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MTAR Technologies: Motilal Oswal advises buying, says company well-positioned to capitalise on emerging opportunities
Posted On 22 May 2024
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Domestic brokerage firm Motilal Oswal in its latest report has initiated coverage on MTAR Technologies with a ‘buy’ rating and a price target of ₹2,800 per share, highlighting the company’s robust growth prospects. This target price reflects an upside of 32.7% from the stock’s latest closing price of 2,110 apiece.
The brokerage noted that MTAR Tech has become a key supplier of precision-engineered systems to major global multinationals, government departments, and large Indian public and private sector enterprises over the years.
It says that the company’s primary revenue stream comes from the clean energy fuel cells business, which is heavily reliant on Bloom Energy (BE). Additionally, the company’s other business segments, including nuclear, space, defence, and products, present significant growth opportunities.
The brokerage emphasised that the company is well-positioned to capitalise on emerging opportunities due to its strong manufacturing capabilities and established customer relationships.
It projects that MTAR Tech’s business segments will experience robust order inflows, with a CAGR of 39% during FY24E–26E, driven by rising global demand for fuel cells and increased government initiatives in the nuclear, space, and defence sectors.
Among these segments, the brokerage anticipates that the fuel cells segment will continue to dominate the order book and revenue, with its contribution expected to range between 50% and 57% by FY26, compared to 55%–60% in FY24.
Clean energy: A growth catalyst
The company specialises in manufacturing power units, particularly hot boxes like Yuma and Santa Cruz, which are essential components of solid oxide fuel cells (SOFC) and electrolyzers used by Bloom Energy USA (BE), a global leader in SOFC production.
According to the brokerage, this segment has witnessed remarkable growth, with a CAGR of 41% from FY18 to FY23. It constitutes a significant portion of MTAR Tech’s revenue, accounting for approximately 77% and 62% in FY23 and 9MFY24, respectively.
Notably, the United States and South Korea collectively represent 95% of the installed capacity of large-scale fuel cells for stationary applications, while other regions like Europe and Japan are exploring fuel cell adoption.
