IPO Note - Harsha Engineers International Limited By ICICI Direct
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Harsha Engineers International Limited - SUBSCRIBE
Credible player in bearing cages…
About the Company: Harsha Engineers International (HEIL) was incorporated on December 11, 2010. The part of the Harsha Group, HEIL is a leading engineering company that offers a diversified suite of products across geographies and end-use industries.
* It manufactures brass, steel and polyamide cages and stamped components with production facilities in Asia (India & China) and in Europe (Romania)
* HEIL’s market share is estimated to be ~50-60% in the Indian bearing cages market making it the largest manufacturer of precision bearing cages in the organised sector in India
Key triggers/Highlights:
* They offer a wide range of bearing cages starting from 20 mm to 2,000 mm in diameter while their bearing cages find application in the automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, renewables sectors, etc
* HEIL accounted for 6.5% market share in the global organised bearing brass, steel and polyamide cages market in CY21. In contrast, in India, HEIL is the market leader with between 50% and 60% of the organised market.
* HEIL has four strategically located manufacturing facilities for its engineering business with one of its principal manufacturing facilities at Changodar and one at Moraiya, near Ahmedabad, Gujarat in India
* The company has full-service capabilities across the product cycle including product design & development, material sourcing, designing and manufacturing under one roof
What should investors do? During FY20-22, HEIL registered CAGR revenue, EBITDA and PAT growth of 22.1%, 40.2% and 104.9%, respectively. Looking at the current economic scenario and demand in bearing space it is expected to perform on similar lines.
* We assign a SUBSCRIBE rating to the IPO
Key risk & concerns
* Exports contribute more than 60% of revenue. Any significant global slowdown can impact growth prospects
* Exposure to foreign currency exchange rate fluctuations which can cause HEIL’s quarterly results to fluctuate significantly.
* Inability to successfully diversify the product offerings of its engineering business
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