The hottest Indian company that gives ISRO the metal for its rockets and satellites
- As ISRO is busy making plans to explore the space, the stock of Telangana-based government company
Mishra Dhatu Nigamhas been skyrocketing.
- It supplies ultra high strength steel for rockets and satellites.
- In January,
Midhanidispatched its first delivery of steel for Ignitor box and Cobalt alloy for Throat Sitting Ring for the mission ‘ Gaganyaan’ — which is expected to take off next year.
- As India’s premier space agency preps for 15-16 launches per year it is expected to bring in orders worth ₹250-300 crore per annum.
The stock has increased from ₹150 to nearly ₹217 in the last two weeks. But this may just be the beginning.
ICICI Securities believes that returns from this stock is at 20% and it also raised its target price to ₹326 from ₹242, earlier.
What's so special about MIDHANI?
Half of the orders that the company receives are from ISRO, which is on a growth path.
ISRO has several space missions lined up including Chandrayaan 3, Mangalyaan 2 and two unnamed missions as well. In order to pull off these projects, Finance Minister Nirmala Sitharaman, in her latest budget speech, allocated ₹13,479 crore for space exploration — increasing 8% from last year.
As India’s premier space agency preps for 15-16 launches per year it is expected to bring in orders worth ₹250- ₹300 crore per annum. This will be a major part of the ₹800 crore orders they would add per year.The supply of material to ISRO typically starts nearly two years prior to the launch.
“Increasing order inflow from ISRO over the years has led to a higher topline. Also, MIDHANI has managed to better its yield i.e. more output from lesser input,” said a report by ICICI Securities.
Size does matter
The company which operates under the Ministry of Defence now supplies 40% to the sector that it was originally intended for. In the last few years, increased space activity for large scale projects like Chandrayaan 2 has given it a spurt. Moreso, it added economies of scale to its business — bringing in unexpected levels of operational efficiency.
Last year, its margin expanded to a massive 73-95%. “MIDHANI’s higher value of production leading to operating leverage benefits; lower rejections; lower power costs, and bulk buying of raw materials are some of the reasons,” the report said. The reduction in corporate tax rate also added to its coffers.
On January 6, 2020, Midhani dispatched its first delivery of steel for Ignitor box and Cobalt alloy for Throat Sitting Ring for the mission ‘Gaganyaan’ — which is expected to take off next year. As it demonstrates its ability to efficiently supply large and mission critical orders, it will also pave the way for its ambitions of becoming a multinational company.
Over 70% of the company’s production is supplied to Defence Research & Development Organisation (DRDO), Indian Space Research Organisation (ISRO), Hindustan Aeronautics (HAL), and Department of Atomic Energy (DAE). While the rest goes to the commercial companies including Larsen & Toubro and BHEL.
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