Mangal Electrical Industries Limited (Avoid)

Highlights

Mangal Electrical Industries Limited (MEIL), incorporated on 1989 and they manufacture and supply different components that are critical for the manufacturing of the transformers used for distribution and transmission of electricity in the power sector.

MEIL specialize in processing transformer components, including transformer laminations, CRGO slit coils, amorphous cores, coil and core assemblies, wound and toroidal cores, and oil-immersed circuit breakers and they also trade CRGO and CRNO coils, amorphous ribbons.

Additionally, they manufacture transformers and customized products for the power infrastructure industry. Their transformer range spans from single-phase 5 KVA to three-phase 10 MVA units.

Out of the total proceeds of Rs. 4,000 mn, ~Rs. 1,013 mn would go towards Prepayment and/or repayment of outstanding borrowing availed by the company. ~Rs. 789 mn would go towards CAPEX, ~Rs. 1,220 mn would be go towards funding working capital and ~Rs 978 mn would go towards general corporate purpose.

Key Highlights

• The Indian transformer industry is experiencing a period of robust growth, driven by a confluence of factors. The market size is projected to expand significantly from Rs. 354 bn in FY25 to Rs. 522 bn by FY 2030 at a CAGR of ~8.1 pct.
• MEIL have five production facilities in Rajasthan with an aggregate production capacity for (i) 16,200 MT for CRGO, (ii) 10,22,500 KVA for transformers and (iii) 75,000 units for ICB and (iv) 2,400 MT for Amorphous units per annum.
• As of Q1FY26, an orderbook of the company across all the business line stood at Rs. 2,942 mn which is 0.54x of the FY25 sales with target completion date of September 2026, indicates short term sales visibility.
• MEIL’s key growth strategies include (i) Expand manufacturing capacity at existing facilities (ii) Enhance capacity by qualifying for 765 kV class approval issued by PGCIL (iii) Establishing collaboration with CRGO mill suppliers (iv) Expand existing product portfolios (vi) Grow customer base by diversifying into new geographies and maintain relationships with key customers and other stakeholder.
• The sales/EBITDA/ profit of the company have grown 24.53 pct CAGR/35.7 pct CAGR/38.4 pct CAGR over FY23-25. In FY25 sales of the company stood at Rs. 5,494 mn, rose 22.2 pct YoY. EBITDA of the company increased 92.09 pct YoY to Rs. 818 mn while margins expanded 540 bps YoY to 14.9 pct. Profit came at Rs. 473 mn, grew 126.3 pct YoY.

Key Risk

• MEIL do not have any direct hedging policy in place for mitigating raw material price fluctuations, for CRGO and CRNO coils, which may adversely impact business.
• A substantial portion of MEIL sales (70 pct) is derived from the states of Rajasthan, Gujarat and Uttar Pradesh. This concentration exposes company to region-specific risks.
• Regulatory restrictions on the import of CRGO material may adversely impact MEIL business operations and cost structure.

Financial Performance

Peers Comparison based on FY25 Financials

Valuation

Mangal Electrical Industries Limited (MEIL) manufacture and supply different components that are critical for the manufacturing of the transformers used for distribution and transmission of electricity in the power sector. Their core strength lies in its backward and forward integration, which significantly enhances its operational efficiency and competitive advantage. At the upper end of the price band of Rs. 561, the issue is priced at a PE of 32.8x its FY25 earnings on post issue equity capital. The issue appears to be fully priced. One can Avoid this issue.

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