Fundamental Analysis of MTAR Technologies: It is believed that an ancillary stock for a booming industry can be a more lucrative bet than core industry stocks sometimes.

One such ancillary stock is small-cap MTAR Technologies, a recently listed company supplying components to clean energy, defense, and space sectors.

In this article, we’ll conduct a fundamental analysis of MTAR Technologies to know if it is worth adding to our watchlists.

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Fundamental Analysis of MTAR Technologies

We’ll start by getting to know the history, business, and segments of the company. Next, we’ll equip ourselves with an overview of the industries in which the company operates. After that, we’ll race through the financials of the stock. A highlight of the future plans and a summary conclude the article at the end.

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Company Overview

MTAR Technologies was established in 1969 as a supplier of coolant channel assemblies to the Department of Atomic Energy, Government of India. Since then, it has evolved into a precision engineering company with an international footprint.

It is involved in the business of manufacturing critical components for civil nuclear energy, fuel cells, aerospace, and defense industries.

Its workforce of over 1,740 employees caters to high-profile domestic and international names such as Nuclear Power Corp. of India, ISRO, DRDO, HAL, Rafael Advanced Defense Systems, Hitachi Zosen, and Bloom Energy.

The company owns seven manufacturing facilities including an export-oriented unit in Hyderabad, Telangana for machining, fabrication, brazing & heat treatment, assembly & testing, and surface treatment.

The company went public in March 2021 raising Rs 596 crore out of which Rs 473 crore was an offer for sale. We’ll read more on segment analysis and shareholding structure in the sections ahead.

Segment Analysis

MTAR Technologies broadly classifies its product portfolio into four segments for internal reporting purposes: civil nuclear energy, fuel cells & others, aerospace, and defense. The share of fuel cells & others and the aerospace division in the total revenue has grown multifold over the years to 62.61% and 14.99% in FY22 respectively.

The civil nuclear energy division’s and defense division’s share has come down as their revenues have largely remained the same over the years.

A snapshot below shows the sectorial revenue breakdown of the revenues of the company over the years.

Fundamental Analysis of MTAR Technologies - Annual Report
Source: MTAR Technologies Ltd. Annual Report FY 2021-22

As for the geographical revenue share, income from abroad accounted for 62.73% of the total income for the company. However,  the concentration of the customers is a cause for concern. Two customers together accounted for Rs 233 crore or 73% of the revenues in FY22.

Industry Overview

Clean Energy – Fuel Cells

We’ll start with the clean energy – fuel cells industry as it is the largest division for the company. Fuel cells, like batteries, are used to provide power. But unlike batteries which need to be recharged, they provide energy as long as hydrogen or any other fuel is supplied to them. They are used in military equipment, unattended sensors, unmanned vehicles, automobiles, and more.

According to AEO 2020, the adoption of fuel cells clean energy is projected to grow from 150 MW in 2019 to 185-200 MW by 2025. Overall, the sector is estimated to grow 14-15% every year between 2020 and 2025, moving the technology towards mass adoption as the cost comes down.

Industry image
Source: MTAR Industries Ltd. AR FY 2021-22

Clean Energy Civil Nuclear

The civil nuclear energy sector is all set for rapid growth after the renewed focus of the government on it. 

NPCIL has planned to float tenders of 14 reactors presenting a Rs 350-435 billion market opportunity in the equipment space. Including the maintenance & refurbishment market, the sub-sector is projected to grow 1.7x during the next five years.


As for the Indian aerospace equipment market, it is estimated to touch Rs 4,600 to Rs 4,800 crore, compounding at 7-8% every year by 2025. Overall, the outlook for the sector is weak because of rising competition globally. However, rising private participation, small & micro satellites increase, and a rise in demand for SSLVs are some of the key growth drivers for the future.

Chandrayaan-3 Mission

As a feather in its cap, MTAR Technologies played a crucial role in the success of the Chandrayan-3 mission of India. It made critical components of the rocket engines and core pumps of cryogenic engines. These equipment’s and components were used for the take-off of the rocket launched by the ISRO.

We have not devoted separate space to the defense industry as it comprises a small portion of the company’s revenues presently.

