59 33.14 19.74 12.41
Vipraw SRIVASTAVA
P/FCFE (x) (162.11) 110.51 691.30 489.04 210.30
T (91) 22 4161 1565
Net Gearing 18.1% 20.7% 21.4% 19.6% 15.4%
E vipraw.srivastava@incredresearch.com
P/BV (x) 8.79 8.06 7.05 5.71 4.33
Arafat SAIYED ROE 18.1% 8.7% 13.3% 21.0% 27.6%
T (91) 22 4161 1542 % Change In Core EPS Estimates
E arafat.saiyed@incredcapital.com
InCred Research/Consensus EPS (x)
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Powered by
EQUITEC
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

MTAR’s precision machining capabilities in a

niche space gives it unique entry barriers
MTAR caters to nuclear energy, clean energy, space and defence industries.
These industries have very high barriers to entry with zero tolerance level, in the
form of errors or defects. Hence, from client empanelment to first-time orders
takes a significant amount of time - from three to five years. Moreover, MTAR is
one of the few precision machining companies which has capabilities in
conventional and non-conventional machining (the only other company is
Bharat Forge). Conventional machining refers to a tool coming in direct contact
with the workpiece to remove excess materials and shape the piece. With non-
conventional machining, the materials are removed using various techniques that
do not require a sharp tool to carve out the design. MTAR, apart from conventional
machining, has expertise in EDM (electronic discharge machining), which utilizes
electrical energy to carve out metals from a workpiece. In aerospace and other
demanding industries, a single micron sometimes decides whether a part can be
used or will end up as scrap. High-quality precision grinding machines can achieve
microscopic tolerances and help manufacturers meet high customer
requirements down to the μm (micro metre).

Clean energy to be the biggest growth driver for MTAR

MTAR is engaged in the manufacture of mission-critical precision components
with close tolerances (5-10 microns), and in critical assemblies. The company has
exposure to clean energy, nuclear, space and defence sectors, with clean energy
contributing more than 50% to its top line. In clean energy, the company caters to
Bloom Energy, a solid oxide fuel cell (SOFC) manufacturer based in the US.
Bloom Energy fuel cells, also called energy servers, are the only solution to the
US grid transmission issues and we believe that in the coming years, they are
going to be the biggest growth trigger for MTAR. Moreover, with MTAR’s strong
research pedigree, the company is continuously improving the percentage value
addition it does for its clients, which further improves its position in the value chain.
Figure 1: Fuel cells dominate the revenue mix for MTAR

Nuclear Power Fuel Cells Defence Space Products and Others

90

80

70

60

50

40

30

20

10

0
FY18 FY19 FY20 FY21 FY22 FY23 FY24F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

2
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 2: Current order book also has fuel cell as the largest contributor
Products
4%
Nuclear
14%

Clean Energy
Space & Defence
Space & Defence
Nuclear
16%
Products

Clean Energy
66%

SOURCE: INCRED RESEARCH, COMPANY REPORTS

A fuel cell is more resilient than a normal battery

A fuel cell is like any other battery which generates power. However, there is a
fundamental difference between a normal battery and a fuel cell. A normal battery,
like for instance, a lithium-ion battery stores power and discharges it over a period.
However, fuel cells use a continuous source of power, for example natural gas,
hydrogen, or biogas. Hence, fuel cells are more resilient as they do not need
replacement like normal batteries when their power is exhausted. As long as you
have access to fuel, you have access to electricity – anytime, anywhere. Hence,
they are very resilient in terms of power generation compared to batteries.
However, their efficiency is lower when compared to normal batteries.

Science of fuel cells involve basic oxidation and reduction

In principle, the operation of a fuel cell can be explained as an electrochemical
reaction. The basic components of a fuel cell are the anode, cathode, electrolyte,
and a wire. In basic chemistry, oxidation is when a chemical element gains
electrons whereas reduction is when a chemical element loses electrons. In
simple terms, the anode is the site at which oxidation takes place in a fuel cell.
Conversely, the cathode is the site at which reduction takes place. In a Solid Oxide
Fuel Cell (SOFC), the electrolyte is a non-conducting ceramic material that
performs well when heated to 750 to 1,000 degrees Celsius, whereas in other
fuels the electrolytes are in a liquid state. Although a SOFC can run on a variety
of hydrocarbon fuels including methane, the hydrocarbon fuels are catalytically
reformed so that the gases flowing into a SOFC are CO, H2, and O2. On the
output side you get water, carbon dioxide and energy.

3
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 3: A basic diagram explaining the working of a fuel cell

SOURCE: INCRED RESEARCH, BLOOM ENERGY

Ceramic electrolyte is the most important part of SOFC and that

is where Bloom Energy has its USP
SOFC works the same way as most fuel cells do but instead of a solvent
electrolyte, it uses a solid electrolyte. The material used for the electrolyte is very
important as it defines the efficiency and the performance of the SOFC. SOFC
functions at very high temperatures, in the range of 700-1,000 degrees. The high
temperature results in high costs as the materials that make up the system need
to have high tolerance for high temperature conditions. The benefit, on the other
hand, of the high temperature is that there is no need for any kind of catalyst to
trigger/speed up the reaction. Hence, the material used for the ceramic electrolyte
becomes very important. Usually, the electrolyte is a ceramic material; most
commonly it comes in the form of Yttria Stabilized Zirconia (YSZ) or as Scandia
Stabilized Zirconia (ScSZ). Bloom Energy fuel cell uses Scandia Stabilized
Zirconia for its solid oxide electrolytes. In fact, Bloom Energy is sometimes
quoted as being the largest scandium consumer in the world. Scandia costs
have ranged from US$1,000-5,000/kg. The truth about solid oxide fuel cells
is that we've not explored the entire space of possible and potential
materials. However, there's reasonable theoretical evidence to say that
Scandia-based systems should be the most efficient.
Figure 4: The graph below denotes conductivity of various electrolytes for SOFC;
Scandia-based materials (ScSZ) have the highest conductivity and thus, efficiency

