IGI Logo

Robust 2Q; momentum to continue in 2HFY27

Earnings above our estimate

* MTAR Technologies (MTARTECH) delivered a healthy 2QFY27 performance, with revenue/EBITDA surging 2.9x/5.8x YoY, fueled by 2.4x YoY growth in fuel cells (57% of revenue), and 2.7x YoY growth in Aerospace & Defense (11% of revenue). The order book grew 4.6x YoY/16% QoQ to INR59.8b, with strong inflows (~INR12.4b).

* Driven by strong order book growth across segments, ongoing fuel-cell capacity expansion, robust nuclear opportunities, doubling of aerospace revenue in FY27E, and growing contribution from Product Solutions & Data Center Infrastructure, we believe MTARTECH is well-positioned to achieve growth across all segments.

* Factoring in strong 1HFY27 results, we raise our FY27/FY28 earnings estimates by 8%/9%. We reiterate our BUY rating on the stock with a TP of INR9,000 (55x FY28E EPS translating into a ~0.4x PEG ratio on FY26-28E EPS CAGR).

Stellar topline growth coupled with better margins

* MTARTECH’s consolidated revenue grew 2.9x YoY to INR4.1b (est. INR3.2b). EBITDA grew 5.8x YoY to INR992m (est. INR749m). EBITDA margin expanded 1,184bp YoY to 24.4% (est. 23%). Gross margin was 46.8% vs. 51.2% in 2QFY26 due to a change in the product mix. Employee costs/other expenses as a % of sales stood at 12.2%/10.2% Vs 24.6%/14.1% in 2QFY26, indicating operating leverage.

* Adj. PAT surged 14x YoY to INR598m (est. INR450m) for the quarter.

* Revenue from Clean Energy – Fuel Cell/Aerospace & Defense (A&D)/ Product & Others grew 2.4x/2.2x/7.7x YoY to INR2.3b/INR1.3m/INR438m, while Clean Energy – Civil Nuclear remained flat YoY at INR55m. Revenue mix between Civil/Fuel cells/Aerospace & Defense/Products & others stood at 1%/57%/11%/31% in 2QFY27 vs. 4%/72%/12%/12% in 2QFY26.

* In 1HFY27; revenue/PAT surged 2.6x/7.3x YoY to INR7.b/INR1.1b and EBITDA jumped by 4x YoY to INR1.8b, with the EBITDA margin expanding from 16% in 1HFY26 to 24% in 1HFY27.

* The order book as of Sep’26 stood at INR59.8b (vs. INR51.4b/INR12.9b as on Jun’26/Sep’26), with inflows of ~INR12.4b in 2QFY27 (cumulative INR41.6b inflows in 1HFY27). The order book mix stood at ~67.2%/13.5%/ 7.2%/12.1% for Clean Energy – Fuel Cell/Clean Energy – Nuclear/A&D/ Product & Others.

* NWC days declined to 50 as of Sep’26 from 172/60 as of Mar’26/Jun’26. The inventory/receivable/ payable days stood at 162/68/180 (vs. 145/82/ 167 in Mar’26)

Valuation and view

* MTARTECH has a strong order book of ~INR59.8b as of Sep’26, driven by a healthy pipeline across clean energy (fuel cells), A&D, nuclear, and products & others sectors. The commercialization of new products and onboarding of new clients across segments are expected to drive further growth. Incrementally, enhancing wallet share with existing customers will also accelerate growth. MTARTECH is foraying into new high-growth sectors, which will contribute meaningfully over the coming years. We anticipate these initiatives to translate into strong growth and margin expansion.

* The company targets 3x asset turns on incremental capex (INR5b), with ~70% of the investment directed toward the fuel cell segment. The fuel cell phase-2 expansion is expected to be commissioned by Sep-Oct'26, followed by a multi-fold phase-3 expansion by Mar'27. The current order book is expected to be executed over the next three years.

* We estimate a CAGR of 85%/107%/127% in revenue/EBITDA/adj. PAT over FY26- FY28, and upgrade our EPS estimates by 8%/9% for FY27/FY28. We reiterate our BUY rating on the stock with a TP of INR9,000 (based on 55x FY28E EPS and translating into a ~0.4x PEG ratio on FY26-28E EPS CAGR).

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412