Up 275% in three years! Brokerages see more upside in this defence multibagger

MTAR Technologies Ltd, after a sharp correction from its recent highs, has hogged the attention of analysts at Dalal Street. While a domestic brokerage Motilal Oswal Financial Services has initiated coverage on the stock, while another one Anand Rathi sees a strong upside in the stock based on the technical parameters.  

MTAR Technologies has established itself as a key supplier of precision engineered systems for clean energy – fuel cells and nuclear– to global MNCs, government departments, and large Indian public and private sector enterprises. The company has seven manufacturing units (including one EOU) in Hyderabad, said Motilal Oswal.  

MTAR Tech's business segments are poised to report strong order inflows, aided by emerging global demand (fuel cells) and accelerated government initiatives. The nuclear, space, and defense sectors are also expected to see a significant ramp-up in order flows with increase in the government's focus on indigenization, it said.  

"Import substitution will emerge as a new growth engine for the company. We expect a revenue, Ebitda and adjusted PAT CAGR of 38 per cent, 53 per cent and 67 per cent, respectively, over FY 24-26, with RoE and RoCE improving to 23 per cent and 21per cent. We initiate coverage on MTAR Tech with a 'buy' rating and a target price of Rs 2,800," Motilal said.  

During the trading session on Wednesday, Shares of MTAR Technologies rose more than a per cent to Rs 2,145.30, commanding a total market capitalization of more than Rs 6,600 crore. The scrip had settled at Rs 2,110.85 in the previous trading session on Wednesday. The stock has corrected about 28 per cent from its 52-week high at Rs 2,920 hit in September 2023.  

MTAR Tech develops and manufactures components and equipment for the defense, aerospace, nuclear and clean energy sectors. The company also supplies specialized products such as ball screws, water lubricated bearings, roller screws, electro-mechanical actuation systems, ASP assemblies and more, which are used across diverse sectors.  

Bloom Energy, a global leader in solid oxide fuel cell which accounts for more than 80 per cent of revenues, has been associated with MTAR for over nine years. Share of Bloom Energy in the overall revenue mix will remain above 60 per cent over the medium term, expect the analysts.  

After peaking near the Rs 2,923 level, MTAR Technologies experienced a significant downturn, plummeting nearly Rs 1,260 points, which equated to a substantial 43 per cent decrease in its overall value. However, over the past week, the stock has stabilized within the Rs 1,800-1,900 range, establishing a solid support base, said Anand Rathi Shares and Stock Brokers.  

"During the stabilization period, a bullish divergence has appeared on the daily MACD scale, indicating a positive shift in market sentiment. Given these developments and observed chart patterns, it may be prudent for investors to consider initiating buy positions within the Rs 2,050-2,100 range, for an upside target of Rs 2,535. Tt is advisable to set a stop-loss at Rs 1,845 on a daily basis," it said.  

MTAR Technologies had raised a total of Rs 596.41 crore via its initial public offering in March 2021. The company issued its shares at Rs 575 apiece. The multibagger counter has delivered a return about 275 per cent from its issue price so far.  

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