SOURCE: INCRED RESEARCH, PATENT FILINGS

4
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Bloom Energy’s fuel cell is cheaper than the US grid

Bloom Energy’s fuel cells’ costing would primarily involve two sub-divisions - the
capital expenditure costs and operating costs. Let’s focus on the capex costs first.
Bloom Energy’s fuel cell currently is priced at US$3,200/kW, and the company
has an aim to incur double-digit percentage price reductions going ahead.
However, for our analysis, we have assumed US$3,200/kW as a price point. Now
the critical question is the average life of the fuel cell. This has been a contentious
point for Bloom Energy in the past but according to various media reports, Solid
Oxide Fuel Cells last for around five-to-seven years, although Bloom Energy
stated that the average lifetime of its cell is around 10 years. Hence, assuming a
five-year lifetime means 365*24*5 units of power generated. Dividing US$3,200
(average price of the cell as mentioned above) by 365*24*5 will give us US$/kWh.
Now moving ahead with the operating costs, Bloom Energy’s fuel cells have a
beginning life efficiency of 65%, which gradually decreases with every passing
year, and once it goes below the 50% threshold, the company replaces the fuel
cells. For our analysis, we have assumed Bloom Energy’s fuel cell to have an
average efficiency of 55%. Now, natural gas prices are volatile and are on the
higher side in the US post Russia-Ukraine war, and we have assumed a range of
prices from US$7-10/KCF. It is to be noted that for our calculations, we have not
considered any tax deductions and manufacturing incentives for Bloom Energy.
However, Bloom Energy does receive a significant chunk of production tax
incentives from the Inflation Reduction Act. This helps Bloom Energy to further
subsidize costs for its consumers, making it far more competitive than grid power.
Figure 5: Bloom Energy has been decreasing average cost/kW for its fuel cell

Bloom Energy Server Costs ( USD/KWH)

8000

7000

6000

5000

4000

3000

2000

1000

0
CY19 CY20 CY21 CY22 CY23

SOURCE: INCRED RESEARCH, BLOOM ENERGY

Figure 6: Fuel cells’ efficiency decreases linearly as the time from installation
progresses; for our calculations, we have assumed an efficiency of 55%

SOURCE: INCRED RESEARCH, BLOOM ENERGY

5
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 7: Different pricing scenarios in cents/kWh for energy generated from Bloom
Energy’s SOFC

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 8: Bloom Energy’s electricity costs are cheaper than grid power in most US states; the highlighted region is the energy cost
from Bloom Energy’s fuel cells

Electricity Costs (Cents/KWH)

45
40
35
30
25
20
15
10
5
0

SOURCE: INCRED RESEARCH, EIA DATA

Natural gas prices are coming down but the US grid cost is
rising - this is mainly due to rising transmission costs
Figure 9: A major portion of grid power in the US is generated from natural gas
Solar Biomass
Hydropower 4% 1%
6%

Wind
10% Natural Gas
Nuclear
Natural Gas
44% Coal
Wind
Hydropower
Coal
16% Solar
Biomass

Nuclear
19%
SOURCE: INCRED RESEARCH, EIA DATA

6
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 10: Henry Hub spot price of natural gas has been decreasing

Natural Gas Price ($/ MMBTU)

10
9
8
7
6
5
4
3
2
1
0

Jan-2023
Jan-2010

Jan-2011

Jan-2012

Jan-2013

Jan-2014

Jan-2015

Jan-2016

Jan-2017

Jan-2018

Jan-2019
Jul-2019
Jan-2020

Jan-2021

Jan-2022

Jan-2024
Jul-2010

Jul-2011

Jul-2012

Jul-2013

Jul-2014

Jul-2015

Jul-2016

Jul-2017

Jul-2018

Jul-2020

Jul-2021

Jul-2022

Jul-2023
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 11: However, grid power costs yoy in the US have been rising…

Annual growth in nominal electricity prices (%)

12%

10%

8%

6%

4%

2%

0%
CY18 CY19 CY20 CY21 CY22 CY23 CY24F CY25F
-2%

SOURCE: INCRED RESEARCH, EIA DATA

Figure 12: …mainly driven by the rise in transmission costs

Transmission Costs (USD M) Distribution Costs (USD M)

18000

16000

14000

12000

10000

8000

6000

4000

2000

0
CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22

SOURCE: INCRED RESEARCH, EIA DATA

7
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Basic functioning of a modern power grid

The working of the grid depends on a fundamental equation involving ‘electricity
produced’ and ‘electricity used’. So ‘electricity produced’ and ‘electricity used” are
always in balance on the grid. When you turn on a light, somewhere on the grid,
a power plant makes more kWh for that light. When you turn the light off,
somewhere on the grid, a power plant on the grid makes fewer kWh. Production
and consumption are always in balance in real time. Someone (a ‘balancing
authority’) has the responsibility for calling the plants online and asking them to
leave the grid to keep the grid in balance. However, the critical thing here is that
people don’t use the same amount of electricity every hour of each day. Hence,
to meet this varying load for electricity, some plants may run all the time; other
plants will only run when called upon. Those plants running all the time provide
‘baseload power’ and those running only when the power requirement is high
provide ‘peak power’. Once the power is generated at the generating stations via
natural gas or renewables, it is transmitted through transmission towers and finally
reaches distribution sub-stations where it is distributed to households.
Figure 13: Basic functioning of a modern power grid

