NDTV Profit's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer NDTV Profit's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
DRChoksey Report
Sedemac Mechatronics Ltd. launched its initial public offering on March 04 and the offer closes for subscription on March 06.
The Rs 1,087.45-crore IPO is exclusively an offer for sale of 80.43 lakh shares and no fresh issue component.
Headquartered in Pune, a technology-focused automotive electronics component manufacturer, has fixed the price band of Rs 1,287 to Rs 1,352 per equity share.
The minimum bid size for retail investors is 11 shares. ICICI Securities Ltd., Axis Capital Ltd. and Avendus Capital Pvt. are the merchant bankers to the IPO while Kfin Technologies Ltd. is the registrar to the offer.
Bosch, ZF Commercial Vehicle Control Systems India, Sona BLW Precision Forgings, Schaeefler India are the other listed entities in the segment.
Shares of Sedemac Mechatronics IPO will be listed on the NSE and BSE tentatively on March 11.
Outlook:
The Indian automotive electronics landscape is upgrading with increasing integration of embedded control systems across internal combustion, hybrid and electric platforms. Sedemac represents a differentiated play within this niche, offering investors exposure to a domestic independent in-built tech-play on control systems company over the conventional auto ancillary setups.
With its expansion through manufacturing facility 3 (MF3) facility and strategic land acquisition in Hosur to support future capex Sedemac positions itself well for a strong growth over next three-five years. MF3 which will be 2.5x current capacity is expected to ramp-up (management expects to reach optimal capacity utilization in 6-12 months) as increasing adoption from other brands as well entering other adjacencies such as power tools which is 10x auto market volumes.
Valuation:
The company has delivered 25% revenue CAGR and 50%+ Ebitda CAGR over FY23–FY25, with RoCE at 30%+, reflecting strong operating leverage and capital efficiency. The addressable market across ISG, EFI and EV MCUs is projected to grow at mid- to high-teens CAGR, with the EV MCU segment expanding at 40%+, providing structural growth visibility for Sedemac with strong competitive moats.
While customer concentration (~75–80% exposure to a single OEM) remains a highlighted issue, we believe it doesn't possess much risk as the value add for OEM is much significant (based on customer reviews and our own experience) which leads to sticky business for the company.
The company also increasing diversification into EV MCUs, industrial controllers and power tools provides incremental growth optionality. The company is currently trading at 62x TTM PE, albeit with the high growth from new capex we expect it to trade 32-35x FY28E earnings, which makes a decent value proposition given the niche auto ancillary play and the optionality of the massive power tool segments.
Key Risks:
The company growth can be severely affected if competition overcomes company's technical moat. Delay in entering adjacent power tool segment could slow the ramp of new MF3 facility weighing down on company's profitability in near term.
Click on the attachment to read the full report:
ALSO READ: Sedemac Mechatronics IPO: 10 Key Things To Know Before You Subscribe — Read Anand Rathi's Report
DISCLAIMER
This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
