December 15, 2023
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Azad Engineering IPO Guidance, Apply, Retain and Accumulate!!
This is also the much-awaited IPO. The company is one of the key manufacturers of its qualified product lines supplying to global original equipment manufacturers (“OEMs”) in the aerospace and defence, energy, and oil and gas industries, manufacturing highly engineered, complex and mission and life-critical components.
It manufactures complex and highly engineered precision forged and machined components that are mission and life-critical and hence, some of its products have a “zero parts per million” defects requirement.
Its customers include global OEMs across the aerospace and defence, energy, and oil and gas industries such as General Electric, Honeywell International Inc., Mitsubishi Heavy Industries, Ltd., Siemens Energy, Eaton Aerospace and MAN Energy Solutions SE.The Company’s aerospace and defence products include airfoils/ blades and components for engines, auxiliary power units (“APUs”), hydraulics, actuating systems, flight controls, fuel and inerting sections of commercial and defence aircrafts and spacecrafts, among other defence systems and various critical components for missiles. It has supplied critical components to major commercial aircraft manufacturers such as B737, B737 Max, B747, B777, B777X, A320, A350, A355, A350 XWB, Gulfstream G550 and is currently in discussions for supply of components for new engine platforms to various kinds of aircraft manufacturers. In the energy industry, the Company produces high-precision rotating and stationary 3D airfoils/ blades, special machined parts and combustion component assemblies for land-based turbines with applications in industrial and energy plants using different fuel types such as nuclear, hydrogen, natural gas and thermal. For the oil and gas industry, it manufactures components of drilling rigs such as drill bits and other critical components that are used in drilling equipment and are part of exploration and production phase.
Most of its revenues are derived from exports to global OEMs, backed by long-term contracts and as
of June 30, 2023, 90.68% of its total revenue was from contracts with customers located outside India.
Among the addressable markets for the Company, the market for aerospace and defence components was the largest at Rs 990 billion in Financial Year 2022 and is expected to go up to Rs. 1,530 billion by Financial Year 2027 with the highest CAGR of +9% by 2027. It supplies components to six of the key manufacturers in the aerospace and defence industries.
The overall addressable market across aerospace and defence and energy components for its Company is expected to grow at +7% CAGR from Rs 1,280 billion in Financial Year 2022 to Rs 1,810 billion in Financial Year 2027 2027. Additionally, the addressable market for oilfield drilling components is expected to grow at +4% CAGR by Financial Year 2027.
IPO Size: Its IPO size is Rs. 740 crore comprises of Fresh issue of Capital and Offer for sale. IPO size net of Anchor portion is just of Rs.518 Cr with Retail portion of Rs. 259 Cr and HNI portion of Rs. 111 Cr. So huge oversubscription is a sure thing.
Now let’s talk of financial part.
Azad Engineering has demonstrated consistent growth in terms of revenues and profitability. Its addressable market is expected to grow at high percentage. If we consider the earnings of FY23, the shares appear to have offered at costly valuation. Yet we should consider and estimate the earnings for current year and from that angle, the shares are at very reasonable valuation. The shares are offered at PE multiple of 47.64 based on the estimated EPS for the year 23-24.
So? There is room for huge listing gains and if you do not get allotment, buy on listing day and it can bring good returns in next 18 months. You may like to study latest GMP, click
So, our Guidance?? APPLY, Retain, Accumulate. (means? Apply this IPO, If you get allotment, hold and if donot get allotment, accumulate as medium term investment)
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