SOURCE: INCRED RESEARCH, COMPANY REPORTS

US grid’s main problem is renewables resulting in what is

widely known as California duck curve
The grid power generally consists of two parts: baseload power and peak power.
Traditionally, baseload power has been provided by baseload plants. These are
plants that are very good at steady, reliable, inexpensive operations. In general,
baseload plants are steam plants: nuclear plants and coal plants. The electricity
demand that ramps up during the day and generally lowers late in the evening is
generally provided by ‘load-following plants’. These are more expensive to run but
more flexible in following the load. They tend to be gas-fired plants and hydro.
Now keeping this in context, the major problem relating to renewables is their
intermittent and spiky nature.
• Intermittent and spiky nature: Renewables like solar and wind are
intermittent and spiky i.e. they can come and go suddenly. This messes up
with the grid, as while grid demands change slowly, the wind starts blowing
and dies down with comparative suddenness. The wind is blowing hard, but
the consumers don’t need any extra power. In this case, the grid operator asks
the wind turbines to disconnect from the grid partially or totally (this is called
curtailment). It is important because the grid must always be in balance. This
results in what is famously known as the ‘California duck curve’. Solar inputs
to the grid tend to be the highest during summer afternoons. However, when
the Sun goes down, the solar goes offline rapidly. In that case, peak load power
plants like gas and hydro ramp up, and they often must ramp up faster than
the solar is ramping down. Faster because people tend to turn on the light

8
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

when the Sun sets or come inside and begin cooking dinner and so on. There
is a rule of thumb on the grid that no plant should be so big - that is more
than 10% of the average demand of the grid. People look at solar as a
distributed system: my rooftop, your rooftop. No huge power plant here.
However, in fact, solar often acts as a single mega plant which switches
off entirely in the evening.
Figure 14: Duck Curve prevalent in California electric grid

SOURCE: INCRED RESEARCH, COMPANY REPORTS

More renewables doesn’t neccesarily mean less carbon as

renewables suffer from levelized cost paradox
To understand the levelized cost paradox associated with renewables, let’s
undertake a simple analogy. If you rent an apartment for US$100 per night, and
then you also start renting a second apartment for US$50 per night, then your total
rental costs go up by 50%, not down by 50%. The simple levelized cost of the
second apartment is 50% lower than the first. But overall costs rise as the costs
of the first apartment are fixed, and renting the second apartment erodes the
utilization rate of the first one. Something of this sort happens with renewables as
well. When clouds pass across the Sun, and the wind starts and stops when it
wants to, the output from renewable energy sources can go up and down quite
quickly. To keep the grid in balance, something must be ready to start up quickly
when a renewable gets spiky. In general, the thing that starts up quickly is a gas-
fired plant that is deliberately kept in a state where it is ready to run. However,
simply having such a plant on the grid does not necessarily provide fast back-up
for the renewable’s spikiness. The plant must also be ready to begin operations
very quickly. This often means keeping the plant running at a low level, or keeping
the turbine spinning without a load to be sure that the plant can come up to speed
quickly. In fact, a grid, large or small, needs as much quick-reacting fossil
capacity as it has intermittent renewable capacity. Hence, in the analogy
mentioned, this is what the fixed-cost plants must have to keep the grid
reliable due to intermittent nature of the grid.

9
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 15: Every 1% rise in renewables leads to a 0.88% rise in fossil fuel-powered
back-up

1.02%
1%
1.00%

0.98%

0.96%

0.94%

0.92%

0.90%
0.88%
0.88%

0.86%

0.84%

0.82%
Increase in renewables Leading to fossil fuel powered back up

SOURCE: INCRED RESEARCH, SHORTING THE GRID

Figure 16: A study conducted on an Irish grid showed wind turbines resulted in higher
carbon and hence, no direct correlation between wind energy and lower carbon

Kg/ MWH

600

500

400

300

200

100

0
Carbon Emission when no renewables Carbon Emission when wind energy is used

SOURCE: INCRED RESEARCH, SHORTING THE GRID

Figure 17: The red dotted line in the graph below shows that Figure 18: However, the same red dotted line shows carbon
carbon emission goes up when intermittent renewables like emissions coming down when renewables like geothermal,
solar and wind are used in an European grid nuclear and fuel cells are used

SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

10
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

The US grid is unreliable and expensive and this will be further

exacerbated by power demand from data centres
With the generative AI boom resulting from ChatGPT and Nvidia, power demand
is expected to surge. As the US grid is already stretched, this will likely result in
further worsening of the power demand situation. Queries for ChatGPT are more
energy-intensive than Google Chrome. Secondly, with every passing year, the
efficiency of the US grid was improving due to the addition of renewables, resulting
in flattening power demand. However, that efficiency is reaching its peak and
hence, in the coming years, rising power demand will require higher power
generation.
Figure 19: Chat GPT queries are 6x-10x power-intensive as traditional Google
searches

Power Consumption per query (Wh)

3.5

2.5

1.5

0.5

0
Google Chatgpt

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 20: US power demand growth has averaged 0% in the last 10 years, relative to
early 2000s’ growth of ~1.5% on an average - this is expected to go up till CY30F

US Power demand growth (%) CY00-CY07 average 10 year average

5%

4%

3%

2%

1%

0%
CY00
CY01
CY02
CY03
CY04
CY05
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
CY21
CY22
CY23
CY24F
CY25F
CY26F
CY27F
CY28F
CY29F
CY30F

-1%

-2%

-3%

-4%

-5%

SOURCE: INCRED RESEARCH, EIA DATA

Bloom Energy is getting significant incremental orders from

these data centres, which should benefit MTAR
Data centres are critical for sustaining the generative AI boom. However, these
data centres require resilient power with no outages. In fact, the cost of a US data
centre outage has grown to US$8,851/minute. With outages becoming more and
more expensive, this is where the USP of Bloom Energy lies. Bloom Energy’s
servers have been successfully implemented in 40+ data centres throughout the
US including AT&T, Equinix and JP Morgan. While the company is generating

11
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

sales from brownfield data centres currently, which have a relatively shorter sales
cycle, incremental demand will come from greenfield data centres which have a
longer sales cycle. Bloom Energy has roughly 0.5GW incremental demand from
data centres in the pipeline currently.
Figure 21: Bloom Energy’s data centre installation (MW) and pipeline demand

Bloom Energy Installations for Data Centers (MW)

600

500
500

400

300

200

100 72
37 41

0
Amazon Equinix AT&T Pipeline

SOURCE: INCRED RESEARCH, BLOOM ENERGY

Figure 22: Over a span of 15 years, Bloom Energy is significantly cheaper than the
grid if we take the opportunity cost from outages into account

