Unimech Aerospace & Manufacturing IPO Analysis 2024

Liquide -

Unimech Aerospace & Manufacturing Ltd (Unimech) launched its initial public offering (IPO) on December 23, 2024, with bidding set to close on December 26. The IPO, carrying a grey market premium (GMP) of 61%, received a solid response on the first day.

However, investors should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Unimech IPO Details

  • Issue Details: Mainstream
  • Issue Size: Rs 500 crore 
  • Fresh Issue: Rs 250 crore
  • OFS: Rs 250 crore
  • Price Band: Rs 745 – Rs 785
  • Lot size: 19 shares
  • Listing Date: December 31, 2024

Unimech IPO Subscription Status

The Unimech IPO kicked off with a strong response, recording an overall subscription of 4 times as of 5 p.m. on the opening day. Retail investors led the surge, oversubscribing their allotted shares by an impressive 4.68 times. Non-institutional investors also showed strong interest with a 4.23 times subscription, while qualified institutional buyers (QIBs) registered a 2.62 times subscription rate.

Overview of Unimech Aerospace & Manufacturing Ltd

Unimech is an engineering solutions provider specializing in the manufacture of critical components such as aero tooling, ground support equipment, and precision-engineered parts. It offers build-to-print services, producing products from client designs, and build-to-specification services, assisting in designing products tailored to client needs for industries like aerospace, defense, energy, and semiconductors.

Operating out of two facilities in Bengaluru, Unimech covers 120,000 sq. ft. and is equipped with advanced manufacturing capabilities including turning, milling, double column milling, electro discharge machining, and grinding.

Unimech Key Strengths

  • Diverse Product Offering & Global Reach: Between FY22 and the six-month period ending September 30, 2024, Unimech has produced 2,999 SKUs in tooling and precision complex sub-assemblies, and 760 SKUs in the precision machined parts category, serving over 26 customers across 7 countries.
  • Exceptional Financial Growth: Unimech has demonstrated significant growth, with operational revenue, EBITDA, and net profit achieving impressive compounded annual growth rates (CAGRs) of 140%, 220%, and 314% respectively, from FY22 to FY24.
  • Strong Return Metrics: Despite a lengthy cash conversion cycle, Unimech maintains a healthy balance sheet with a low debt-equity ratio of 0.32x and delivers superior return ratios. Its Return on Equity stands at 53.5% and Return on Capital Employed at 54.4% as of FY24, outperforming its peers.
  • High Profitability Margins: Unimech is distinguished by some of the highest profitability margins in its sector, with an EBITDA margin of 37.9% and a PAT margin of 27.8% as of FY24. These margins reflect the firm’s successful scale enhancement and operational efficiencies.

Unimech Risk Factors

  • Client Concentration: Unimech faces significant client concentration risk, as a major portion of its revenue depends on a few key clients. As of September 30, 2024, the top five customers represent nearly 95% of total revenue.
  • Export Dependency & Currency Risk: Unimech primarily earns its revenue from exports, with over 90% of its sales directed to the US market in FY24. Without a hedging policy, the firm is vulnerable to risks associated with foreign currency fluctuations and export market disruptions, which could adversely affect its business and financial standing.

Conclusion: Should You Subscribe to Unimech’s IPO?

Unimech has demonstrated remarkable growth, leading the industry with a 140% CAGR in revenue between FY22 and FY24. It also boasts some of the highest EBITDA and PAT margins in 2024, underpinning strong financial health and profitability.

The IPO is priced at a P/E multiple of 59x based on FY24 earnings, and the grey market premium indicates a strong debut on the stock exchanges.

Unimech's niche product line presents significant growth prospects, given the global MRO (maintenance, repair, and operations) tooling market's estimated value of $19 billion. Moreover, the company is actively seeking expansion opportunities in complex sectors like medical devices, semiconductors, and robotics.

Given these factors, investors may consider subscribing to the IPO from a long-term perspective.

For a deep dive into other IPOs, explore: IPO Corner on Liquide