Dynamics Technologies Limited Research Report

Industry

Market Price

Recommendation

Target

Time Horizon

Misc. Capital Goods

2,383

Buy

5,000

1-Year

 

Q3 FY 2022 Review

Dynamics Technologies Limited reported net revenue of ₹30,770 lakhs for the quarter ended December 31, 2021, compared to ₹34,035 lakhs for the quarter ended December 31, 2020. EBIT and Profit After Tax were ₹2,367 lakhs and ₹802 lakhs for the quarter ended, 31, 2021, as compared to ₹1,866 lakhs and ₹114 lakhs, during the corresponding quarter of the previous year.

 

Dynamics Technologies Limited - Investment Summary

CMP (₹)

2,383

52 Week H/L

949/3380

Market Cap (Lakhs)

1,51,145.

Face Value (₹)

10.00

Promoter Holding (%)

44.84

Non-Promoter Holding (%)

55.16

Total (%)

100.00

Book Value

₹581.50

EPS TTM

(₹34.59)

 

Overview

  • Dynamatic Technologies Limited got an order from Boeing for manufacturing assemblies for their tactical fighter, the F-15 EX Eagle II.

  • The expansion of the Aerospace facility at Dynamatic Aerotropolis near Bangalore Airport is well underway and is expected to be completed in mid-FY-2023. Technological advancements at the new plant are expected to improve the company’s operational efficiency and meet customer expectations more effectively.

  • The company has been rated BBB+ for the banking facilities by Indian Ratings & Research (credit rating agency).

Dynamics Technologies Limited Overview

 

Beta: 0.99

Alpha: 15.11

Risk Reward Ratio: 4.56

Margin of Safety: 55%

 

Dynamics Technologies Limited - Quarterly Summary

Quarterly (INR in lakhs)

Dec-21

Sep-21

Jun-21

Mar-21

Dec-20

Revenue from Continued business (A)

30,770

30,435

32,041

35,333

31,001

Revenue from Discontinued business (B)

-

168

1,843

3,529

3,057

Total

30,770

30,603

33,884

38,862

34,058

 

         

Other Income

34

155

137

250

301

Total Revenue (A+B)

30,804

30,758

34,021

39,112

34,359

Total Expenditure (continuing business)

28,437

28,587

29,852

32,634

29,102

Total Expenses (discontinued business)

-

1,498

2,172

4,720

3,391

EBIT

2,367

673

1,997

1,758

1,866

Interest

1,324

1,392

1,494

1,663

1,647

EBT

1,043

-719

503

95

219

Tax

241

290

251

871

105

Net Profit (continued + discontinued business)

802

1,009

252

-776

114

  • The board of directors of JKM Ferrotech Limited, a wholly subsidiary of Dynamatic technologies, vide its meeting on February 01, 2021, had approved the term sheet and plan for its foundry business to Danblock Brakes India Private Limited. All the conditions have been met, and Dynamatic Technologies received a net consideration of ₹7041 lakhs on July 22, 2021.

 

Business

  • Incorporated in 1973, Dynamatic Technologies Limited (DTL) is into the manufacturing of Hydraulic Gear Pumps and Automotive Turbochargers.

  • It also serves clients across Aerospace, automotive and Hydraulic Industries

  • DTL has manufacturing facilities in Europe and India, serving customers across six continents

  • DTL has diversified business segments, and they are as follows:

    • Hydraulics

      • The company is one of the world's largest manufacturers of hydraulic gear pumps and geared motors.

      • The company can build customized solutions for any application, from farm mechanization to agricultural tractors and harvesters, off-highway vehicles, construction equipment, metal cutting metal forms, material handling, and mining equipment.

      • The company has over 75% market share of pumps on agriculture tractors produced in India and 34% shares in agriculture tractors produced globally.

    • Aerospace and Defense:

      • The company is a leading player in the Indian private sectors and the UK to manufacture Flight Critical Airframe Structures and High Precision Class 1 parts.

      • The company has an extensive infrastructure to cater to the needs of OEMs like Airbus, Boeing, Bell, and Hindustan Aeronautics Limited as Tier-1 suppliers.

    • Automotive and Metallurgy:

      • The company is a leading player in the Indian private sectors and the UK to manufacture Flight Critical Airframe Structures and High Precision Class 1 parts.

