Aerospace Stock Down 37% From the Top. Time to Get in?

How often do you come across a situation where the market offers you the chance to invest in a company at the same price as three years ago, essentially giving you three years of past business for free?

One might argue that if a stock's price remains unchanged over three years, the business must have deteriorated.

However, this is not necessarily always the case. Markets are not always efficient in factoring in every piece of information about a stock.

This is where the opportunity for rational investors lies, and based on this, Benjamin Graham, the father of value investing, established the principles of value investing.

Value investing is a style of investing that involves buying assets at a price that is below their intrinsic value hoping to sell them at a higher price in the future.

Value investors believe that an asset's price, while it may fluctuate widely in the short-run, will move towards its intrinsic value in the long-run.

Today, based on this premise of value investing we have filtered out a stock for you which could potentially add value to your watchlist and eventually to your portfolio as well.

Let's take a closer look at this stock.

MTAR Technologies

MTAR Technologies is a manufacturing company renowned for its precision engineering capabilities in building nuclear and pressurised water reactors, aerospace engines, and other critical components.

The company's product portfolio includes fuel machining heads, drive mechanisms, water-lubricated bearings, liquid propulsion rocket engines, cryogenic engines, and high-precision sheet metal.

It caters to various industries such as nuclear, space, defence and aerospace.

MTAR Technologies boasts an impressive clientele, including ISRO, Rafael, Elbit, DRDO, BHEL, Bharat Dynamics, and the Indira Gandhi Centre for Atomic Research.

The company has played a vital role in several notable Indian missions, supplying core parts for rocket engines and cryogenic engines in missions like Chandrayaan-3 and Aditya L1.

MATR Technologies: Financial Snapshot

Coming to its financials, for FY24, the company's revenue rose slightly by 1.2% to Rs 5.8 bn. However, the net profit for the year declined 26.8% to Rs 1.1 bn.

Notably, MTAR Technologies missed its revenue guidance for the financial year 2024, which was projected at Rs 6.1 bn.

The management attributed the lower-than-expected results to the deferment of orders in the clean energy segment and delays in the execution of projects in the space vertical.

In response to these challenges, the company has revised its revenue growth guidance for the financial year 2025, lowering it to a range of 30% to 35%, down from the previous guidance of 45% to 50% shared after its December quarter results.

The company has also adjusted its EBITDA margin expectations to between 21% and 23%, compared to the earlier guidance of 26%.

The net profit also saw a significant drop, declining by 84.3% to Rs 48.7 m, compared to Rs 310.7 m in the same quarter last year.

Despite these setbacks, MTAR Technologies continues to secure new business.

It won an export orders worth US$ 16.73 m (approximately Rs 1.4 bn) on 8 August 2024 in the clean energy fuel cells vertical for the execution of power units and associated components.

After the poor results in FY24, the Q1 FY25 results have also disappointed investors.

In Q1 FY25, MTAR Technologies reported a revenue from operations of Rs 1.28 bn, a 15.9% decrease compared to Rs 1.53 bn in Q1 FY24.

The company's operating profit for the quarter stood at Rs 166 m, a substantial 51.9% decline from Rs 345 m in the same period last year.

Profit Before Tax (PBT) also saw a substantial drop, coming in at Rs 62 m, which was a 77.2% decrease from Rs 273 m in Q1 FY24.

Similarly, Profit After Tax (PAT) was reported at Rs 44 m, a 78.2% decline compared to Rs 203 m in the same quarter of the previous year.

The management has expressed a positive outlook for the remainder of the year, emphasising that the company is anticipating its highest-ever revenue in Q2 FY25 and expects a stronger execution in the second half of the year compared to the first half.

The management further highlighted that margins are expected to progressively improve starting from Q2.

For more details, see the MTAR Technologies company fact sheet and quarterly results.

How MTAR Technologies' Share Price has Performed Recently?

In the past 6 days, MTAR Technologies' share price has moved down 6.3%.

In a month, the stock is down 13%.

Shares of MTAR Technologies have declined 40% from its 52-week high of Rs 2,902.4 to Rs 1,727 on 14 August 2024. In 2024 so far, shares of the company have declined 19%.

Here's a table comparing MTAR Technologies with its peers.

Comparative Analysis

Company	P/E	P/B	Mkt. Cap (Rs bn)	52W L (Rs)	52W H (Rs)
MTAR Technologies	128.1	7.7	52.3	1,600.00	2,920.00
HAL	41.23	10.78	314.2	1,767.80	5,674.75
Thermax	73.17	11.57	51.4	2,500.25	5,839.95
Jupiter Wagons	65.49	9.78	23.6	251.95	748.1
Titagarh Rail Systems	64.6	8.48	18.8	610.1	1,896.95
BEML	55.7	5.98	16	1,905.05	5,488.00
Praj Industries	43.8	10.6	13.5	448	757.95
Texmaco Rail	90.4	4.4	10.2	110.7	296.49
Azad Engineering	140.8	14.4	9.6	642.4	2,080.00
Skipper	44.7	4.6	4.4	168.38	441

Data Source: Equitymaster

What Next?

Looking ahead, MTAR Technologies is focused on driving revenue growth, diversifying its business, and forming strategic partnerships.

It has ambitious plans for capital expenditure, intending to establish new manufacturing units in Europe and the US.

This expansion will increase the company's total manufacturing facilities from seven to nine, demonstrating its commitment to growth despite recent challenges.

The company is also focused on expanding its customer base and developing initial articles to ensure sustained growth.

It is addressing challenges in the clean energy sector while exploring opportunities in aerospace, defence, and aviation.

Despite facing challenges in the clean energy segment, the company has recently secured orders amounting to Rs 1.40 bn and is optimistic about receiving additional orders in this sector this year.

Management indicated that the company expects a significant inflow of orders from the Oil & Gas sector and other industries in the second half of the year, which will contribute to its growth and performance.

Looking ahead, the company remains optimistic about favourable policy developments following the US elections in November 2024.

Conclusion

A stock trading at the same price as it did three years ago can present a compelling value investment opportunity.

It could reflect market inefficiencies, potentially aligning with Benjamin Graham's principles of buying below intrinsic value.

However, investors should approach with caution, as a stagnant price might also signal underlying business challenges or deteriorating fundamentals.

Additionally, market inefficiencies can persist longer than expected.

Thorough research and a cautious approach are essential to ensure that the investment aligns with your financial goals and risk tolerance before making any decisions.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.