Unimech Aerospace and Manufacturing IPO analysis

Unimech Aerospace and Manufacturing Limited IPO (initial public offering) will open for subscription on December 23, 2024, and close on December 26, 2024. Below is a breakdown of this high-precision engineering solutions company's strengths, weaknesses and growth prospects to help investors make an informed decision. Unimech Aerospace and Manufacturing IPO in a nutshell Quality: During FY22-24, Unimech Aerospace and Manufacturing reported a three-year average ROE and ROCE of 48.6 and 43.7 per cent, respectively. Growth: During FY22-24, its revenue and profit after tax grew by 139.7 and 314 per cent per annum, respectively. Valuation: At the upper end of the price band of Rs 785, the stock is valued at a P/E and P/B ratio of 68.7 and 6.2 times, respectively. Overview: Growth in the aerospace industry will help Unimech Aerospace and Manufacturing scale its business as it is an established supplier of some critical components used in aircraft manufacturing. However, dependence on a few clients can affect its financials. About Unimech Aerospace and Manufacturing Unimech Aerospace and Manufacturing is a high-precision engineering solutions company that specialises in the manufacture and supply of critical parts such as aero tooling (they help with tasks like assembling wings, engines or other aircraft components), ground support equipment, electro-mechanical sub-assemblies (small devices made by combining electrical parts like wires and circuits with mechanical parts like gears or motors) and other precision engineered components for the aerospace, defence, energy and semiconductor industries. The company serves more than 26 customers across seven countries. As of H1 FY25, it has an order book of Rs 81 crore. Strengths of Unimech Aerospace and Manufacturing High entry barriers: Unimech manufactures complex tooling, mechanical assemblies, electro-mechanical turnkey systems and precision components. The company is an approved supplier for aerospace, defence, semiconductor and energy industry leaders. Since these products are critical in nature, it is difficult for OEMs (original equipment manufacturers) to switch or find new vendors. This allows Unimech to maintain high profit margins. Diverse product offerings: As of H1 FY25, the company has manufactured 2,999 SKUs in tooling and precision complex sub-assemblies and 760 SKUs in precision machined parts. Unimech's varied product offerings enable it to cater to multiple industries and customers. This diversity enhances the company's ability to attract new clients easily. Weaknesses of Unimech Aerospace and Manufacturing Client concentration: As of H1 FY25, 94.62 per cent of total revenue came from the top five customers. Thus, losing even any single client can significantly hamper its financials. Unimech Aerospace and Manufacturing IPO details Total IPO size (Rs cr) 500 Offer for sale (Rs cr) 250 Fresh issue (Rs cr) 250 Price band (Rs) 745-785 Subscription dates December 23-26, 2024 Purpose of issue Offer for sale, funding capex and meeting working capital requirements Post-IPO M-cap (Rs cr) 3,992.3 Net worth (Rs cr) 640.1 Promoter holding (%) 79.8 Price/earnings ratio (P/E) 68.7 Price/book ratio (P/B) 6.2 Key financials Metrics (Rs cr) 2Y CAGR (%) FY24 FY23