The Harsha Engineers International (HEI) initial public offering will open for subscription on Wednesday September 14 and will close on September 16. The price range is set at Rs 314-330.
The company, which provides rolling cages, plans to raise Rs 455 crore through a new share issue and Rs 300 crore through a sale offering.
HEI operates under two segments – Engineering business in which it manufactures bearing cages (brass, steel and polyamide), complex and specialized precision stamped components, brass castings, etc.
The other division is the solar EPC business, where it provides complete turnkey solutions for all solar PV needs.
Its products have many applications in end-user industries such as automotive, railroad, aviation and aerospace, construction, mining, agriculture, electronics and renewable energy. .
The company holds a 50-60% market share in the domestic organized roll cage market, while it holds a 6.5% share in the global organized outsourcing market, meeting 75% of global demand.
Its exports account for almost two thirds of its turnover and it supplies its products to customers in more than 25 countries in North America, Europe, Asia, South America and Africa.
Main risks: Depends on a limited number of customers for revenue. High exposure to fluctuations in exchange rates. The recent reorganization of the company may cause administrative and operational difficulties.
Here’s what brokers are saying about the company:
Motilal Oswal | SUBSCRIBE FOR SIGNUP GAINS
HEI has recently branched out into the production of bronze bushings, sand casting, and specialty stamped components to meet the needs of end-user industries like wind power, mining, and shipping. It plans to grow this low-volume, high-value segment over the next 3-5 years. Additionally, it is well positioned to meet the growing demand for bearing cages across all industries.
Its growing focus on other specialty precision components and the growing electric vehicle segment could boost its EBITDA margins. Given the resumption of growth in automotive/auxiliary and strong mid-cap momentum, we expect the IPO to go well.
Investmart swastika | SUBSCRIBE
The company has managed to carve a lion’s share of the Indian roll cage market with its first mover advantage as it was the first player to persuade bearing players to outsource the cage manufacturing rather than to produce it in-house.
The government’s focus on infrastructure, agricultural reforms, boosting private capital spending and growing demand for housing and real estate bode well for the company’s prospects.
This is a proxy play on India becoming a global manufacturing hub theme, and given the positive growth prospects, experienced management and competitive advantages, we have rated it “undertake ” at the question.
LKP securities | SUBSCRIBE
HEI has established a strong relationship with its customers who are the world’s leading bearing manufacturers in all industries. The global bearing cage market is concentrated with the top 6 players holding a 54% market share in FY22. As of March 31, HEIL supplied each of these six companies. The company’s top 10 customers have contributed 45-48% of its total revenue over the past 3 years. She also maintains a long-term relationship with her clients.
At the upper end of the Rs 330 price range, it is valued at 27.7x FY22 earnings, which is reasonable compared to its peers.
Angel One | SUBSCRIBE
The company has expertise in tooling, design development and automation and has strategically located domestic and international production facilities and warehouses.
Of its 4 manufacturing plants, two are in Changodar and Moraiya (near Ahmedabad in Gujarat), and one in Changshu, China, and one in Ghimbav Brasov in Romania.
Its consolidated PAT grew at a CAGR of 105% in FY20-22 thanks to margin expansion. Its diversified product portfolio and solid expertise are not yet factored into valuations.
Religare Brokerage | NEUTRAL
The brokerage expects the company to benefit from an increase in outsourcing of bearing cages by global companies. He estimates that the global market is expected to grow at a CAGR of 6-8% over the period 2021-2029. In addition, the company plans to strengthen its leadership in the bearing market as well as seize opportunities in the electric vehicle segment, which has good room for growth.