Amic forging limited - sme

Stock Opportunities
1

AMIC FORGING LIMITED
Listed @ 251.35/- on 06.12.2023

IPO Size - 34.80 crs
Fresh Issue - 27,62,000 shares
Cap Price(IPO) - 126/-
3M Profit - 3.5 cr
(June Quarter)
2024 Profit = 3.5cr *4 = 14 cr
(Assumption)
EPS = 13.34
Post IPO P/E = 9.5
(Based on 2024
Profit Assumption)

The company is a manufacturer in forging industry and is engaged in manufacturing of forged Components catering to various industries. They manufacture precision machined components as per customer specifications and International Standard catering to the requirements of various industry such as Heavy Engineering, Steel Industry, Oil & Gas,Petrochemicals, Chemicals, Refineries, Thermal Power, Nuclear Power, Hydro Power, Cement Industry, Sugar and other related industries.

The company is planning to expand via backward integration with starting the manufacturing of Steel Melting & Ingot Casting. This backward integration would increase our product base and also increase our output due to easily availability of raw material.

The company is also planning to pursue forward integration to change the grain size, refine its magnetic and electrical properties to increase the resistance against corrosion as well as against wear and tear. For that, they propose to set up state of art heat treatment plant which is capable of normalizing, annealing volume hardening and flame hardening, etc

FINANCIALS
image

Promoters -

  1. Mr. Girdhari Lal Chamaria
  2. Mr. Anshul Chamaria
  3. Ms. Manju Chamaria
  4. Ms. Rashmi Chamaria

Product Range-
Rounds, Shafts, Blanks and engineering spare parts like Gear Coupling Hub, Round and Flange.
Definitely go through website of the company for further information on products-
https://amicforgings.com/

Clientele-
JSPL, TATA Steel, L&T, Phooltas and many more

Strengths -

  1. Experienced Promoters
  2. Integrated Manufacturing Facility
  3. Brand Positioning
  4. Quality Assurance

Risks -

  1. High working capital requirements
  2. Highly Competitive industry
  3. Invested in shares of HFCL Ltd worth Rs 3.24 cr.
    Market value as on June 2023 is Rs 2.45 cr
5 Likes
2

Thanks for the write-up here, Do you think they will be able to sustain the growth that they have shown to date?
Also, could you identify the reason behind the sudden growth in the margins just before the IPO?

3

Thank you.
May not be the extraordinary growth which they had shown in the previous year but still they will definitely be able to maintain 25-30% of growth as this sector is in high demand and this will remain in future too.

The reason for there sudden growth was due to shift from only forging activities to Forging with precision engineering (better margins sector).

5 Likes
4

The stock price has increased by more than 13x from the IPO price. I think this now is trading at a very high P/E which probably would go down in the future. I see their disclosures are not very well articulated either (Not available on screener.in, had to check their website). Is there anyone who is tracking this company closely and has any information to share?

1 Like
5

In SME companies the P/E is not the actual indicator to track.
These small companies have their own STORY - their aggresive promoters and their special products which is scalable to big levels.
The compant is out with a preferrential issue - just after 7 months from IPO(generally doesn’t happen in SME companies) - there must be some big plan definitely.

Disclosure - Invested

3 Likes
6

Thanks for your response!
Can you please point me to where you found that they have issued a preferential issue? It might be a good read to check their expansion plans.

I recall from their IPO document that they raised backing for backward integration. Any update on how they are performing on that aspect?

Thanks

7

AMIC BOARD MEETING.pdf (1.8 MB)

They have issued share warrants. So there is an expansion plan but its not in public what are they going to do with the money. Hopefully it will be out in public soon.

Disclosure - Invested

1 Like
8

Madam have you read their research report by Nuvama?
I am attaching the report
AMIC Forging
Key takeaways
• The company specialises in customised forging products. These products are tailor made for
customers as per their requirements. Given the high level of customisation, there is no
direct competitor to AMIC and no new player is expected to enter in the near term.
• Previously, these customised products (~90% of domestic demand) were met by production
in Ukraine and Europe. Over the last few years, orders have moved to domestic markets as
Ukraine (due to war) and Europe (due to higher energy prices) weren’t able to meet demand.
Due to this sudden change, the industry is facing a supply imbalance.
• AMIC is facing capacity problems rather than demand issues. While it has monthly supply
orders of ~1,200 axles, it is only able to supply 15–20 units. In fact, its one-year supply is only
able to cater to the demand of one quarter.
• The company has an order book of INR80cr, with orders worth INR20cr expected to be closed
in January 2025. Crane wheels/axles account for 25%/15% of group sales.
• The management is targeting a revenue of INR150cr, implying 15% YoY growth in H2FY25.
• Mid-term targets (FY27): AMIC is targeting a revenue of INR500cr (60% CAGR over FY24–
27) if capacity growth goes according to the plan. The target does not include revenue from
spring plant (SOP in April 2025), which is expected to generate annual sales of ~INR50cr.
• The management is confident of raising its PAT margin through backward integration and
targets a PAT of INR180cr, which implies a PAT margin of ~36% and FY24–27 CAGR of over
200%.
• Other income: It expects other income of INR15-16cr semi-annually over the next six-to eight
quarters, post which it should decline.
• Backward integration: Its main raw material is steel ingots (~80% of input cost). Steel ingots
cost INR80–85/piece, but dealers sell it ~INR135k per piece to AMIC. The company will
capture this price delta (via backward integration), thus offering a tailwind of 10–15%.
• Capacity: AMIC has an annual forging/machining capacity of 80k/ 8.5k tonne. Machining is
the biggest bottleneck and hence AMIC is increasing its annual capacity to 20k tonne per year
from 8.5k tonne. It has an electrohydraulic/pneumatic hammer with six/one tonne capacity
and has also placed an order for an 18t hammer.
• Capital raise: The promoter is not looking to dilute its equity stake. To finance this capex, the
promoter may issue preferential shares. This is evident as the promoter purchased seven
lakh warrants in the latest warrants issue in October.
• AMIC has no plans to foray into the nuclear power business at present.

2 Likes