Indian precision engineering company MTAR Technologies underwent a considerable drop in share prices on Thursday, November 9, 2023, with a decrease of over 11.7% on the National Stock Exchange (NSE) and BSE. This decline was sparked by a reported drop in net profit for Q2FY24 and a downward revision to the company's FY24 guidance. The trading day saw a surge in volume, with approximately 1.7 million shares traded on both NSE and BSE by mid-day, significantly surpassing the one-month average of 0.3 million shares. By 12:35 PM, shares had dropped further to Rs 2,297.35.
In Q2FY24 ending September 30, 2023, MTAR Technologies, a manufacturer of precision-engineered systems for various sectors including civil nuclear power, fuel cells, space, defence, and clean energy, reported a net profit decrease of 17% to ₹20.5 crore from the same quarter of the previous year. This was lower than Bloomberg's anticipated ₹26.5 crore. Despite this decrease in net profit, the company registered a rise in operational revenue by 32% to ₹166.8 crore, up from ₹126.2 crore of the corresponding quarter last year.
However, an upsurge in costs and inventories led to a decrease in gross profit margin from 54.1% YoY to 45.6% and sequentially from Q1FY24's 49.9%. These rising expenses resulted in only a minimal YoY increase in EBITDA to ₹36.1 crore from Rs 34.9 crore, causing the EBITDA margin to contract to 21.6% in the quarter under study from 27.2% last year and 22.7% in the previous quarter.
MTAR secured orders worth ₹79.6 crore in various sectors during Q2FY24, including Civil Nuclear Power, Space, Defence, Fuel Cells, Hydel & Others sectors. However, the company's Managing Director and Promoter, Parvat Srinivas Reddy, revised the annual guidance for FY 2023-24 to ₹670-700 crore from the initial ₹830-860 crore due to the deferment of shipping plans for confirmed orders from Clean Energy into the next fiscal year. Ebitda growth estimates were also reduced to 26 percent +/-100 basis points from the previous forecast of 28 percent +/-100 bps.
Foreign Institutional Investors increased their holdings to 8.8 percent while Mutual Funds lowered their stake from 25.9 percent to 22.8 percent. MTAR's shares had hit a 52-week high of Rs 2,920 on September 11, 2023, and a low of Rs 1,472.4, with an overall decline of 23 percent from its September high.
Despite the downward adjustments and the drop in share prices, MTAR's shares rebounded slightly later in the day, trading at an 8.8% deficit by 11:19 AM. This outpaced a nominal 0.1% drop in the NSE Nifty 50 as predicted by Bloomberg. MTAR operates seven manufacturing units, including an export-oriented unit each in Hyderabad, Telangana, and expects an acceleration of orders inflow from H2FY24.
InvestingPro Insights
Based on the real-time data from InvestingPro, MTAR Technologies yields a high return on invested capital and has been consistently increasing its earnings per share. This aligns with the reported 32.2% YoY increase in revenue for Q2FY24.
InvestingPro Tip: MTAR, despite the recent downward adjustment to the company's FY24 guidance, has been a prominent player in the Machinery industry, often moving against market trends. This characteristic could be of interest to investors looking for some portfolio diversification.
Another InvestingPro Tip to consider is the company's high return over the last year, which despite the recent dip, suggests a potential for strong long-term performance.
InvestingPro offers 17 additional tips for MTAR Technologies, providing an in-depth analysis for those interested in further understanding the company's financial health and market position.
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