Unimech Aerospace IPO: A snapshot of peer-to-peer comparison of defence & aerospace component makers

Incorporated in 2016, Unimech Aerospace and Manufacturing is an engineering solutions company specialising in the manufacturing and supply of critical tools including mechanical assemblies, electromechanical systems, and components for aero-engine and airframe production. It caters for sectors like aerospace, defence, energy, and semiconductor industries.

Unimech Aerospace and Manufacturing IPO is open for subscription between 23 to 26 December. The IPO is a combination of fresh issue and an offer for sale. The price band has been set between ₹745 and ₹785 per share, with lot size of 19 shares.

Unimech Aerospace provides ‘build to print’ and ‘build to specification’ involving machining, fabrication, assembly, testing, and the development of new products. In FY24, Unichmech Aerospace and Manufacturing Ltd earned 99.35% of revenue from the aerospace sector, whereas 0.65% was derived from other sectors such as defence, energy, and semiconductors.

The aerospace and defence industries are dependent on precision tooling to manufacture high-performance components. The ground support tooling equipment is used in the manufacturing and maintenance of the aircraft.

With the expansion of global air travel, driven by increasing air travel demand and fleet modernization initiatives, the Aircraft Maintenance, Repair, and Overhaul (MRO) market is anticipated to witness significant growth and evolution. MRO services encompass a wide range of activities, including scheduled maintenance checks, unscheduled repairs, component replacement, and overhaul services.

Among listed companies, Unimech Aerospace and Manufacturing has peers such as Azad Engineering, Dynamatic Technologies, MTAR Technologies, Paras Defence & Space Technologies, and Data Patterns (India).

(Source: Screener.in and Company’s DRHP) (Note - *Approx estimation based on upper band for issue, ** Other than Unimech market-cap are as of December 23, 2024)

Unimech Aerospace and Manufacturing among listed peers has a significantly higher return on net worth of 9.92%, with the second highest of Paras Defense at 5.71%. Unimech has a good earning per share (EPS) of 8.49 per share, however, Dynamatic Technologies and Data Pattern have significantly higher EPS of 34.49 and 11.27 per share respectively. On the valuation front, at a P/E of 69x, the issue of Unimech Aerospace seems reasonable compared with peers.

A glance at listed peers

Azad Engineering Ltd, based in Hyderabad focuses on high-precision components, catering to aerospace, defence, energy, and oil & gas. Its exports span to Japan, the USA, and France. Dynamatic Technology is a Bangalore-based company operating in hydraulics, metallurgy, and aerospace & defence with Airbus and Boeing as key customers.

MTAR Technologies established in 1970 is engaged in critical precision components for nuclear, space, defence, and clean energy sectors. Paras Defense and Data Pattern are both specialised in defence electronics.

Comparison of financial indicators for FY24

In FY24, Unimech witnessed the highest triple-digit growth in revenue from operations of 121.71% among peers. Azad Engineering, Paras Defence, and Data Patterns (India) were the only other peers who recorded double-digit growth. During the previous financial year, Unimech reported ₹209 crore in revenue, whereas the highest was reported by Dynamatic Technologies at ₹1,429 crore.

Azad Engineering had the best gross margin among peers at 86.49%, followed by Data Patterns at 68.23%, and Unimech Aerospace at 65.90%. At the EBITDA level, Data Pattern led with a 42.64% margin, followed by Unimech’s 37.93%. Also, Unimech’s PAT margins stood at 27.85%, the second best among peers. Unimech maintains a low debt-to-equity ratio of (0.20x) almost similar to the majority of peers.

Comparison of operational indicators for FY24

Unichmech Aerospace operates 2 plants, while Dynamatic Technologies and MTAR Technologies operate 9 and 8 plants respectively as of December 2024.

Unichmech Aerospace outperformed its peers in operational efficiency, achieving a significant return on capital employed (ROCE) at 54.36%, followed by Data Patterns at 15.52%.

Unimech is efficient in cash management with the best cash conversion cycle of 117 days among peers whereas Azad Engineering and Data Pattern have significantly high 1028 days and 777 days respectively.

Unimech’s IPO looks solid, considering industry tailwinds and its presence in the niche segment. It outperforms through strong financial performance its best ROCE (54.36%) and RONW (9.92%) among peers. Dynamatic Technologies and Data Pattern have significant revenue and EPS but Unimech's valuation seems reasonable compared with peers at a P/E of 69x.