  • Out of the total revenue, 39.52% of revenue have generated from Automotive and Metallurgy, 26.62% from Hydraulics, 33.44% from Aerospace & Defence, and 0.42% from others % in FY 2021, compared to 35.38%, 23.99%, 40.42% and 0.20% in FY 2020.

Dynamics Technologies Limited Product wise Revenue-Break

  • Out of the total revenue, 39% of revenue have generated from Europe, 25% from India, 17% from the United States, 13% from the UK and 4% from Canada, and 1% from the Rest of the countries in FY 2021, compared to 35%, 27%, 14%, 17%, 6% and 1% in FY 2020.

Dynamics Technologies Limited Geographical wise Revenue break up

 

Revenue Trend

Topline and Bottomline trend (lakhs)

Dynamics Technologies Limited Revenue Trend

 

Dynamics Technologies Limited EBIT Margin

 

Dynamics Technologies Limited Shareholding Pattens

 

Dynamics Technologies Limited Major Shareholding Patterns

 

Ratio Analysis

 

Mar-18

Mar-19

Mar-20

Mar-21

Profitability Ratio

49.79%

49.33%

53.02%

51.35%

EBITDA Margin

10.96%

12.16%

16.96%

13.87%

EBIT Margin

7.40%

8.87%

10.46%

6.93%

Pre-Tax Margin

1.79%

3.57%

3.92%

0.68%

Net Profit Margin

0.05%

1.82%

3.18%

-1.96%

 

 

 

 

 

Return on Investment

 

 

 

 

Return on Asset – ROA

0.05%

1.95%

2.72%

-1.50%

Return on Capital Employed – ROCE

12.33%

17.01%

15.77%

8.90%

Return on Equity – ROE

0.24%

8.57%

11.19%

-5.90%

 

 

 

 

 

Liquidity Ratio

 

 

 

 

Current ratio (x)

0.95

1.05

1.01

1.02

Quick Ratio

0.50

0.59

0.59

0.60

 

 

 

 

 

Turnover Ratio

 

 

 

 

Receivables Turnover

46.28

50.54

69.04

70.86

Inventory Turnover

134.07

167.19

162.46

175.30

Payables Turnover

63.87

160.86

151.37

Asset Turnover

0.97

1.07

0.86

0.77

         

Solvency Ratio

       

Debt to Equity

1.37

1.22

1.20

1.30

Interest Coverage Ratio

1.32

1.67

1.60

1.11

Note: Net profit margin, ROA, ROE includes net profit from the discontinued business.

 

Dynamics Technologies Limited - Financial Overview

Profit and Loss Statement (₹ in Lakhs)

 

Mar-18

Mar-19

Mar-20

Mar-21

Revenue

1,32,779

1,50,030

1,23,007

1,11,820

Other income

578

724

1,782

607

Total Revenue

1,33,357

1,50,754

1,24,789

1,12,427

         

Cost of Goods Sold

67,241

76,751

59,574

55,011

Gross Profit

66,116

74,003

65,215

57,416

         

Excise Duty

670

     

Employee benefit expense

23,839

25,388

24,288

22,147

Other Expenses

27,049

30,377

20,069

19,761

EBITDA

14,558

18,238

20,858

15,508

         

Depreciation and amortisation expenses

4,733

4,925

7,988

7,754

EBIT

9,825

13,313

12,870

7,754

         

Finance costs

7,442

7,950

8,045

6,999

EBT Before exceptional item

2,383

5,363

4,825

755

         

Exceptional items

       

Profit before tax

2,383

5,363

4,825

755

         

Income Tax Expense

1,179

2,257

-2,531

557

Profit from continuing operations (A)

1,204

3,106

7,356

198

Discontinued operations:

       

Loss of the year from discontinued operations

-1,652

-460

-3,450

-2,385

Tax credit of discontinued operations

-520

-91

   

Loss of the year from discontinued operations after tax (B)

-1,132

-369

-3,450

-2,385

         

(Loss)/Profit of the year (C)= (A)+(B)

72

2,737

3,906

-2,187

         

EPS

       

Basic

1

43

62

-34

Diluted

1

43

62

-34

 

 

 

 

 

Number of shares

       

Basic

63

63

63

63

Diluted

63

63

63

63

 

Cash Flow Statement (₹ in Lakhs)

 

