Dynamatic Technologies - Can it be Dynamite


(Strong Brick) #1

DYNAMATIC TECHNOLOGIES CMP 2906

https://www.screener.in/company/?q=505242&con=1

Dynamatic Technologies Limited designs and builds highly engineered products for Automotive, Aeronautic, Hydraulic and Security applications. With futuristic design, engineering and manufacturing facilities in Europe and India, the company is able to meet customers' exacting requirements on 6 continents.

Dynamatic has three main divisions Automotive, Hydraulic and Aerospace.

1. Automotive

Provides about 65% of revenue. Dynamatic manufactures automotive components like engine, turbocharger and chassis parts for marquee clients such as Daimler, Audi, Nissan, Hyundai and Tata motors.

2. Aerospace and Defence

Comprises about 18% of the revenue. Manufactures wings, wing flaps, ailerons and major airframe structures for clients such as Boeing, Airbus, Hindustan Aeronautics and Bell Helicopters. Manufactures certain key parts for Sukhoi aircrafts for Defence.

3. Hydraulics

Comprises about 17% of the revenue. Manufactures hydraulic gear pumps, valves, displacement pumps etc, to clients such as Caterpillar, Escorts, Eicher and M&M. It is the biggest supplier of hydraulics to the Indian tractor industry.

FUNDAMENTALS

Shareholding pattern: Promoters hold 51.13% and institutions own about 22 %.. Well-known investors like Ashish Kacholia and Lashit Sanghvi feature in the list of shareholders who own more than 1%.

Following data is taken from Screener.in:-

Narration

Mar 11

Mar 12

Mar 13

Mar 14

Trailing

Period

12 months

12 months

12 months

12 months

12 Months

Sales

501.34

1508.53

1452.13

1587.54

1670.78

Operating Profit

83.53

141.84

137.79

162.93

160.57

OPM

16.66%

9.40%

9.49%

10.26%

9.60

Other Income

0.69

9.97

5.45

15.36

16.43

EBIDT

84.22

151.81

143.24

178.29

177.00

Interest

29.80

71.45

84.56

99.73

87.33

Depreciation

25.04

43.40

46.38

51.26

50.34

Profit before tax

29.38

36.96

12.30

27.30

39.33

Tax

8.65

10.57

24.21

12.03

21.61

Net profit

21.68

24.64

-11.91

13.77

36.82

EQUITY IS 6.34 CRORES AND AT AROUND CMP OF 2906, MARKET CAP CLOSE TO 1844 CRORES.

Link to the latest annual report is here:

http://www.dynamatics.com/downloads/finresults/ANNUAL_REPORT_2014.pdf

POSITIVES;

* Tier 1 supplier to prestigious clients such as Boeing and Airbus

* Vertically integrated facilities including advanced foundries, in-house division for prototyping. Has 11 facilities in India, Germany and England.

* Has DST recognized R&D facilities, has design IP for all products manufactured in Hydraulics division and has 17 patents.

* Supplies critical engine and transmission parts to 50% of the passenger cars made in India

* Has 65% share of the organized tractor market in India for hydraulic gear pumps

NEGATIVES;

* Debt-Equity ratio is very high 2.2 though this has reduced from 3.9 as on 31st March 2014

* The high margin Aerospace division only brings currently comprises only 18% of the revenue

* The price movement has been too fast disproportionate to the improvement in fundamentals

Would request for feedback and comments.


(A. King) #2

Not open for non residents.

Any other profitable defence stock for NR ?


(Strong Brick) #3

Look at Astra microwave or Rolta.

L&T and Bharat Forge also have defence businesses that could become significant compared to their other businesses over the long term.


(A. King) #4

Yes the names you suggest are on my radar.

What about Rane Holding? Last year balance sheet they had 2% revenue from defence. Likely to get higher this year?


(Strong Brick) #5

Not following Rane holding King ji.


(Vishnu Ch) #6

Also have a look at Zen Technologies.

Please find below the link to the analysis done by Nitin Siddamsetty.


(Strong Brick) #7

Zen is also a good company but in my view Dynamatic has a greater moat and has much more long term potential as compared to Zen nothwithstanding its current high valuations due to current run up in price.Not to say that Zen can not scale up especially the tie up with Rockwell can be a game changer.


(Vishnu Ch) #8

//

Hello Strong Brick,

I agree with u, in that both are equally attractive buys.

As A. King wanted alternatives, i have proposed Zen.

Coming to Dynamatic, it has wide-moat due to high-quality and safety aspect of areospace parts which leaves only few suppliers with the capabilities to match those rigorous standards.

Pat Dorsey in his Google Talks, makes the above precise point.

You can check his comments at 12:28 to 12:45 portion of the below video:

https://www.youtube.com/watch?v=YFS5JBgz1Xc Link: https://www.youtube.com/watch?v=YFS5JBgz1Xc

Summarizing his comments:

  1. Huge moat
  2. source-supplier
  3. 40% margin (esp. after-market)

Disc: Not invested. As u said, valuations have run up and i don’t see a reason to replace it with other picks in my portfolio.