MTAR Technologies – Financials

Revenue & Net Profit Growth

The revenues of MTAR Technologies have grown at an impressive CAGR of 15.07% p.a. over the previous five years from Rs 159.60 crore in FY18 to Rs 322.01 crore in FY22. 

The bottom line grew by 55% from Rs 39.20 crore in FY19 to Rs 60.88 crore in FY22. We have excluded FY18 net profit as the base period for calculating growth because of a low base. The net tax rate was high for the company resulting in a depressed net profit for the year.

The table below highlights the growth of operating revenue and net profit of MTAR Technologies for the previous five years.

Fiscal YearOperating RevenueOperating ProfitNet Profit
(figures in Rs Cr)

Operating & Net Profit Margin

The operating profit margin and net profit margin of the company have remained volatile over the years because of the difference in net tax, other income, and the rise in material cost.

It is a capital-intensive business with exposure to global headwinds when it comes to raw materials cost. Thus, any reduction in operating margins is more pronounced in the bottom line.

Overall, MTAR Technologies is a high-margin company. The table below shows the profit margins of the company for the last five financial years.

Fiscal YearOPMNPM
(figures in %)

Return Ratios: RoE & RoCE

In this section, we’ll analyze return ratios to assess the efficiency of the business as part of our fundamental analysis of MTAR Technologies.

Historically, the company has clocked return ratios: RoCE and RoE for its investors. The figures have come down in the last two fiscals as the company raised money via IPO and term loan. 

The data below presents the return ratios of MTAR Technologies from FY18 to FY22.

Fiscal YearRoCERoE)
(figures in %)

Debt / Equity & Interest Coverage Ratio

Moving on to the debt analysis of MTAR Technologies, we can note from the data below that the debt-to-equity ratio of the company reduced in FY21 when the company raised money through the IPO. But it increased in the next fiscal on the account of fresh borrowings for the investment in the Adibatla plant and higher working capital requirements.

Overall, MTAR Technologies seems a safe stock from the point of view of debt and interest coverage. The table below presents debt to equity ratio and interest coverage ratio for the last five fiscals.

Fiscal YearDebt / EquityInterest Coverage

Promoter Shareholding

A concern is a reduction in the promoters’ shareholding from 62.24% (pre-IPO) to 50.25% (post-IPO) and then further down to 47.18% (as of December 31, 2022). The promoters have sold a 3.07% stake since the listing.

The table below highlights the recent shareholding pattern of the company.

Shareholder type% Held

Future Plans of MTAR Technolgies

So far we have looked at only the previous years’ data for our fundamental analysis of MTAR Technologies. In this section, we’ll try to make a sense of what lies ahead for the company and its investors.

  1. Bloom Energy, a key customer of MTAR, has signed a $ 4.5 billion deal with a South Korean conglomerate. This presents a large order of 10,000 units for the company during the 2022 to 2024 period. 
  2. It recently started production at its sheet metal facility. This will result in higher order inflow in the coming years. 
  3. Furthermore, the Adibatla unit will also be producing specialized fabrication products for critical structures in the clean energy industry in the coming quarters.
  4. The board of the company has approved setting up a dedicated electronics manufacturing vertical in the future. Thus, MTAR will be making investments toward setting up an EMS facility in the near future.

MTAR Technologies – Key Metrics

We are almost at the end of our MTAR Technologies fundamental analysis. Let us take a quick look at some of the key metrics of stock.

CMP₹2,390Market Cap (Cr.)₹6,515.5 
EPS₹30.3Stock P/E60.59
Debt to Equity0.23Dividend Yield0
Promoter Holding47.2%Interest Coverage13.4x
Net Profit Margin29.9%Operating Profit Margin18.9%
Book Value₹183Price to Book Value9.48

In Conclusion

We are now at the end of our fundamental analysis of MTAR Technologies. The expansion plans and quarterly sales growth make it an attractive company. However, at present P/E of 57.8, is it a growth company or simply overvalued? The earnings growth and stable margins will likely result in shareholder gains in the future.

Do you think MTAR Technologies will be able to deliver more such impressive returns in the future to its shareholders? 

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