Aeroflex Industries (AIL), a
subsidiary of SAT Industries, is a global flexible flow solutions company
developing and manufacturing of environment friendly metallic flexible
corrugated hoses, assemblies, and fittings for a diverse range of industrial
sectors in both global as well as domestic market. In the last three fiscals,
exports accounted about 81-85% of the total revenue of the company.
Metallic flexible corrugated
hoses are used on an ongoing basis for efficient flow of varied types of
materials and substances including liquid, air and solid from one point to
another. The metallic flexible flow solutions of the company are made of SS.
They have recently developed products made of bronze as well. And these
products replace flow solutions made of rubber and polymers.
Metallic flexible flow solution
product portfolio of the company is diverse comprising corrugated stainless-steel
hose, Double interlock flexible metal hoses, Composite hose and stainless-steel
hose assemblies. The offerings also include braided hoses, unbraided hoses,
solar hoses, gas hoses, vacuum hoses, braiding, interlock hoses, hose
assemblies, lancing hose assemblies, jacketed hose assemblies, exhaust
connectors, exhaust gas recirculation (EGR) tubes, expansion bellows,
compensators, and related end fittings.
Offers a range of metallic
flexible corrugated hoses with diameters starting from ¼ inch to 14 inches and
handle pressure capacity of upto 300 bars. Interms of SKUs, the company had a vast
repertoire of more than 1700 SKUs as on 31 March 2023. Its flexible flow solutions made with
stainless steel corrugation conform to BS 6501 Part 1, ISO 10380 and PED CE and
are manufactured as per type A, B, and C flexibility.
AIL’s products, owing to the
stainless-steel material, are used for food-grade hoses, and widely used in
pharmaceutical and other food-related industries. Apart from these two its
products find application in fire sprinklers, HVAC, and natural gas. Steel and
Metal, Petrochemicals and Oil Refineries, Bulk Terminal Handling, Chemicals and
Paper and Pulp. Emerging sectors such as Hydrogen, Semiconductors, Robotics
& Automation, Aerospace and Defence, Solar and Electric Mobility are emerging
as end use industries for metallic flexible flow solutions. In FY2023, revenue about 21.96% came from steel,
18.93% from O&G, 16.45% from refineries, 16.40% from fire sprinklers,
15.70% from chemicals, 8.19% from metals/mining, 0.65% from solar, and 1.73%
from others.
Its diversified customer base
comprises distributors, fabricators, MROs, OEMs, and companies operating in a
wide range of industries.
The manufacturing facility of
the company is located at Taloja, Navi Mumbai, in Maharashtra. The total
installed capacity is about 11.00 million meters p.a. The capacity utilization of the plant in FY2023
stood at 83%.
The current initial public offer
comprises a Fresh Issue aggregating to Rs 162 crore and an Offer for Sale of up
to 17500000equity shares. The OFS is made by Sat Industries, the promoters of
the company, who post-issue will hold 61.23% stake.
Proceeds from the issue will be
used to repay debt (Rs 32 crore), meet working capital needs (Rs 84 crore) and general
corporate purposes. As on July 31, 2023,
the aggregate outstanding borrowings of the company was Rs 39.442 crore.
Strengths
Focuses on environment friendly metal
flexible flow solutions that is gaining widespread acceptance, undoubtedly due
to its superior attributes compared to non-metallic flexible flow products.
A comprehensive range of
high-quality flow solutions in terms of size, metal grade (SS/bronze), and braiding/non
braiding.
Moreover, it has a wide
international market presence with exports to more than 80 countries with the largest
market being the US, accounting for 28% in FY2023. The next largest contributor
being UAE, accounting for 7% of the total revenue of the company.
High entry and exit barriers
given critical nature of application of MFFS, there is rigorous product
approval systems and stringent design,engineering, and use specifications by
customers.
Metallic flexible flow solutions,
though highly durable over other non-metallic flexible flow solutions, have to
be replaced after certain period creating continuous replacement demand.
Weaknesses
Restriction in accessing any key
export market due to increase in import duty, and sanctions.
Slowdown in demand for key end
user industry or recession in countries in which key customers operate their
businesses will impact the operations of the company.
The company was categorized as a
willful defaulter in the pastbefore the takeover of it by the present promoter
and management.
SAT Industries, the promoter of
the company, engages in investment activity and have made investments in more
than 125 startups across 30 different industries and any sudden downfall in the
value of investments of promoters may adversely affect the promoter’s
profitability which in turn may have a negative impact on the company.
Volatility in forex rates will
have an impact on the financials of the company considering most of the revenue
is from exports.
Valuation
Consolidated re-stated sales of the
company for the fiscal ended March 2023 (FY 2023), were up 12% to Rs 269.46
crore. With the operating profit margin expanding by 70 bps to 20.1%, operating
profit was up 16% to Rs 54.03 crore. Eventually, the PAT was up 10% to Rs 30.15
crore, restricted largely by higher EO expenses.
On post-issue equity (on the upper
price band) the EPS for FY2023 was Rs 2.5 and the P/E works out to 43.2 times. ThePrice/BV
on the upper price band works out to 5.1 times. There is no comparable peers
with similar line of business, but AIA Engineering, which is into manufacture
of high chrome grinding media and mill liners, quotes at a P/E of 31.6 times
its consolidated FY2023 EPS. Price/BV of AIA Engineering was 5.9 times. SAT
Industries, the parent of the company, quotes at a P/E of 38.4 time its
consolidated FY2023 EPS.
Aeroflex Industries: Issue Highlights
|
|
Fresh Issue (in Rs Crore)
|
162
|
Offer for sale (in equity share nos.)
|
17500000
|
Price band (Rs.)
|
|
Upper
|
108
|
Lower
|
102
|
Post-issue equity (Rs crore)
|
|
in
Upper price band
|
25.86
|
in
Lower Price Band
|
26.04
|
Post-issue promoter (including promoter group)
stake (%)
|
66.99
|
Minimum Bid (in nos.)
|
130
|
Issue Open Date
|
22-08-2023
|
Issue Close Date
|
24-08-2023
|
Listing
|
BSE, NSE
|
Rating
|
49 /100
|
|
|
Aeroflex Industries: Re-stated Consolidated Financials
|
|
|
|
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
|
Sales
|
144.77
|
240.80
|
269.46
|
|
OPM (%)
|
15.4
|
19.4
|
20.1
|
|
OP
|
22.33
|
46.69
|
54.03
|
|
Other income
|
0.06
|
0.19
|
0.02
|
|
PBIDT
|
22.39
|
46.88
|
54.05
|
|
Interest
|
8.94
|
6.25
|
4.55
|
|
PBDT
|
13.45
|
40.63
|
49.50
|
|
Depreciation
|
3.78
|
4.18
|
5.22
|
|
PBT
|
9.67
|
36.45
|
44.28
|
|
EO Exp
|
1.63
|
-0.41
|
3.07
|
|
PBT after EO
|
8.04
|
36.86
|
41.21
|
|
Tax
|
2.04
|
9.36
|
11.06
|
|
PAT
|
6.01
|
27.51
|
30.15
|
|
Net profit
|
6.01
|
27.51
|
30.15
|
|
EPS (Rs)*
|
0.6
|
2.1
|
2.5
|
|
* on post IPO fully dilluted equity (on upper
price band) of Rs 25.86 crore. Face Value: Rs 2
|
EPS is calculated after excluding EO and
relevant tax
|
|
|
|
|
|
Figures in Rs crore
|
|
|
|
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Source: Capitaline Corporate database
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