Costs for 10 MW AI Data Center (USD M)

250

200

150

100

50

0
Opportunity Cost due Grid Costs Total Costs Bloom Energy Server
to Grid Outages Cost

SOURCE: INCRED RESEARCH, COMPANY REPORTS

12
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

MTAR generates 60% of its revenue from Bloom Energy and

hence, they are closely interlinked
Figure 23: Bloom Energy is expected to register a growth of 9% in FY25F and 23% in
FY26F, according to consensus estimates

Bloom Energy Revenue (Rs M) MTAR Revenue from Bloom (Rs M)

160000 5,000
140000 4,500
4,000
120000
3,500
100000 3,000
80000 2,500
60000 2,000
1,500
40000
1,000
20000 500
0 -

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 24: Bloom Energy’s financials - snapshot

SOURCE: INCRED RESEARCH, BLOOMBERG

Figure 25: Reduction in FY24 revenue for MTAR was due to higher inventory on Bloom
Energy’s balance sheet due to the change in green hydrogen policies in South Korea

Days Inventory Outstanding for Bloom Energy

140

120

100

80

60

40

20

0
CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23

SOURCE: INCRED RESEARCH, BLOOMBERG

13
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Scenario analysis for MTAR’s PAT with respect to Bloom

Energy’s consensus earnings miss/beat in FY26F
Figure 26: Even if Bloom Energy misses its revenue estimates by 15%, it will only have a corresponding 11% PAT decline for MTAR
Bloom Energy Revenue Miss/ Beat from Consensus
FY26F PAT miss/beat from our estimates -15% -10% -5% 0% 5% 10%
3% -35% -33% -30% -28% -26% -24%
MTAR’s revenue as 4% -23% -20% -17% -14% -11% -8%
a %age of Bloom 5% -11% -7% -3% 0% 4% 7%
Energy’s revenue 6% 2% 6% 10% 14% 19% 23%
7% 14% 19% 24% 29% 34% 38%
SOURCE; INCRED RESEARCH, COMPANY REPORTS

Nuclear energy to be a significant growth trigger for MTAR

Nuclear energy is an up-and-coming alternative source of energy in the country.
The Government of India or GoI is planning to commission 20 nuclear reactors by
CY31F, trebling its power generation capacity from 7,480MW currently to 22,480
MW, and so vast number of opportunities are on the cards. There is another critical
problem which a nuclear plant can address. In the past, power supply was
constant (thanks to thermal power plants) while demand surged and waned. The
demand and supply balance was usually maintained through load shedding. That
is changing now. As the share of renewables in India’s energy mix rises, both
supply and demand will become variable. The country’s electricity system will
need additional investments in the forms of energy which are reliable and
resilient. Bloom Energy’s fuel cells could be among them while nuclear
could be another. However, India has also tried to develop nuclear power
generation capacity in the past, but it has suffered from cost and time overruns.
So, what has changed this time. Firstly, Nuclear Power Corporation of India
(NPCIL) has been told to jointly develop nuclear plants with companies like NTPC.
The rationale? Not only can NTPC raise funds more easily than NPCIL by pooling
their strengths in project management and nuclear plant design, but they can also
set up nuclear plants faster. Secondly, the government is also very bullish on
SMR or Small Modular Reactors (we will discuss this subsequently). As a result,
due to the government push, things in the nuclear energy industry are bound to
change.

MTAR makes fuel machining heads & other specialized

products for nuclear reactors, which is a significant value
add
The nuclear segment accounted for ~11%/16% of revenue/order book in FY24,
respectively. The segment’s revenue growth yoy was a healthy 40% from Rs438
m in FY23 to Rs619m in FY24. MTAR manufactures and supplies specialized
products, such as fuel machining head, drive mechanisms, bridge and column and
coolant channel assemblies, ball screws and water-lubricated bearings, among
other critical products under the nuclear segment. The company expects ~Rs5bn
worth of orders flowing in for the Kaiga 5 and 6 reactors in 1QFY25F. Also, the
aftermarket provides a good revenue opportunity in the form of maintenance and
refurbishment as most India’s installed reactor base hits the critical 20-year life
span in the coming years. The market was valued at Rs5.5-6bn during FY15-19
and is estimated to be Rs9-10bn over FY20-25F. As of CY19-end, nuclear power
plants with 2.6GW capacity were in the refurbishment stage. This is expected to
rise to 3.5-4.0GW by 2025F. MTAR supplies 14 different pieces of equipment to
the nuclear sector, translating into an addressable market opportunity size of Rs7-
8bn per reactor. The total addressable market opportunity for MTAR stands at
~Rs70-80bn as it caters to ~20-25% of the equipment portion of the overall order
of 700MW PHWR nuclear plant.

14
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 27: MTAR’s revenue from nuclear division has significantly improved in FY24

MTAR Revenue from Nuclear Division (Rs M)

700

600

500

400

300

200

100

0
FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 28: Upcoming nuclear capacity in India

Nuclear Capacity in India (GW)

25
22.4

20

15

10 9.1
6.8
6
5

0
Current Capacity Under Construction Planned Total Capacity

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 29: Capital cost break-up of a nuclear reactor

Procurement Design Others

5% 4% 9%
Project Mgmt
Services Construction and Construction and
6% Installation Installation
31% Equipments

Construction Labor Onsite

Material
7% Site Development

Construction Material

Project Mgmt Services

Procurement
Site Development
10% Design

Labor Onsite Others

13% Equipments
23%

SOURCE: INCRED RESEARCH, COMPANY REPORTS

15
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 30: Under-construction nuclear reactors in India

Under Construction Reactors Construction Start Gross Capacity (GW)
PFBR 2004 0.5
Kakrapara 4 2010 0.7
Rajasthan 7 & 8 2011 1.4
Kudankulam 3 & 4 2017 2
Gorakhpur 1 & 2 2018 1.4
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 31: Upcoming nuclear reactors in India

