MTAR Technologies gains from record order book and fuel-cell capacity expansion

Investment View and Key Takeaways

Motilal Oswal Financial Services retained its Buy rating on MTAR Technologies following a stronger-than-expected 1QFY27 performance and a substantial expansion in the order book. The broker believes MTAR Technologies is positioned for growth across fuel cells, civil nuclear, aerospace and defence, and Product Solutions and Data Centre Infrastructure.

Motilal Oswal raised its FY27E and FY28E adjusted PAT estimates by 9 per cent and 2 per cent, respectively, following the quarterly outperformance. It forecasts FY26-FY28 revenue, EBITDA and adjusted PAT CAGRs of 78 per cent, 98 per cent and 118 per cent, respectively.

Strong 1QFY27 Financial Performance

MTAR Technologies reported consolidated 1QFY27 revenue of Rs 3,607 million, up 2.3x year on year and above Motilal Oswal's estimate of Rs 3,132 million. EBITDA rose 3x year on year to Rs 851 million, compared with the broker estimate of Rs 673 million. EBITDA margin expanded 550 basis points year on year to 23.6 per cent, versus the estimated 21.5 per cent.

Adjusted PAT increased 4.7x year on year to Rs 502 million, exceeding the estimate of Rs 399 million. Gross margin declined 870 basis points year on year to 45.5 per cent because of a changed product mix. However, lower employee and other expenses as a share of sales demonstrated operating leverage.

Segment Growth and Aerospace Opportunity

Fuel cells remained the main growth contributor, with revenue increasing 2.1x year on year to Rs 2,208 million and accounting for 61 per cent of quarterly revenue. Product and other revenue grew 4.7x to Rs 1,003 million, representing 28 per cent of revenue.

Aerospace and defence revenue grew 47 per cent to Rs 364 million, while civil nuclear revenue declined 41 per cent to Rs 32 million. Management expects aerospace and defence revenue to double in FY27 as qualified products move from first-article approvals to commercial production.

Management sees aerospace and defence segment revenue reaching Rs 6-7 billion over the next three to four years, compared with Rs 1 billion in FY26. The opportunity is supported by multinational customer orders, domestic defence opportunities exceeding Rs 2.5 billion, and products including actuator assemblies, wing flaps and electromechanical systems.

Order Book Provides Strong Visibility

The order book at June 2026 stood at Rs 51.4 billion, up 5.5x year on year and twice the March 2026 level. This followed approximately Rs 29 billion of 1QFY27 inflows, including about Rs 23.3 billion from fuel cells.

Management subsequently reported an additional order of approximately Rs 8 billion, taking the order book above Rs 59 billion. Current orders are expected to be executed within three years, while 2HFY27 is expected to be substantially stronger than 1HFY27 in Clean Energy, Nuclear and Product Solutions.

Guidance, Capacity Expansion and Data Centre Opportunity

Management reiterated FY27 guidance for approximately 80 per cent revenue growth and an EBITDA margin of 24 per cent, plus or minus 100 basis points, while expressing confidence of outperforming this guidance.

Fuel Cell Phase 2 is scheduled for commissioning by September-October 2026, followed by a multi-fold Phase 3 expansion by March 2027. MTAR Technologies has also secured an initial approximately Rs 450 million export-oriented Data Centre Infrastructure Solutions order and is completing first-article qualifications. Management indicated potential annual demand for eight similar infrastructure sets.

Nuclear Outlook and Balance-Sheet Position

Civil nuclear is expected to gain momentum from 2HFY27. The segment is supported by the Rs 5 billion Kaiga 5 and 6 order, prospective refurbishment work and an expected nuclear order book above Rs 8 billion. Management expects nuclear orders to be executed over three to three-and-a-half years.

Working-capital performance improved materially, with net working-capital days falling to 59 at June 2026 from 172 at March 2026. The improvement was driven by better customer payment terms, faster collections and tighter receivable and inventory monitoring. Management aims to keep net working capital below 100 days in FY27.

Operating cash flow was Rs 2.48 billion, and net debt was effectively negligible after considering cash and investments.

Capex Plan and Valuation

MTAR Technologies plans approximately Rs 5 billion of capex during FY27-FY28, with 70 per cent allocated to Clean Energy and 30 per cent to nuclear, aerospace and defence. Management targets 4-5x asset turnover on incremental capex.

Motilal Oswal's target price of Rs 7,550 is based on 50x FY28E EPS and implies approximately 0.4x PEG on FY26-FY28E EPS CAGR.

Key Factors to Monitor

• Execution of the enlarged order book within the expected timelines.
• Commissioning of planned fuel-cell capacity and delivery of the related expansion.
• Sustaining the improvement in working capital and keeping net working-capital days below 100 in FY27.
• The effect of product mix on gross margins.
• Conversion of new nuclear, aerospace and data-centre opportunities into executable orders and commercial production.