Diffusion Engineers IPO - Issue Details, Valuations, Strategies, Risks, Financials And More: DRChoksey

Deven Choksey Research Report

Diffusion Engineers Ltd.'s IPO will be launched on Sept.26 and the offer closes for subscription on Sept.30. The manufacturer of welding consumables, wear plates and wear parts and heavy engineering machinery for core industries has fixed the price band in the range of Rs 159-168 per share. The minimum order lot for subscription is 88 shares.

The Rs 158 crore IPO consists only of a fresh issue with no offer for sale component.

Objects of the Offer

• Funding capital expenditure requirements towards Proposed Expansion of existing manufacturing facility at Unit IV.

• Setting up of a new manufacturing facility.

• Funding working capital requirements of the Company.

• General Corporate Purposes.

Strategies:

• Strategic expansion by venturing into nickel, cobalt and iron-based powder manufacturing for enhanced welding consumables portfolio.

• Expanding the geographical reach.

• Strategic Leasing and Maintenance Business Model for Heavy Equipment.

• Diversifying Anti Wear Solutions and Heavy Engineering Equipment business into new industries.

Outlook and Valuation:

Diffusion Engineers, a leading manufacturer and service provider in the welding consumables and heavy engineering sectors, is well-positioned to capitalize on the growing demand for durable and efficient industrial solutions.

Operating in a steadily expanding market driven by increasing industrialization and the need for wearresistant materials, the company benefits from its established reputation and long-standing relationships with a diverse clientele, including major players in the cement, steel, and power sectors.

The company’s strategic focus on forward integration has allowed it to evolve from manufacturing welding electrodes to producing advanced welding consumables and heavy engineering equipment.

This evolution, coupled with a commitment to quality and customized solutions, has led to consistent financial growth, with revenue increasing at a 3 year revenue CAGR of 21% and a PAT CAGR of 38% from FY21-24.

With a focus on operational efficiency and customercentric strategies, Diffusion Engineers is well-equipped to meet the evolving needs of its clients. Currently, the company is attractively valued at a PE ratio of 20x on FY24 Adj EPS, which is at a discount relative to its peers.

We assign a "Subscribe" rating to Diffusion Engineers, given its robust business model and strategic initiatives aimed at sustaining long-term growth.

Risks:

• The company is becoming more reliant on the domestic market for its sales and any decline in this market could negatively impact its market share.

• Reliance on its four Nagpur manufacturing facilities makes the company vulnerable to local unrest, natural disasters or production disruptions, which could harm its business.

• The company's reliance on specific industries means that economic cyclicality or reduced demand in these sectors could adversely affect its operations and finances.

• Negative cash flows in past fiscal years could adversely impact the company's future operations and financial condition.

Click on the attachment to read the full IPO report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.