Reliance Securities - Uniparts India - IPO - Global Engineered Solutions Provider

About the Company

Uniparts India (Uniparts) manufactures engineered systems and solutions. The company was incorporated in 1994 and it is one of the leading suppliers of systems and components for the off-highway market in the agriculture, construction, forestry & mining (CFM) and aftermarket sectors with the presence across more than 25 countries. The company is coming up with an IPO comprising fully OFS of ~14.5mn shares, aggregating to an issue size of Rs8.36bn.

Concept-to-Supply Player

Uniparts is a concept-to-supply player for precision products for off-highway vehicles (OHVs) with a presence across the value chain. Its product portfolio includes core product verticals of 3-point linkage systems (3PL) and precision machined parts (PMP) as well as adjacent product verticals of power take-off (PTO), fabrications and hydraulic cylinders or components. In India, the company has 5 manufacturing facilities: 2 at Ludhiana, 1 at Visakhapatnam and 2 at Noida.

Business Model

Uniparts has a global business model which is based on: I) Local Deliveries (24%): Sales from dual shore manufacturing facilities in India and US in their respective domestic markets, II) Direct Exports (32%): Export sales from Indian locations directly to overseas customers, III) Warehouse Sales (40%): Sales from the warehousing facilities in their respective domestic markets and IV) Others (4%). The company also has a manufacturing, warehousing and distribution facility at Eldridge, now known as Uniparts Olsen Inc. (UOI) and a warehousing and distribution facility at Augusta.

Strong Presence in 3PL & PMP Markets

During FY22, the company had an estimated market share of 16.68% in the global 3PL market in value-terms and an estimated 5.92% market share in the global PMP market in the CFM sector. Moreover, in FY22 the company's customer base comprised of 125+ customers across 25 countries. The company has long-standing relationships of 15+ years with several customers like Bobcat, TAFE and Kramp. The company differentiates itself from other component suppliers through their in-house value engineering and process innovation capabilities, supported by product development programs undertaken jointly with some of the key clients.

Financials in Brief

During FY20-FY22 the company registered a healthy Revenue, EBITDA and PAT CAGR of 15%, 67% and 63% respectively. The company witnessed a strong increase in EBITDA margins from 10.6% and 13.2% in FY20 and FY21 respectively, to 21.8% in FY22. For 1QFY23, the company recorded a Revenue, EBITDA and PAT of Rs3.5bn, Rs752mn and Rs505mn respectively. RoE witnessed a steady increase from 13.5% in FY20 to 24.4% in FY22, while the company's Net-Debt/Equity declined from 0.6x in FY20 to 0.2x in FY22.

Our View

Based on FY22 earnings, the company is valued at 15.6x P/E, 10.1x EV/EBITDA and 2.2x EV/Sales. The demand for PMP products is expected to grow at a decent CAGR of 6% and 8% between FY21-26E led by strong volume growth in construction equipment production in key markets such as Japan and Europe. This is likely going to provide further opportunities to the company in terms of expanding its business. Increasing mechanization in the agriculture and CFM sectors would enable the company to efficiently serve Original Equipment Manufacturers (OEM) across multiple global locations, and to rationalize their supply chain and asset/working capital management. In view of healthy financials, strong global presence, leadership position in supply of systems and components, growing opportunities in the PMP and 3PL markets, and attractive valuation, we recommend a 'SUBSCRIBE' to the issue.

Source : Equity Bulls

Keywords

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