Established in 2003, Macpower CNC Machines Ltd is Rajkot, Gujarat based company, engaged in manufacturing of CNC Turning Centers, Vertical Machining Centers, Horizontal Machining Centers, Cylindrical Grinder, Vertical Turret Lathe, TurnMill Centers, Drill Tap Center, Twin Spindle VMC and also Multi Tasking, 5-axis along with subspindle. Macpower has also offered Robotic Automation integrated with CNC machines to cope up the demand of technology driven machining excellence. CNC Machining is a process used in the manufacturing sector that involves the use of computers to control machine tools. A computer program is customised for an object and the machines are programmed with CNC machining language (called G-code) that essentially controls all features like feed rate, coordination, Position and RPM. With CNC machining, the computer can control exact positioning and speed. Company imports various components and parts i.e. Spindle, Ball Screw, Linear Guide ways,Linear Glass Scale, Live Tool Turret, Live Tool Holder, Probe, CNC System from Taiwan, Germany, Japan, Italy etc. Company has in house research and development approach allows the company to offer customised solutions to its customers. Macpower is registered to ISO 9001(Design), a universally accepted quality assurance designation by Tuv Suddeutchland India Private Limited (Germany) and also ISO 9001: 2008 by BSCIC, India. Company has catered to over 178 customers with total 213 Machines during the six months ended September 30,2017 and 236 customers with total 343 Machines in Financial Year 2017 across various sectors like Automobile, Agriculture, Earth Moving Equipment’s, Bearings, General Engineering, Aerospace, Metal,Petroleum, Construction Industries, Defence, PSUs. As on the date of this Red Herring Prospectus, company has 356 employees on payroll. On financial performance front, MCNC has posted turnover/net profits of Rs. 37.57 cr. / Rs. - (1.22) cr. (FY13), Rs. 42.37 cr. / Rs. 0.28 cr. (FY14), Rs. 64.26 cr. / Rs. 0.29 cr. (FY15), Rs. 61.16 cr. / Rs. 0.49 cr. (FY16) and Rs. 69.55 cr. / Rs. 0.79 cr. For H1 of 2018, it has reported net profit of Rs. 2.50 cr. on a turnover of Rs. 46.45 cr. From FY15 to FY17, its top-line and bottom-line are almost identical, but there is sudden jump in bottom-line and top-line for H1 of FY18 is surprising. For last three fiscals it has posted an average EPS of Rs. 0.92 and an average RoNW of 19.10% on an equity base of Rs. 0.60 crore. If we annualise latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 27. Asking price is at a P/BV of 14 (on its NAV of Rs. 10.06 as on 30.09.17). As per offer documents, its listed peer, Lokesh Machines is trading at P/E of 29 as on 01.03.18. So issue is fully priced as per latest earnings. On merchant banker's front, this is the 63rd mandate from its stable in last three fiscals. Out of last 10 listings, 1 opened at discount, 1 opened at par and the rest with premiums ranging from 4% to 130% on the day of listing. (Listing at premium of 130% was for main board IPO of Astron Paper) As per financials, company's top-line is constant with some improvement in bottom-line, RoNW is 19.10% for last three fiscals and issue looks fully priced as per latest earnings. There is big jump in earnings of H1 FY18, which is very surprising. So, we give NEUTRAL rating to this SME IPO.
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