Dynamatic Technologies - IsEC - 31 Mar 2024

BUY
CMP: INR 7,457 Target Price: INR 10,250  37% ICICI Securities Limited is the author and distributor of this report
31 March 2024 India | Equity Research | Initiating Coverage
Dynamatic Technologies
Defense
On the runway; set to soar further!
We initiate coverage on Dynamatic Technologies (DTL) with BUY rating and a target price of INR 10,250/share (based
on 45x FY26E EPS). Key points: 1) Sole supplier of Flap Track Beams (FTB) for Airbus’ 86% order backlog; 2) largest
gear pump supplier in the world with a well-diversified client mix; 3) healthy blend of complex machining of the west
and superior engineering of the east; 4) recent order wins likely to propel EBITDA to 2x FY23 by FY27E; and 5) likely to
be a participant in domestic aerospace. Going ahead, we expect aerospace & defence segment to be the earnings
driver, resulting in EBITDA CAGR of 19% and EBITDA margin of 17-18% (last five-year average: 13%) through to FY27E.
Aerospace to be the primary growth vector Amit Dixit

DTL has almost 80% market share in the Indian OEM tractor market and ~38% amit.dixit@icicisecurities.com
+91 22 6807 7289
in global tractor market (organized) (source: annual report), but we believe
Mohit Lohia
aerospace is likely to drive earnings growth as: 1) Recent order wins for flight mohit.lohia@icicisecurities.com
critical aero structures for Falcon 6X from Dassault Aviation, Airbus A220 Pritish Urumkar
doors and rear fuselage for 40-seater D328eco regional turbo aircraft signify Pritish.urumkar@icicisecurities.com
higher participation in supply chain of global aerospace OEMs; 2) it is the sole
supplier of FTBs for Airbus’ 86% order backlog, implying book/bill of 12.6x; 3)
healthy orderbook of INR 50-60bn from ongoing platforms and another INR
60bn from the recent order wins; and 4) increasing potential of regional
connectivity in India is likely to open more market for the company in near Market Data
future. We expect aerospace & defence segment to contribute 45% of revenue Market Cap (INR) 51bn
by FY30E compared to 34% in FY23. Thus far, in our estimates, we have not Market Cap (USD) 607mn
Bloomberg Code DYTC IN
considered incremental earnings from domestic defence orders.
Reuters Code DYNM BO
Hydraulics and metallurgy divisions are turning a fresh leaf 52-week Range (INR) 7,791 /2,585
Free Float (%) 57.0
DTL’s hydraulics division has orderbook of INR 50-60bn, to be executed over ADTV-3M (mn) (USD) 2.0
the next 10 years. The megatrends of global OEMs shifting their
manufacturing bases to India, rising urbanisation and modernisation in
agriculture are likely to improve the demand for tractors and construction Price Performance (%) 3m 6m 12m
equipment. In metallurgy, the company is likely to gain from Germany revving Absolute 47.2 84.5 186.8
up its defence spending, requiring artillery shells, which are currently under Relative to Sensex 45.4 72.1 159.0
development at Erla site (in Germany).
Financial Summary
Y/E March (INR mn) FY23A FY24E FY25E FY26E
Net Revenue 13,158 14,841 16,755 18,571
EBITDA 1,813 1,664 2,416 2,814
EBITDA Margin (%) 13.8 11.2 14.4 15.2
Net Profit 428 1,396 1,180 1,545
EPS (INR) 67.3 219.6 185.6 243.1
EPS % Chg YoY 33.2 166.7 (3.3) 31.0
P/E (x) 110.7 41.5 42.9 32.8
EV/EBITDA (x) 28.7 30.6 20.6 17.3
RoCE (%) 8.5 8.0 11.3 13.4
RoE (%) 9.9 26.1 17.5 19.0
Please refer to important disclosures at the end of this report

Dynamatic Technologies | Initiating Coverage | 31 March 2024
Returns set to improve

In our view, DTL has already invested in augmenting its capabilities. The company has
already invested INR 4.75bn in the past 7 years in augmenting its capacities and
capabilities both in India and abroad. Hence, the capex has peaked out and we expect
annual capex at INR 250-350mn hereon. Besides, the company has restructured its
Erla facility in Germany and disposed the wind farm asset in Coimbatore spread over
an area of 1.4mn sq.mt, while retaining an area of 352,000 sqmt for greater strategic
value for future development. This is likely to bring down its gross debt by 30% YoY to
INR 4.3bn (net debt/EBITDA at 2.1x) by end-Mar’24. We expect RoCE to improve to
22% by FY30E (FY23: 8.6%) as incremental earnings from new orders get reflected.
Creating opportunities, reaping the benefits

We like DTL’s distinct way of expanding business. Key points: 1) Blending the benefits
of advanced machining (capital intensive) of the west with extensive engineering and
artisanal craftsmanship (labour intensive) of the east; 2) doing value engineering in
components – from material to processes; and 3) fomenting local ecosystem – by
involving and integrating other players and utilising their competencies, essential for
securing big orders. In our view, these endeavours are likely to further boost earnings
from aerospace & defence segment.
Outlook: An active beneficiary of aerospace ecosystem

