Why MTAR Technologies Share Price is Falling

On Wednesday, 14 February 2024, the domestic market experienced a significant downturn, mirroring global trends. This came in the wake of higher-than-anticipated US inflation, casting a shadow over market sentiment.

The latest US inflation data has disrupted earlier forecasts about the Federal Reserve's timeline for initiating interest rate cuts.

Following this update, 27 stocks in the Sensex and 44 in the Nifty pack experienced declines, contributing to overall negative market sentiment.

This impacted other stocks as well, with MTAR Technologies experiencing an 11% decline in its share price today.

Here's what dragged the stock lower.

#1 Weak Results

Shares of the company declined after it posted weak numbers for the December 2023 quarter.

The company recorded a 26.3% year-on-year (YoY) decline in revenue, at Rs 1.2 billion (bn) compared to Rs 1.6 bn the previous year.

Due to the decline in revenue, the company's operating profit also plummeted by 48% YoY to Rs 234 m from Rs 450 m a year ago. As a result, operating profit margins declined from 28% to 19.8%.

Consequentially, the company's net profit witnessed a substantial drop to Rs 104 m, marking a 67% decrease.

Over the nine months ending December 2023, the company reported a 16% YoY increase in revenue, reaching Rs 4.4 bn, driven by heightened demand in previous quarters.

However, operating profit experienced a 10% decline, amounting to Rs 945 m compared to Rs 1 bn the previous year.

The net profit for the company also took a 29.2% hit, totalling Rs 512 million against Rs 724 million, with this decline attributed to a 14% YoY rise in employee benefit expenses and other expenses.

#2 Stake sell

Another reason why the shares have been falling is the reduction in promoter holding.

In the December 2023 quarter, promoters reduced their stake from 39.1% to 37.3%. This adjustment follows insider G. Reddy's sale of shares in December, amounting to Rs 239 million at a rate of Rs 1,950 per share.

It's noteworthy that this is not the first occurrence of such a reduction, as promoters have been trimming their stake since the June 2022 quarter.

Quarter ending	22-Mar	22-Jun	Sep-22	Dec-22	Mar-23	Jun-23	Sep-23	Dec-23
Stake (%)	50.3	47.5	47.2	47.2	46.6	39.1	39.1	37.3

In addition to the promoters, mutual funds have also decreased their stake in the company, declining from 22.9% in the September 2023 quarter to 18.2% in the December 2023 quarter.

This has additionally weighed on the stock, causing it to decline further.

What Next?

Looking ahead, Parvat Srinivas Reddy, Managing Director & Promoter of MTAR Technologies, anticipates a marginal increase in revenues in FY24 compared to FY23.

This can be attributed to the deferment of export shipments in the clean energy sector to the next fiscal year.

Despite this, the management is optimistic about the growth prospects for FY25, projecting a substantial 45 to 50% year-on-year increase in revenues.

Further, the company is in its final stages of discussion with reputed global MNCs and has made good progress in the Small Satellite Launch Vehicle project.

Additionally, the company has received Rs 2.9 bn of orders in various sectors, including clean energy - civil nuclear power, fuel cells and hydel, space, defence, products and others in Q3 FY24.

MTAR is also working on developing its defense products, further fueling Modi's Make in India initiative.

How MTAR Technologies Shares Have Performed Recently

MTAR Technologies shares have fallen 21% in the last one month. In past five days the stock is down 15%.

MTAR Technologies touched its 52-week high of Rs 2,920.4 on 11 September 2023 and a 52-week low of Rs 1,473 on 28 March 2023.

At the current price, MTAR Technologies trades at a PE multiple of 71.9 and a price-to-book value multiple of 8.9x.

About MTAR Technologies

MTAR Technologies, founded in 1970, has a diversified portfolio of 14 kinds of products in the nuclear sector, six kinds of products in the space and defense sectors, and three kinds of products in the clean energy sector.

It constructs nuclear and pressurised water reactors, aerospace engines, and numerous other important parts, and assemblies.

On 15 March 2021, MTAR Technologies made a spectacular debut in the stock market and rose 85% over the issue price.

However, it didn't take long before the company started to face headwinds and the volatility of the market.

The sectors in which MTAR Technologies operates - clean energy, space, aeronautics, defense, etc - hold bright prospects.

However, before investing one should always check the company's fundamentals and its recent financial performance.

To know more about the company, see the MTAR Technologies company fact sheet and quarterly results.

You can also compare companies with their peers.

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