New Reactors Planned State Gross Capacity (GW)
Gorakhpur 3 & 4 Tamil Nadu 1.4
Chutka 1 & 2 Gujarat 1.4
Mahi Banswara- 1,2,3 and 4 Rajasthan 2.8
Kaiga- 5 & 6 Tamil Nadu 1.4
Kudankulam- 5 & 6 Haryana 2
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Product business for MTAR will result in import substitution

opportunity
The product and other segments accounted for 19%/4.3% share in the
revenue/order book, respectively, in FY24. Recently, the Ministry of Defence
(MoD) announced 101 major pieces of defence equipment that the MoD will no
longer clear for import. Instead, these 101 items will be incrementally procured
from indigenous sources, as per the provisions of Defense Acquisition Procedure
(DAP) 2020. In this regard, the company recently developed a few products such
as ball screws and water-lubricated bearings which find various applications in
clean energy - civil nuclear power, and space & defence sectors, and were earlier
imported in India. This opens an entire import market for MTAR. The company is
further developing products such as roller screws, electro-mechanical actuators,
valves, ASP assemblies, and bellows for fuel cells, and heaters for electrolyzers.
These products are developed to substitute imports.
Figure 32: Revenue from the products division of MTAR is showing a gradual
improvement

MTAR Revenue from Products Division (Rs M)

1200

1000

800

600

400

200

0
FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

In-house R&D in small satellites launch vehicle to boost

revenue from space division
The Indian Space Research Organization (ISRO) has carried out 92 launch
missions and 125 spacecraft missions since its founding. For these missions,
MTAR has been a major supplier of electro-pneumatic modules, cryogenic
engines, and liquid propulsion engines to ISRO. Prior to the start of Covid-19
pandemic, ISRO had intended to launch 31 satellite missions in FY21 and FY22
but because of the outbreak, ISRO was able to launch only two, five, and six
missions in FY21, FY22, and FY23, respectively. It is anticipated that ISRO will

16
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

increase the number of missions it launches from 21 to 30 in FY24 and FY25F.

ISRO plans to commercialize the Indian space industry in response to the growing
need for satellite applications. To contract with the HAL-L&T partnership to
produce five PSLVs, ISRO established NewSpace India, a new commercial arm,
in CY19. Following the successful completion of this project, the arm will proceed
to produce 12 more PSLVs. Additionally, MTAR and the Indian National Space
Promotion and Authorization Centre (IN-Space) have inked a Memorandum of
Understanding (MoU) for the design and development of GARUDA 1, a two-stage,
all-liquid, low-earth orbit small satellite launch vehicle (SSLV) with a 500kg
payload capacity that is powered by semi-cryogenic technology. The completion
of SSLV, which is expected to take two-to-three years, is likely to create a robust
order flow for the supply of engines and other parts required for launch vehicles
that are comparable. MTAR plans to leverage IN-Space’s assistance for the
acquisition and promotion of avionics as well as its own in-house development of
100t and 10t all-liquid engines. The space division accounted for 6%/15% of the
revenue/order book, respectively, in FY24, and this is expected to see further
order inflow.
Figure 33: Revenue from the space division of MTAR

MTAR Revenue from Space Division (Rs M)

700

600

500

400

300

200

100

0
FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 34: Space sector’s budget has been in an uptrend in the last few years

Space Sector Budget Trend (Rs Bn)

140

120

100

80

60

40

20

0
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

17
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

European defence spending could also act as a trigger for the

defence segment of MTAR
The defence segment contributed only ~3% to the company’s FY24 topline.
However, this could be ramped up significantly in the coming years as MTAR
counts Rafale and IAI among its defence sector clients. With the ongoing Israel-
Hamas and Russia-Ukraine wars, defence spending is ramping up in Europe,
which could lead to growth for players like MTAR in the coming years. Moreover,
MTAR has entered into a long-term agreement spanning over 15 years with Israeli
Aerospace Industries (IAI) to supply mission critical assemblies in the aviation
sector. This is going to be a recurring contract, with a total value ranging from
US$90m to US$120m over 20 years.
Figure 35: Revenue from the defence division for MTAR has been on an uptrend

MTAR Revenue from Defense Division (Rs M)

250

200

150

100

50

0
FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

A peak into MTAR’s valuation

Improving fundamentals to lead the way
The EPS growth rate of MTAR for the next two years is exceptional, in our view,
at an 83% CAGR (FY25F-26F). At the same time, we believe the company’s RoE
will increase from 8% in FY24 to 22% in FY26F. MTAR will benefit from the rising
demand for Bloom Energy’s fuel cell servers, as the US power demand for resilient
and reliable grid picks up. With the incremental power demand coming from data
centres, this number can be further expected to go up. RoCE for MTAR is
expected to improve from 10.7% in FY24 to 24.5% in FY26F. Improvement in
revenue will also lead to rising utilization of the company’s facilities, leading to
higher operating leverage.
Figure 36: Improvement in RoE and RoCE on the cards

RoCE (%) RoE (%)

30%
25%
20%
15%
10%
5%
0%
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F
-5%
-10%
-15%
-20%
-25%

SOURCE: INCRED RESEARCH, COMPANY REPORTS

18
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

We expect the company to register a revenue CAGR of 42% over FY24-26F. Most
of this growth will be fueled by fuel cells in FY25F and FY26F. The inventory
situation with Bloom Energy will revive in the coming quarters, which will lead to
revenue growth from Bloom Energy. Margins will also improve, and we expect the
EBITDA margin to improve by 500bp from FY24 to FY26F. The company has
become cash-flow-from-operations-positive in FY24, and this will continue in
FY25F and FY26F as well. We expect MTAR to become FCF-positive by FY26F.
Figure 37: MTAR’s revenue to register a 41% CAGR over FY25F-26F

Revenue for MTAR (Rs M)

