Sector Tailwinds
Aerospace and Defense has been identified as a megatrend as the government policies have become more focused on developing the two sectors. With the rise of the aerospace manufacturing, aerospace components manufacturing and tooling companies are poised to grow similar to the automobile components industry. However , unlike automobile component manufacturing aerospace component manufacturing is much more stringent than automobile ancillary as the gaining trust of the OEMS is one of the biggest challenges as with commercial aerospace we are dealing with majorly just 2 OEMs and within private sector a few more entities.
An excellent presentation on Aerospace was shared in their annual investors summit and this is one excellent deep dive on the Aerospace sector as a whole . Value Quest is someone who bets big on megatrends with insightful articles and is a must watch for anyone interested in Aerospace
ValueQuest is betting big on Unimech Aerospace as one of the winners of this megatrend which made me excited to look further into the sector .
Techera Engineering
My first though researching Techera Engineering from SME space was this is another SME pretending to be in one of the hottest sectors of the markets capitalizing the tailwinds and encashing along the way .
But researching deeper tells another story altogether
Techera promoter Nimesh Desai has been into automation systems, machining and tooling operations for over 30 years ? What is his achievements ?
Built a proprietorship Techecellency from scratch in 1996 - > Went almost bankrupt in 2001 - > Converted into a Private Limited Company - > Established the VW Engine Assembly Line in Chakan by 2014 - > Entered into JV with Jendamark Automation South Africa - > Company made approx . 50 to 60 cross in revenues by FY 2019 when Desai sold his shares in Jendamark India to the SA JV
Jendamark was already working on aerospace tooling back from 2014 itself but I believe their core business was industrial automation and assembly line with major European automobile companies in their portfolio
Second Innings with Techera
Nimesh Desai alongwith his son Meet Desai ( Aeronautical Engineer ) started the Techera . Starting from scratch Desais understood that building assembly lines and automation for automobile had become too capital intensive as these automation lines now were driven by robotics and multiple complex capital intensive machine .
They identified the niche in aerospace tooling / MRO operations equipment’s and Ground Support equipment’s as this was less crowded and also they had the prior experience in the aerospace and again this was not capital intensive in nature.
Over the last 6 years , out of which couple of years have been lost due to Covid they have expanded the business from scratch to 38.5 cr. Techera has provided roughly 400 tooling parts for the Tata Airbus C295 program , has worked with HAL and according to a promoter in one of the interviews said a single aircraft project required rougly 300 to 400 cr tools . And these tools are specific to the aircraft make as each tool has to be customized to their specific requirements.
Techera expects to grow its Sales conservatively YOY by 30% ( CFO mentions 50% ) and maintain 70 : 30 split between Aerospace and Industrial Automation space on a longer term .
Summary
Techera is an SME in a space which is at a inflection point . Strong Promoter background , no cross holdings and big dreams ? Can it deliver on the long term time will tell but stars seem to be aligning for this small SME
Key Risks
-SME volatility on both upside and downside can be expected
-Concentrated holdings due to being SME
-Working Capital Cycle needs to improve
-Policy or Govt Change can have adverse impact
-Skilled Manpower is difficult to get
-Works closely with the contractors of the OEMs but the tools needs approval of the OEM as well
Disclosure : Invested and Biased
