Buy Unimech Aerospace Ltd for the Target Rs 1,635 by Motilal Oswal Financial Services Ltd
Strong all-round performance; on a rapid growth path Revenue/EBITDA/PAT surge 71%/98%/46% YoY in 1QFY27
Unimech Aerospace (UNIMECH) reported strong results in 1QFY27 as its consolidated revenue/EBITDA/APAT surged 71%/98%/46% YoY. Revenue growth was driven by 35% growth in the organic business, mainly aero tooling, and INR220m additional revenue from Hobel Bellow’s two-month consolidation. EBITDA margin stood high at 36.5%. Other income declined 36% YoY and 50% QoQ as IPO money got deployed in the Hobel Bellows acquisition. Despite this, PAT margin was high at ~26%
Valuation and view: reiterate BUY
After a strong performance in 1Q, we increase our earnings estimates for FY27E/28E by 32%/7%, mainly due to better-than-expected margins. After a flattish revenue and decline in profits on margin contraction in FY26, we expect UNIMECH to post a CAGR of 75%/87%/62% in revenue/EBITDA/APAT over FY26-28E with ~36% EBITDA margin. RoE/RoCE (pre-tax) are also expected to expand to ~16%/18% in FY28 from 9%/12% in FY26, aided by better plant utilization and strong operating results. We reiterate our BUY rating with a revised TP of INR1,635, based on 50x FY28E EPS. We believe the company is strategically positioned to capture structural tailwinds in the aerospace & defense, energy, and semiconductor equipment sectors. Slow ramp-up in new business and contraction in margins are key risks to our call.
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