Megatherm Induction Limited is engaged in the business of manufacturing of induction heating and melting products by means of electric induction like induction melting furnace and induction heating equipment. Besides induction melting & heating equipments the company produces various up-stream & down-stream plant & machineries associated with steel melt shops such as, transformers, ladle refining furnaces, continuous casting machines, fume extraction systems etc. The Company also manufacturers electric arc furnaces for alloys & special steel making industries, the services portfolio includes turnkey solutions for steel plant, which involves design, engineering, supply, erection & commissioning of the steel melt shops using both insourced & outsourced plant & machineries and after sales service, involving maintenance contracts & spare parts business. Following are the key industries to which the products manufactured by the company caters to– 1. Secondary Steel producers involved in scrap recycling, 2. Primary Steel producers involved in conversion of iron ore into sponge iron & subsequent conversion into steel through Induction Melting, 3. Auto ancillaries, 4. Ordnance factories & Railways, 5. DI pipe producers and diverse engineering industries involved in producing critical parts in its captive casting, forging & metal working units. Company has gradually expanded the product portfolio including transformers, metallurgical equipment and allied axillary equipment. Apart from this, they have ventured into the business of installation and setting up of steel melt shops. The installation of these steel shops involved planning and understanding of the customer’s requirements. The company provides a complete solution to the customers for their steel making needs and include equipment’s like transformers, induction melting furnaces, static frequency converters, water cooling plant, fume extraction system, ladle refining furnaces, continuous casting machines, in line induction billet heaters etc. As on December 31, 2023, they have an order book of approximately Rs. 28000 Lakhs. They have over the years, expanded the customer base spread across many countries around the globe. Further, because of the commitment towards customer satisfaction and performance of the equipment in different sectors and different industry have helped to increase the revenues and operations. They export the products to South America (e.g. Argentina, Brazil, etc), Africa (e.g. South Africa, Kenya, Tanzania, Ghana, Nigeria), Gulf (e.g. Saudi Arabia, UAE), Europe (e.g. Poland, France), SAARC (e.g. Bangladesh, Nepal, Bhutan) and South East Asia (e.g. Indonesia, Malaysia). For Fiscals 2023, 2022 and 2021 the exports were Rs. 6826.20 lakhs, Rs. 3743.40 lakhs and Rs. 3784.77 lakhs which constituted 25.67%, 19.93%, and 34.72% of the revenue from operations respectively. As on December 31, 2023, they have an order book of approximately Rs. 28000 Lakhs. Company owns and operates from the manufacturing facility located at Kharagpur, West Bengal. The annual aggregate installed capacity for manufacturing of furnace and transformers is around 300 numbers as of March 31, 2023. The manufacturing facility is equipped with requisite infrastructure including machineries, testing laboratory and other handling equipment to facilitate smooth manufacturing process. As per financial performance, Megatherm Induction Limited has posted total income / net profits of Rs 109.27 Cr / Rs 3.09 Cr (FY21), Rs 188.47 Cr / Rs 1.10 Cr (FY22), Rs 266.44 Cr / Rs 14.00 Cr (FY23) and Rs 147.32 Cr / Rs 7.59 Cr (upto Q2 FY24). So as per previous financials data, company has shown good growth, but sudden rise in net profit just before IPO raises doubts. Also debt of company is high. Company has posted an average EPS of Rs 5.70 and average RoNW of 16.30% for last three fiscals. Issue is priced at a P/BV of 2.57 as per NAV of 42.04 as on 30.09.23. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 184.81, 14.53 and 13.40 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Hem Securities Limited is associated with this SME IPO and handled 38 SME IPOs in last 3 year. From last 10 IPOs, all opened above issue price or at par on the day of listing. As of now from last 10 IPOs, all are trading above issue price. ( As on 19.01.24 ) As per financials, Megatherm Induction Limited has shown good results, RoNW is 27.66% and P/E is respectively 184.61, 14.53 and 13.40 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced. But sudden rise in net profit just before IPO and higher debt raises concerns. Company is in business of manufacturing of induction heating and melting products, which is highly competitive and fragmented segment. They have a healthy order book of around Rs 280/- Cr as on 31, Dec 23. Performance of BRLM is good. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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