Ajax Engineering Limited (Neutral)

Highlights

Ajax Engineering Limited (AEL) incorporated on 1992 a leading concrete equipment manufacturer with a comprehensive range of concrete equipment, services and solutions across the concrete application value chain. The company has developed over 141 concrete equipment variants catering to the concrete application value chain, and over the last ten years, they have sold over 29,800 concrete equipment in India.

The company has developed a comprehensive product portfolio that includes equipment such as self-loading concrete mixers (SLCMs) and batching plants for the production of concrete, transit mixers for the transportation of concrete, boom pumps, concrete pumps and self-propelled boom pumps for the placement of concrete, slip-form pavers for the paving of concrete and 3D concrete printers for depositing concrete.

The company has 77 pct market share in SLCM market in India in terms of SLCMs sold during H1FY25. Moreover, during FY24, 12 pct of the concrete production in India was through AEL SLCMs. AEL also continue to assist customers throughout the life of the equipment, and with that aim, they provide spare parts for the equipment sold by them and facilitate the provision of aftersales service by their dealers.

In addition to SLCM portfolio, they have a large and diverse range of non-SLCM equipment that cater to various aspects of the concrete production, transportation, placement and paving processes. Their non-SLCM product portfolio includes (i) batching plants for concrete production, (ii) transit mixers for concrete transportation, (iii) boom pumps, (iv) concrete pumps, (v) self-propelled boom pumps for concrete placement, and (vi) slip-form pavers.

Out of the total proceeds of Rs. 12,693 mn, ~Rs. 12,693 mn would go towards existing selling shareholders of the company as the company expects that the proposed listing of its equity shares will enhance their visibility and brand image as well as provide a public market for the equity shares in India.

Key Highlights

• Infrastructure development is a crucial driver of India’s economic growth and is projected to increase at ~8 pct CAGR from FY24 to FY29. While manual mixing remains common in the country, the rapid pace of growth is accelerating the penetration of mechanization of concrete which is projected to increase from ~25 pct in FY24 to ~41 pct in FY29. This trend is projected to further propel the demand for mechanized concrete equipment in India and grow the industry from Rs. ~61 bn to ~Rs. 178 bn from FY24 to FY29.
• AEL currently assemble equipment and manufacture boom arms using horizontal boring machines which operate under a lean assembling and manufacturing model. AEL key lean features include the implementation of the Andon system, JIT production, Kaizen, Poka-Yoke and online traceability. This lean manufacturing model distinguishes them from other leading concrete equipment manufacturers and has enabled them to achieve the lowest breakeven point among leading concrete equipment manufacturers in India.
• AEL equipment is sold through dealers in and outside India to a diverse range of end customers, including individual contractors, small and mid-sized contracting companies, rental companies, large construction companies and government construction agencies. Their SLCM customers also serving as a strong source of recommendations for their non-SLCM equipment. This synergy between equipment lines amplifies AEL market presence and solidifies its first-mover advantage.
• Based on AEL engagement with their customers and dealers, and assessment of market dynamics, AEL plan to export equipment to countries which they currently do not export into over the next five years.
• AEL’s key growth strategies includes (i) Maintain leadership position and grow market share of SLCM portfolio by developing innovative products to cater to new untapped markets (ii) Strengthen capabilities and increase market share of non-SLCM portfolio (iii) Improve operational efficiencies (iv) Increase presence in overseas markets through exports (v) Explore opportunities for inorganic growth.
• The company’s sales/EBITDA/profit has grown by 51.04 pct/74.48 pct/82.40 pct CAGR Over FY22-24. During FY24, company reported sales of Rs. 17,414 mn which grew by 51.28 pct YoY while EBITDA rose by 61.38 pct YoY to Rs. 2,755 mn as EBITDA margin expanded by 99 bps in FY24. As of FY24 the company reported profit of Rs. 2,251 mn against profit of Rs. 1359 mn in FY23. As of H1FY25 company registered sales/EBITDA/Profit of Rs. 7,700 mn/Rs. 1,192 mn/ Rs. 1010 mn which grew 12.43 pct YoY/19.82 pct YoY/21.80 pct YoY.

Key Risk

• AEL business is seasonal in nature and any decrease in sales during certain quarters could have an adverse impact on their financial performance.
• The company faces significant competition from domestic and international construction equipment manufacturers which may lead to a reduction in their market share, which in turn may adversely affect their business.

Financial Performance

Peer Comparison Based on FY24 Financials

Valuation

AEL was established, with a focus on manufacturing Self-Loading Concrete Mixers. AEL has expanded its range to include various products in the concreting sector and has also ventured into international markets with a distribution network in multiple countries. At the upper end of the price band of Rs. 629 the issue is priced at a PE of ~35.61 its FY25E annualised earnings. The issue looks fully priced.

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