Mar-18

Mar-19

Mar-20

Mar-21

Net Profit Before Tax

731

4913

1375

-1630

Net Cash from Operating Activities

8803

12378

22578

12621

Net Cash Used for Investing Activities

-5986

295

-5176

-7079

Net Cash From (Used For) Financing Activities

-4790

-12827

-15514

-7339

Net Increase in Cash and Cash Equivalents

-1973

-154

1888

-1797

Cash And Cash Equivalents at The Beginning of The Year

6191

3988

3710

5598

Cash And Cash Equivalents at The End of Year

3988

3710

5598

3801

 

Balance Sheet (₹ in Lakhs)

 

Mar-18

Mar-19

Mar-20

Mar-21

ASSETS:

 

 

 

 

Non-current assets:

 

 

 

 

Property, Plant and equipment

67,022

52,594

58,863

44,534

Other Intangible Assets

2,735

2,541

2,339

2,322

Goodwill

9,513

9,252

9,719

10,259

Capital work-in-progress

817

556

301

325

Right-use-assets

-

-

11,723

13,702

Financial Assets:

       

Investments

60

34

34

33

Loans

1,291

1,154

1,014

931

Other financial assets

18

18

   

Income tax asset (net)

23

632

996

1,571

Other non-current assets

476

448

125

175

Total Non-current assets

81,955

67,229

85,114

73,852

         

Current assets:

       

Inventories

28,305

28,080

26,496

22,475

Financial assets:

       

Trade receivables

18,610

22,938

23,594

19,822

Cash and cash equivalents

3,988

3,710

5,598

3,801

Bank Balances other than cash and cash equivalents above

2,277

3,077

2,699

2,258

Loans

295

413

992

964

Other current financial assets

-

-

-

-

Other current assets

6,464

5,463

4,586

5,669

Total Current assets

59,939

63,681

63,965

54,989

         

Assets are classified as held for sale.

-

7,574

-

14,037

         

Total Assets

1,41,894

1,38,484

1,49,079

1,42,878

         

EQUITY AND LIABILITIES:

       

Equity:

       

Equity share capital

634

634

634

634

Other equity

30,750

31,855

36,679

36,242

Total Equity

31,384

32,489

37,313

36,876

         

Liabilities:

       

Non-current liabilities:

       

Financial Liabilities:

       

Borrowings

42,867

39,580

35,776

36,343

Lease Liabilities

-

-

8,921

11,776

Other financial Liabilities

333

   

152

Provisions

1,669

2,002

2,390

2,537

Deferred tax liabilities

2,511

3,450

976

840

Other Non-current liabilities

101

98

99

99

Total Non-current liabilities

47,481

45,130

48,162

51,747

         

Current Liabilities:

       

Financial liabilities:

       

Borrowings

22,092

21,604

21,995

15,054

Trade payables:

26,314

-

-

-

Total outstanding dues of micro and small enterprises

-

814

1,811

482

Total outstanding dues of creditors other than micro and small enterprises

-

26,859

25,650

19,978

Other financial liabilities

10,618

8,251

7,616

10,980

Lease Liabilities

-

-

4,612

4,869

Provisions

1,076

1,156

973

1,019

Current tax liabilities (net)

1,125

423

315

1,105

Other current liabilities

1,804

1,677

632

614

Total current liabilities

63,029

60,784

63,604

54,101

Liabilities directly associated with assets classified as held for sale

 

81

 

154

Total Liabilities

1,10,510

1,05,995

1,11,766

1,06,002

Total Equity and Liabilities

1,41,894

1,38,484

1,49,079

1,42,878

 

Industry Overview
  • Hydraulic Segment:

    1. The global hydraulics market size is expected to grow from USD 37.4 billion in 2020 to USD 42.1 billion by 2025 at a CAGR of 2.4 %.

    2. The market’s growth is attributed to growing construction activities driving significant demand for hydraulic equipment, an increase in demand for material handling equipment and rising demand for advanced agriculture equipment, and increasing adaption of hydraulic equipment in various industries.

    3. With the covid-19 easing, increasing demand for infrastructure, farmers adopting modern techniques for agriculture will increase the demand for Hydraulic in coming years.

    4. Latest Budget announced is also going to focus on infrastructure development.

  • Aerospace and Defense:

    1. India accounts for 3.7% of the total military spending, making it the third-highest army spender in the world.

    2. The defence expenditure constituted 2.9% of India’s total GDP, with approximately $72.9 billion spent on defence in 2020.