14000

11,586
12000

10000

7,724
8000

5,738 5,808
6000

4000 3,220
2,138 2,464
1,596 1,837
2000 1,039

0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 38: Segmental revenue mix for MTAR; the clean energy segment is expected to dominate revenue growth
FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F FY27F
Clean Energy - Nuclear Power 240 260 553 457 438 619 650 1,300 1,950
Space 291 271 582 483 494 390 1,170 1,463 1,755
Clean Energy - Fuel Cells, Hydel and Others 1,128 1,375 1,227 2,016 4,417 3,512 4,214 6,828 12,290
Defence 77 84 13 81 151 197 276 372 540
Products and Others 101 146 90 183 237 1,083 1,408 1,619 1,943
Total Revenue 1,837 2,136 2,465 3,220 5,737 5,801 7,718 11,582 18,478
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 39: Revenue mix (%) of MTAR; clean energy to be the dominating segment in
FY25F and FY26F
Clean Energy - Nuclear Power
Space
100 Clean Energy - Fuel Cells, Hydel and Others
Defence
Products and Others
80

60

40

20

0
FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F FY27F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

19
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 40: EBITDA margin to remain rangebound as Bloom Energy’s focus on product
costs to decrease

EBITDA Margin (%) Gross Margin (%)

80
70
60
50
40
30
20
10
0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F
-10
-20

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 41: Revenue mix (%) to be heavily tilted towards clean energy and fuel cells

Clean Energy - Nuclear Power Space

Clean Energy - Fuel Cells, Hydel and Others Defence
Products and Others

120

100

80

60

40

20

0
FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F FY27F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 42: Order book mix (%) shows a slight increase in nuclear orders due to
expectation of a Rs6,000m incremental order from Kaiga nuclear reactor

Clean Energy - Nuclear Power Space

Clean Energy - Fuel Cells, Hydel and Others Defence
120 Products and Others

100

80

60

40

20

0
FY23 FY24 FY25F FY26F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

20
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Figure 43: PAT to register an 80% CAGR over FY24-26F

PAT (Rs Mn)

2000

1500

1000

500

0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F

-500

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Working capital improvement to make MTAR free-cash-flow-

positive by FY27F
Figure 44: NWC days to improve from 253 in FY24 to 217 by FY26F

Receivable Days Inventory Days Trade Payable Days Net Working Capital Days

300

250

200

150

100

50

0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 45: MTAR to become free-cash-flow-positive by FY26F

Cashflows from operating activities (Rs Mn) Free Cash Flow (Rs Mn)

1000

500

0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25F FY26F

-500

-1000

-1500

SOURCE: INCRED RESEARCH, COMPANY REPORTS

21
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

We have used the P/E methodology to value MTAR

We have valued MTAR on a P/E basis, as we consider it a more appropriate
valuation method for commodity companies rather than the discounted cash flow
or DCF or P/BV methodologies. In our view, DCF is not a suitable valuation
method because MTAR is a high-growth company and forecasting its long-term
earnings reliably is very difficult.
Figure 46: Target price valuation
MTAR Tech
CMP 1,705
Mean P/E 72.0
PE (x) 45.0
Premium/(Discount) -38%
Target Price (Mar-26F) 2,644
Expected Return (%) 55.1
Price Sensitivity Analysis
EPS Growth P/E Target P/E multiple (x)
(Rs) (%) (x) 35.0 40.0 45.0 50.0 55.0
FY22 19.8 -27.6 86.3 692 790 889 988 1,087
FY23 33.6 69.9 50.8 1,175 1,343 1,511 1,679 1,847
FY24 18.2 -45.7 93.6 638 729 820 911 1,002
FY25F 31.3 71.6 54.6 1,094 1,250 1,406 1,563 1,719
FY26F 58.8 88.0 29.0 2,057 2,351 2,644 2,938 3,232
SOURCE: INCRED RESEARCH, COMPANY REPORTS

We have valued MTAR at 45x FY26F EPS

Figure 47: EPS likely to grow from Rs18 in FY24 to Rs59 in FY26F
70 3,000
EPS (Rs) Target Price (Rs, RHS) 2,644
60
2,500
58.8
50
2,000

40 1,511
1,406
1,500
30 33.6
31.3
889
820 1,000
20
19.8 18.2
500
10

0 -
FY22 FY23 FY24 FY25F FY26F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Key downside risks

• Customer Concentration - One client, Bloom Energy, accounts for a sizeable
amount of the business's revenue (more than 75% in FY23). MTAR’s customer
base in other market segments is relatively small, which presents a risk if these
customers decide to choose competitors over the company, postpone orders,
reduce their outsourcing of MTAR products, or alter their supply chain
strategies negatively. These elements are probably going to have a negative
effect on the company's sales, which could have a big effect on its cash flow
and financial health. Still, the business has been associated with these clients
for as long as 40 years. The company’s longstanding relationship with
customers such as Bloom Energy, NPCIL, ISRO and DRDO is a result of its
consistent and successful supply of complex products to them.
• Sudden government policy shift – Green hydrogen and fuel cells are in an
evolving space, with governments trying the trial-and-error method to frame an
efficient policy. The same happened with Bloom Energy in South Korea when
the company decided to shift to the ‘auction’ model for fuel cells. This resulted
in delayed execution, resulting in higher inventory in the books of Bloom
Energy and ultimately, MTAR.

22
Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Key management personnel

• Mr. Parvat Srinivas Reddy (MD & promoter)- Mr. Reddy has nearly three
decades of industry experience in the manufacturing and construction sectors.
He has been associated with MTAR for the past 13 years. He holds a
bachelor’s degree in industrial production engineering from the University of
Mysore and a master’s degree in science, specializing in industrial engineering
from College of Engineering, Louisiana Tech University. Mr. Reddy is
instrumental in setting up and growing the company’s export vertical.
• Mr. Subbu Venkata Rama Behara, Chairman- Mr. Behara is the chairman
and independent director. He has more than 20 years of manufacturing
industry expertise and held senior leadership positions in various renowned
companies, including Tata and Hyundai. He has immense global exposure with
proven leadership abilities in transforming organizations by formulating growth
strategies. He was recognized as India’s 100 most powerful CEOs by The
Economic Times. Currently, he is acting as an independent director to
companies, including Sona BLW Precision Forgings and KPIT Technologies.
Mr. Gunneswara Rao, CFO- He is responsible for heading finance, mergers &
acquisitions, corporate affairs, and corporate strategy at MTAR. He has more
than 21 years of experience across the finance spectrum in strategic planning,
P&L management, tax compliance, fund raising, financial accounting, and
charting out annual operating plans. He was previously associated with Tata
Sikorsky Aerospace as its CFO for 11 years.

