June 2022
Sample Size: 5 Companies
Median Rating Value of sample size: A-
Individual Parameters Contributing to the Score
DS Equilibrium
With moderation in capital expenditure by the corporate sector over the last 2 years, there has been a significant impact on the order book of machinery manufacturers. To boost fresh investments in the manufacturing sector the Government has offered PLI incentive programme, low interest rates & availability of adequate systemic liquidity. The industry reported y-o-y 10.2% growth in its sales revenue from Rs.30.9 billion in December 2020 quarter to Rs.34.1 billion for the quarter ended December 2021. As per the OBICUS survey, the capacity utilisation of industry was around 72.4% for Q3FY22 as against 68.3% for Q2FY22.
Neutral
The industry is driven by significant capital investment and continuous upgradation requirements due to technology obsolescence. This increases entry barriers for newer players and reduces the extent of competition. Traditionally, large and vintage players exist in this sector as they enjoy pricing power domestically. Cheaper imports from China and Taiwan are the biggest threat to domestic players.
Predictable Regulatory environment
There is no significant regulatory risk threatening the industry. The rationalization of imports of certain machinery that is part of 'import restriction list' may be beneficial for the industry.
Largely predictable supply of inputs from diversified sources or Raw Materials with rare, occasional disruptions / fairly predictable price band
Since the value chain significantly includes imports from China, logistical challenges will continue to remain as seen during the pandemic. This industry is also vulnerable to exchange rate movement. The ongoing recovery in metal prices can increase raw material cost in the near term and may put pressure on operating margins.