    3. With the growing demand in the defence sector, the government has identified it as one of the areas to boost ‘Atma Nirbhar Bhara.’. The export value of defence items, including significant items in FY 2014-15 and 2020-21, was ₹1,9040 crores and ₹8,434.84 crores, respectively.

    4. The Government has also spelled out its vision of achieving a turn of $25 billion, including export of $5 billion in Aerospace and Defence goods and services by 2025.

    5. Government has issued 568 Defence Industrial Licenses to 351 companies. Out of the 113 companies covering 170, Defence Industrial Licenses have conveyed commencement of production.

 

Dynamics Technologies Limited - Technical Analysis

Dynamics Technologies Limited Technical Analysis

  • Stock is trading above EMA 200 and MA 200 indicators, with a strong support level of ₹1,828 and a resistance level at ₹3,260

  • One can accumulate this share at the current price.

 

Recommendation Rationale:

  • For the first nine months, Dynamatic Technologies Limited’s revenue increased by 17.97% to ₹93,572 lakhs, compared to the previous year at ₹76,844. Profit After Tax was ₹45 lakhs compared to -₹1411 lakhs last year.

  • DTL has a well-diversified business profile in three industries: aerospace & Defence, Hydraulics, and Automotive & Metallurgy. The company’s strong market position, its relationships with renowned customers across sectors, and solid technological capabilities across geographies support its business prospects.

  • DTL is a tier-1 supplier of global aerospace original equipment manufacturers such as Airbus, Bell, and Hindustan Aeronautics limited. The company has marquee clients in other segments as well.

  • DTL Hydraulic segment is expected to perform well due to increasing in volume of tractors and easing infrastructure segment.

  • The company’s credit metrics improved in the first nine months of FY 2022. The company has reduced term debt by using the proceeds from the sale of the assets of its loss-making Indian-based subsidiary, JKM Ferrotech Limited.

  • The company is in an advanced discussion stage to sell its wind farmland to the government. Whatever money comes from the proceedings, it will utilize to reduce its debts.

  • With recovery demand in the infrastructure sector, increasing demand for tractors, easing of covid-19, strong technology tie-ups, experience management, and debt reduction will help the company develop overall.

 

Valuation

  • The company’s financials deteriorated due to pandemics, disruptions increasing interest costs, and delays in monetizing non-core assets.

  • In the first nine months of FY 2022, the company’s financials are improving with revenue and EBIT, and debt and interest costs are reduced.

  • Deal of disposal of wind Farmland will help the company reduce its debt to a great extent and improve its operational cycle and efficiency from FY 2023.

  • Based on the current performance of the company in the first nine months, we expect the company could post higher revenue for the current financial (2022), corresponding to the previous year.

  • We have taken data for the last five years (2017-2021) and forecasted revenue for FY 2022-2026. Revenue growth is assumed to be 3%,

 

Estimated Income Statement (₹ in lakhs):

 

Mar-22

Mar-23

Mar-24

Mar-25

Mar-26

 

2022-E

2023-E

2024-E

2025-E

2026-E

Revenue

1,16,162.42

1,20,122.53

1,24,249.01

1,28,550.07

1,33,034.39

COGS

58,964.22

60,981.09

63,082.78

65,273.48

67,557.61

Gross Profit

57,198.20

59,141.44

61,166.23

63,276.59

65,476.78

Employee Expenses

22,863.76

23,645.81

24,460.75

25,310.21

26,195.90

Other Expenses

19,647.50

20,319.55

21,019.85

21,749.82

22,510.91

EBITDA

14,686.94

15,176.08

15,685.62

16,216.56

16,769.96

Depreciation

5,854.32

5,717.33

5,615.87

5,546.54

5,506.36

EBIT

8,832.61

9,458.75

10,069.75

10,670.02

11,263.61

Financial Cost

5,299.57

5,675.25

6,041.85

6,402.01

6,758.16

EBT

3,533.05

3,783.50

4,027.90

4,268.01

4,505.44

Tax expenses

883.26

945.88

1,006.97

1,067.00

1,126.36

PAT

2,649.78

2,837.63

3,020.92

3,201.01

3,379.08

  • We initiate coverage on Dynamatic Technologies Limited with a “BUY” and a 1 Year Target Price of 5,000.

 

 

Disclaimer: This report is only for the information of our customers Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind.

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DISCLAIMER

This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.

 

 

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