23
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

BY THE NUMBERS

P/BV vs ROE 12-mth Fwd FD Core P/E vs FD

19.00 40
400 Core EPS Growth 400
15.00 30
300 300
11.00 20 200 200
7.00 10 100 100

3.00 0 0 0
Apr-21 Apr-22 Apr-23 Apr-24 Apr-25 Apr-26 Apr-21 Apr-22 Apr-23 Apr-24 Apr-25 Apr-26
Rolling P/BV (x) (lhs) ROE (rhs) 12-mth Fwd Rolling FD Core P/E (x) (lhs)

Profit & Loss

(Rs mn) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
Total Net Revenues 5,738 5,808 7,724 11,586 18,480
Gross Profit 3,042 2,784 4,016 5,909 9,425
Operating EBITDA 1,540 1,127 1,694 2,855 4,546
Depreciation And Amortisation (187) (232) (264) (284) (299)
Operating EBIT 1,353 895 1,431 2,571 4,247
Financial Income/(Expense) (146) (223) (204) (215) (225)
Pretax Income/(Loss) from Assoc.
Non-Operating Income/(Expense) 195 58 57 57 57
Profit Before Tax (pre-EI) 1,402 730 1,284 2,413 4,079
Exceptional Items
Pre-tax Profit 1,402 730 1,284 2,413 4,079
Taxation (368) (169) (321) (603) (1,020)
Exceptional Income - post-tax
Profit After Tax 1,034 561 963 1,810 3,059
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit 1,034 561 963 1,810 3,059
Recurring Net Profit 1,034 561 963 1,810 3,059
Fully Diluted Recurring Net Profit 1,034 561 963 1,810 3,059

Cash Flow
(Rs mn) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
EBITDA 1,735 1,185 1,751 2,912 4,603
Cash Flow from Invt. & Assoc.
Change In Working Capital (1,291) (372) (846) (2,021) (3,238)
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense (33) (18)
Other Operating Cashflow
Net Interest (Paid)/Received (14) (9) 57 57 57
Tax Paid (323) (213) (321) (603) (1,020)
Cashflow From Operations 74 574 641 345 402
Capex (1,084) (942) (750) (400) (300)
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow 217 385 57 57 57
Cash Flow From Investing (867) (556) (693) (343) (243)
Debt Raised/(repaid) 457 476 131 110 100
Proceeds From Issue Of Shares
Shares Repurchased
Dividends Paid
Preferred Dividends
Other Financing Cashflow (137) (223) (204) (215) (225)
Cash Flow From Financing 320 253 (73) (105) (125)
Total Cash Generated (473) 270 (125) (104) 34
Free Cashflow To Equity (336) 493 79 111 259
Free Cashflow To Firm (793) 17 (52) 1 159
SOURCES: INCRED RESEARCH, COMPANY REPORTS

24
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

BY THE NUMBERS…cont’d

Balance Sheet
(Rs mn) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
Total Cash And Equivalents 312 508 383 280 314
Total Debtors 2,084 1,466 2,222 3,238 5,114
Inventories 3,866 3,476 3,809 5,396 7,797
Total Other Current Assets 430 198 234 308 440
Total Current Assets 6,692 5,648 6,648 9,221 13,664
Fixed Assets 3,546 4,127 4,235 4,251 4,252
Total Investments
Intangible Assets 8 7 7 7 7
Total Other Non-Current Assets 113 294 529 529 529
Total Non-current Assets 3,666 4,428 4,771 4,787 4,788
Short-term Debt 656 939 940 950 950
Current Portion of Long-Term Debt
Total Creditors 2,183 714 889 1,333 2,126
Other Current Liabilities 577 425 529 741 1,119
Total Current Liabilities 3,416 2,078 2,358 3,024 4,195
Total Long-term Debt 777 970 1,100 1,200 1,300
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities
Total Non-current Liabilities 777 970 1,100 1,200 1,300
Total Provisions 239 265 107 57 57
Total Liabilities 4,432 3,313 3,565 4,281 5,552
Shareholders Equity 6,201 6,763 7,726 9,536 12,596
Minority Interests
Total Equity 6,201 6,763 7,726 9,536 12,596

Key Ratios
Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
Revenue Growth 78.2% 1.2% 33.0% 50.0% 59.5%
Operating EBITDA Growth 63.1% (26.8%) 50.3% 68.5% 59.2%
Operating EBITDA Margin 26.8% 19.4% 21.9% 24.6% 24.6%
Net Cash Per Share (Rs) (36.41) (45.48) (53.79) (60.73) (62.87)
BVPS (Rs) 201.34 219.59 250.86 309.62 408.96
Gross Interest Cover 9.29 4.01 7.01 11.96 18.88
Effective Tax Rate 26.3% 23.2% 25.0% 25.0% 25.0%
Net Dividend Payout Ratio
Accounts Receivables Days 109.54 111.56 87.14 86.00 82.47
Inventory Days 377.09 443.11 358.62 295.92 265.90
Accounts Payables Days 186.41 174.82 78.90 71.43 69.73
ROIC (%) 13.9% 7.9% 11.1% 16.5% 21.3%
ROCE (%) 19.1% 10.7% 15.3% 23.9% 32.0%
Return On Average Assets 13.4% 7.1% 10.4% 15.5% 19.9%
SOURCES: INCRED RESEARCH, COMPANY REPORTS

