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ICICI Securities
CMP: ₹156.85
Target: ₹242
Mishra Dhatu Nigam (Midhani) is an super alloy and titanium alloy manufacturer, catering to the very niche segment of maraging/super alloy steel segment in India. Increase in Indian space expenditure budget has been one of the key tailwinds for Midhani. Significant expenditure budget CAGR towards space (15.8 per cent CAGR over the past six years), joint product development with Indian Space Research Organisation (ISRO) for strategically important materials, relatively small scale of operations, all tilt the risk reward in favour of Midhani.
Tilt towards ISRO has not only enriched value, it can help better utilisation as well. Midhani’s facilities are under-utilised, given the batch production process and niche product segments it caters to. As ISRO fulfils its potential of probable launches, higher volumes to Midhani can help reverse some losses on account of current underutilization of the company’s facilities.
We initiate coverage on the stock with a ‘buy’ rating and a target price of ₹242/share, at 22x FY22E P/E, implying 56 per cent upside over the current price of ₹159/share.
Risk: Sudden drop in space contract inflow/execution.
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