Buy Man Industries Ltd For Target Rs. 480 - Choice Broking Ltd
Marquee Investors Repose Faith
Short Summary: MAN Board approved raising up to INR 3Bn via issue of convertible warrants to promoter and marque non promoter allottees (EGBM to seek shareholder approval scheduled for 25 June 2025). These funds would be useful for the executing the capacity additions underway at Jammu & the Middle East. This proposed fund raise reposes investor faith in the prospects of MAN, would be viewed as a key positive by the market.
Event: On 31 May 2025 Man Industries (MAN) board has approved raising up to INR 3Bn via issue of 9.15Mn convertible warrants on a preferential basis to promoters (1.22Mn) and an other cohort of non promoter allottees (7.93Mn) at a price of INR 328/sh. Extraordinary General Meeting (EGM) is scheduled to be held on Wednesday, 25 June 2025 for seeking shareholder's approval. The list of proposed non promoter allottees includes reputed institutional and individual investors.
The proceeds from this issue are expected to be received in 2 tranches: 25% at the time of allotment and the rest 75% at the time of conversion to equity shares within 18 months from the date of allotment. Upon conversion to equity shares post receiving full money within the next 18 months, the fresh issue of equity shares will result in a dilution of 12%.
Additionally, during the week ending 01 June 2025 MAN also issued equity shares of 2.5Mn upon conversion of warrants that were issued in Dec 2023, at an issue price of INR 183.5/sh. Total amount received from this transaction is INR 459Mn, 25% of it was received in Dec 2023 and the rest 75% last week.
Valuation:
We arrive at a 1 year forward TP of INR 480/share (INR 450/sh earlier) for MAN. We now value MAN on our EV/CE framework where we assign an EV/CE multiple of 1.35/ 1.35x for FY27E/28E, which we believe is conservative given strong ROCE even under reasonable operational assumptions. This valuation framework gives us the flexibility to assign a commensurate valuation multiple basis an objective assessment of the quantifiable forecast financial performance of the company. We do a sanity check of our EV/CE TP using implied EV/EBITDA, P/BV, and P/E multiples On our TP of INR 480 FY28E implied EVEBITDA/PB/PE multiples are 5.9x/1.2x/10.1x. Slow down in conversion of bid pipeline into order book and slow ramp up of upcoming capacities are risks to our BUY rating.
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SEBI Registration no.: INZ 000160131