25
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

DISCLAIMER
This report (including the views and opinions expressed therein, and the information comprised therein) has been prepared by Incred Research
Services Private Ltd.(formerly known as Earnest Innovation Partners Private Limited) (hereinafter referred to as “IRSPL”). IRSPL is registered with
SEBI as a Research Analyst vide Registration No. INH000011024. Pursuant to a trademark agreement, IRSPL has adopted “Incred Equities” as its
trademark for use in this report.
The term “IRSPL” shall, unless the context otherwise requires, mean IRSPL and its affiliates, subsidiaries and related companies. This report is not
directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication,
availability or use would be contrary to law, regulation or which would subject IRSPL and its affiliates/group companies to registration or licensing
requirements within such jurisdictions.
This report is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated,
stored or reproduced in any form by any means; or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any
purpose without the prior written consent of IRSPL.
The information contained in this report is prepared from data believed to be correct and reliable at the time of issue of this report.
IRSPL is not required to issue regular reports on the subject matter of this report at any frequency and it may cease to do so or change the periodicity
of reports at any time. IRSPL is not under any obligation to update this report in the event of a material change to the information contained in this
report. IRSPL has not any and will not accept any, obligation to (i) check or ensure that the contents of this report remain current, reliable or relevant;
(ii) ensure that the content of this report constitutes all the information a prospective investor may require; (iii) ensure the adequacy, accuracy,
completeness, reliability or fairness of any views, opinions and information, and accordingly, IRSPL and its affiliates/group companies (and their
respective directors, associates, connected persons and/or employees) shall not be liable in any manner whatsoever for any consequences (including
but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
Unless otherwise specified, this report is based upon reasonable sources. Such sources will, unless otherwise specified, for market data, be market
data and prices available from the main stock exchange or market where the relevant security is listed, or, where appropriate, any other market.
Information on the accounts and business of company(ies) will generally be based on published statements of the company(ies), information
disseminated by regulatory information services, other publicly available information and information resulting from our research. Whilst every effort is
made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other
subjective judgments contained in this report are based on assumptions considered to be reasonable as of the date of the document in which they are
contained and must not be construed as a representation that the matters referred to therein will occur. Past performance is not a reliable indicator of
future performance. The value of investments may go down as well as up and those investing may, depending on the investments in question, lose
more than the initial investment. No report shall constitute an offer or an invitation by or on behalf of IRSPL and its affiliates/group companies to any
person to buy or sell any investments.
The opinions expressed are based on information which are believed to be accurate and complete and obtained through reliable public or other non-
confidential sources at the time made. (Information barriers and other arrangements may be established where necessary to prevent conflicts of
interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their
duties or the performance of his/their recommendations. In reviewing this report, an investor should be aware that any or all of the foregoing, among
other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.
The report is not a “prospectus” as defined under Indian Law, including the Companies Act, 2013, and is not, and shall not be, approved by, or filed or
registered with, any Indian regulator, including any Registrar of Companies in India, SEBI, any Indian stock exchange, or the Reserve Bank of India.
No offer, or invitation to offer, or solicitation of subscription with respect to any such securities listed or proposed to be listed in India is being made, or
intended to be made, to the public, or to any member or section of the public in India, through or pursuant to this report.
The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other
activities of IRSPL. Information barriers and other arrangements have been established, as required, to prevent any conflicts of interests.
The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other
activities of IRSPL. Information barriers and other arrangements have been established, as required, to prevent any conflicts of interests.
IRSPL may have issued other reports (based on technical analysis, event specific, short term views etc.) that are inconsistent with and reach different
conclusion from the information presented in this report.
Holding of Analysts/Relatives of Analysts, IRSPL and Associates of IRSPL in the covered securities, as on the date of publishing of this report

26
 Industrial Goods and Services │ India
MTAR Technologies Limited │ June 12, 2024

Analyst/ Entity/
Relative Associates
any financial interests in the company covered in this report (subject company) and nature of such financial
NO NO
interest
actual/beneficial ownership of 1% or more in securities of the subject company at the end of the month
immediately preceding the date of publication of the research report NO NO
or date of the public appearance;
any other material conflict of interest at the time of publication of the research report
NO NO
or at the time of public appearance
received any compensation from the subject company in the past twelve months
for investment banking or merchant banking or brokerage services or investment advisory or depository or
distribution from the subject company in the last twelve months for products/services other than investment NO NO
banking or merchant banking or broker- age services or investment advisory or depository or distribution from
the subject company in the last twelve months
managed or co-managed public offering of securities for the subject company in the last twelve months NO NO
received any compensation or other benefits from the subject company or third party in connection with the
NO NO
research report
served as an officer, director or employee of the subject company NO NO
been engaged in market making activity for the subject company NO NO

Analyst declaration
• The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his
or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and
autonomously in an unbiased manner.
• No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or
view(s) in this report or based any specific investment banking transaction.
• The analyst(s) has(have) not had any serious disciplinary action taken against him/her(them).
• The analyst, strategist, or economist does not have any material conflict of interest at the time of publication of this report.
• The analyst(s) has(have) received compensation based upon various factors, including quality, accuracy and value of research, overall firm
performance, client feedback and competitive factors.

IRSPL and/or its affiliates and/or its Directors/employees may own or have positions in securities of the company(ies) covered in this report or any
securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities.

IRSPL and/or its affiliates and/or its Directors/employees may do and seek to do business with the company(ies) covered in this research report and
may from time to time (a) buy/sell the securities covered in this report, from time to time and/or (b) act as market maker or have assumed an
underwriting commitment in securities of such company(ies), and/or (c) may sell them to or buy them from customers on a principal basis and/or (d)
may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies)
and/or (e) solicit such investment, advisory or other services from any entity mentioned in thisreport and/or (f) act as a lender/borrower to such
company and may earn brokerage or other compensation. However, Analysts are forbidden to acquire, on their own account or hold securities
(physical or uncertificated, including derivatives) of companies in respect of which they are compiling and producing financial recommendations or
in the result of which they play a key part.

27