(A. King) #9

Rane holding may be worth looking on the basis of the following announcement on 27 Nov 2014:-

Rane Holdings said the company has enhanced its equity shareholding to 45.24% in SasMos HET Technologies (SasMos), a Bangalore-based company, engaged in the manufacture of interconnection system and wiring harness for defence and aerospace industry.

Note that this news does not give a perspective - contribution from the SasMos business to Rane Holding.


(A. King) #10

Does anyone track Axiscades in aviation software?

CEO Intervew

http://www.moneycontrol.com/news/business/revenue-will-cross-rs-300-cr-this-year-axiscades-engg_1308981.html


(A. King) #11

Does anyone track Axiscades in aviation software?

CEO Intervew

http://www.moneycontrol.com/news/business/revenue-will-cross-rs-300-cr-this-year-axiscades-engg_1308981.html


(Strong Brick) #12

Please find below the Crisil result update as on 11th March 2015

http://www.crisil.com/pdf/capitalmarket/ier-reports/CRISIL-Research_ier-report-dynamatic-technologies_Q3FY15.pdf


(Strong Brick) #13

Any idea why Dynamatic has shown a recent runup?


(Raj) #14

Dynamatic had a subdued result which was expected.

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/BEF93AEA_D1C1_44F9_AB24_9CA156AA4840_201840.pdf

In AGM management did set the expectation that results will be bumpy and stability will come only after 12-18 months. I attended the AGM and am convinced that story is intact, but I feel it will take some more time to play out…May be FY17 and beyond…

Disc: Only tracking position

@strongbrick it was nice meeting you.


(Chintan) #15

Dynamatic Tech - Weak Euro and subdued demand in Auto and Hydraulics led net loss for the qtr

CMP Rs 2954 | Mcap Rs 1874cr | EV Rs 2381cr

Consol Sales and Ebitda declined -12% and -47% yoy on account of subdued Auto and Hydraulic segment coupled with weak Euro impacted performance during the qtr. Currency impact on Sales and Ebitda were at Rs 40.5cr and Rs 13.7cr respectively. Adjusted that, Sales and Ebitda degrew -3% and -18% yoy respectively.
Hydraulic segment sales declined -21% yoy while Ebitda declined -35% yoy during the qtr.
Auto segment sales declined -13% yoy while Ebitda degrew -67% yoy during the qtr
Aero/Defence sector sales and Ebitda remained flat during the qtr
Reported net loss for the qtr - Net loss stood at Rs 9.7cr vs adj profit of Rs 4cr yoy/Rs 5cr qoq. Interest cost declined -9% yoy but up +4% qoq to Rs 19.3cr.

Net Debt inched up higher to Rs 507cr vs Rs 440cr in Mar’15 (and Rs 507cr in Jun’14). D/E at 2.4x vs 2.1x in Mar’15 (and 3.7x in Jun’14)

Outlook - In Aero/Defence segment company holds strong order book of Rs 60bn and order rampup is expected in coming qtrs will drive growth. While in hydraulic, company is targeting OEM and export market to drive order bookings and performance going forward. Auto segment is expected to higher revenue and profitability driven by growth in German foundary and recovery in domestic auto industry.

As mentioned earlier by @raj1968 that results will be bumpy…this qtr reflects the same…any idea on mgmt claim of 60bn orderbook at aerospace segment is real or if its real than theres any risk attached to it (cost overrun, passthru of rm benefits, cancellation etc) .and also timeline to execute such an order (which i assume will take atleast 4-5yrs given its size)…

while hydraulics and casting biz are dragging with no ray of hope at the moment…any strategy or greentshoots mgmt sensing in these segments which they discussed in agm??


(Raj) #16

@csheth3650 The order book is for 10 years or so. You might of noticed airlines declaring that they would buy 100 planes from Boeing/Airbus. But these orders get executed in 10-20 years. Similarly, these guys get the order based of delivery schedules.
Management was upbeat on the business but also upfront that the stability will come only after 12-18 months.


(Chitresh Lunawat) #17

Any update on their project cheel?


(spvk1) #18

results declared

https://nseindia.com/corporates/corpInfo/equities/AnnouncementDetail.jsp?symbol=DYNAMATECH&desc=Financial%20Result%20Updates&tstamp=290520172021&seqId=113185&param1=1


(Kumarsids) #19

Hi All

Very Disappointing results from Dynamatics. Revenues declined 20%+ and company made a loss this quarter. Weakness seen across all segments.
Any insights- if this continues to be hold / buy on declines ?

thanks

Disc: Having small position and current CMP is close to my average price.


(Sarabjeet Singh) #20

Hi Guys, just doing sm research on this.

Cud smone pls share info on why this company posted such bad results in last complete year.