MTAR Technologies: Business turns sluggish, guidance shrinks
Lower earnings and orders in hand to keep the stock under pressure.
Highlights
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- Stock tumbles as a result of subdued performance in Q4FY24
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- The company cuts revenue and profitability guidance
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- Delays in execution and deferment of projects impact outlook
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- Order book shrinks to Rs 915 crore
- Stock trading at 47 times its fiscal 2026 estimates
There has been a significant departure from what MTAR Technology (CMP: Rs 1845, Market capitalisation: Rs 5680 Crore, Stock Rating: underweight) guided earlier about its performance. While slowing execution, delays, and pressure on margins were visible in the past quarters, it was expected that the company would be able to recoup quickly.
However, the company has recorded revenues of Rs 581 crore in FY24 as against its guidance of Rs 610 crore. It has cut revenue growth guidance for the fiscal 2025 to 30-35 percent as against the earlier guidance of achieving a 45-50 percent growth. Even on the margin front, it expects to maintain the EBITDA margins at 21-23 percent as against the earlier guidance of
This comes as a surprise and that is why the stock tanked nearly 11 percent on Wednesday, closing at Rs 1839 a share. In light of the slowing business, the stock could remain under pressure because of lower earnings expectations. We have cut our estimates significantly because of lower guidance and orders in hand. The company’s order book has shrunk from almost Rs 1200 crore in December 2023 quarter to Rs 915 crore now, which is less than two times its annual revenue.
Factoring lower expectations, the stock is now trading at 47 times its fiscal 2026 estimates, which is expensive and there could be more pressure on prices.
The company reported a 27.2 percent year-on-year decline in revenues for the quarter ended March 2024. This was mainly on account of the deferment of orders in clean energy and delays in the execution of projects in the space segment.
Lower executions, delays, and cost pressure also resulted in a drop in profitability as the EBITDA margins, during the quarter ended March 2024, saw a sharp erosion to 12.7 percent as against 25 percent in the corresponding quarter of last year.
This along with an increase in interest and other costs, resulted in a steep 84.2 percent decline in net profits.
Overall, the company has delivered subdued numbers, while performance has deteriorated along with lower visibility.The management is confident about new orders, which are in the pipeline in aerospace and other segments. However, one should wait for better clarity and see if the company delivers on its guidance.
Bymoneycontrol