We see DTL in a vantage position as strong orderbook (estimated) of INR 110-120bn
(duration of almost 10 years) at global OEMs in aerospace & defence segment is likely to
drive the earnings. The company also gains from being the sole supplier of FTBs for Airbus
and has an opportunity to increase its wallet share from the existing customers. We are
optimistic on DTL’s participation in domestic defence segment in aerospace, having been
the only supply-chain partner (among private players) of HAL to be collocated in the
Nashik plant. It also has the capability to develop the entire fuselage of an airplane. We
expect DTL’s participation to be significant in fuselage and other advanced critical
machined components. Besides, DTL has the distinction of being the only private
aerospace player to share the same wall with international airport at Bengaluru, thus,
boosting the possibility of a more active role in the defence ecosystem. On hydraulics
front, we expect earnings to remain stable as the company has an existing orderbook of
almost INR 50-60bn (~10x of revenue (ttm)), thus, keeping the revenue base diversified.
We initiate coverage on DTL with BUY rating and TP of INR 10,250 based on 45x FY26E
EPS.
India | Equity Research 2

Table of Contents
Executive summary .............................................................................................................................. 4
Key risks ................................................................................................................................................... 6
Investment theme ................................................................................................................................. 7
Story in charts ..................................................................................................................................... 15
Financial analysis............................................................................................................................... 17
Business Profile .................................................................................................................................. 24
Industry Section .................................................................................................................................. 36
Aerospace & defence................................................................................................................. 36
Indian defence industry............................................................................................................. 39
In Focus: Boeing and Airbus ................................................................................................... 41
Airbus: An Indian perspective ................................................................................................... 45
Hindustan Aeronautics Limited (HAL) and Dynamatic Technologies ......................... 49
Peer benchmarking ........................................................................................................................... 53
Valuation: We value DTL stock at INR 10,250/share ............................................................ 55
Annexure 1: Hydraulics product profile ...................................................................................... 60

Executive summary
Sole supplier of FTBs for Airbus and the largest gear pumps producer
DTL enjoys leadership position in two major components in its two segments. The
company is one of the largest manufacturers of hydraulic gear pumps with 80% share
in Indian OEM tractor market and 38% of global tractor market (organised). The
existing orderbook in hydraulics segment stands at INR 50-60bn, to be executed over
the next 10 years. In aerospace & defence segment, the company manufactures the
precision flight critical and complex airframe structures and components for both
commercial and defence segments. DTL is tier-1 supplier to global aerospace OEMs
and Primes such as Airbus, Boeing, Bell Helicopters, Dassault Aviation and Spirit Aero
systems. DTL is the largest single source manufacturer of FTB in the world for Airbus
and has delivered over 7,000+ aircraft sets (each set has 6 FTBs) of single aisle FTBs
and 200+ aircraft sets (each set has 8 FTBs) for A330 until Mar-23. In FY23, DTL
delivered 125th ship set of Boeing’s P8 Poseidon Mission cabinet, that plays an
important role in surveillance and defence capabilities of P8 Poseidon aircraft.
Furthermore, DTL has successfully indigenised the manufacturing of major helicopter
cabin assemblies in collaboration with Bell Helicopter. The company has the capacity
to produce 12 sets of aft fuselage, turnover bulkhead, nose, roof and beam assemblies
per month. As per our current estimates, DTL has the capacity to produce 720 aircraft
sets and 80 aircraft sets for A320 and A330 families, respectively per annum. The
orderbook for current platforms (excluding the recent wins in FY24) stands at INR 50-
60bn, to be executed over the next 10 years.
Blending the west-east competencies
DTL is an instance of combining the innovative and complex machining available in
the west with the engineering and artisanal craftsman skills of the east. All the three
divisions- aerospace & defence, hydraulics and metallurgy - have overseas presence
in Swindon and Birstol (UK) and Schwarzenberg (Germany). DTL has a clear strategy
of setting up complex machinery (capital intensive) in the west so as to take advantage
of low cost of capital, qualified raw material suppliers and local maintenance support
(in case of breakdown) available there and doing assembly and engineering in India
(labour intensive). The movement of components is generally to and fro wherein the
machined components from west are airlifted to India for assembling and are then
either despatched from India to the end-customer or transported back to the west for
further machining, if required. Hence, the plants in different geographies function like
work stations of the same supply chain, placed 7,000kms apart.
Recent orders have significant potential
Besides its bulwark business FTBs, the company is moving into other components
and/or increasing its wallet share with the existing customers. These orders further
diversify the earnings base by incorporating regional aircraft and business jets in the
mix. After winning the contract in FY23 from Stelia Aeronautique Canada (a subsidiary
of Airbus Atlantic SAS) for manufacturing the escape hatch door for Airbus A220, DTL
has recently won a new contract with Airbus to manufacture and supply the main
passenger doors, service doors, cargo doors and over-wing emergency exit doors for
the A220 (8 doors per aircraft). The contract is likely to further leverage the strength of
the domestic aerospace ecosystem and would involve other players such as Mahindra
Aerostructure, Motherson Aerospace, Aequs, Wipro Aerospace and Ferra Aerospace
with DTL being the lead integrator. Furthermore, DTL has received an order for
manufacturing and assembly of flight critical Aero Structures for Falcon 6X from
Dassault Aviation. Besides, DTL has recently announced partnership with Deutsche
Aircraft to produce rear fuselage for the 40-seater D328eco regional turboprop aircraft
for the life of the aircraft. This modern, fuel-efficient aircraft is designed to serve
regional routes and can have traction in India, where government’s focus is to develop
regional air travel.

Favourable industry tailwinds in defence

Apart from DTL’s strong presence in commercial aerospace segment, we see
opportunities in domestic defence in coming years. DTL was the only vendor (among
private players) to be collocated in HAL’s Nashik plant during manufacturing of Su-
30MK-I. Besides, the company was involved in developing front fuselage jigs for LCA
aircraft. In our view, domestic aerospace sector is likely to see higher indigenisation
and more involvement of local companies. DTL is well placed to grab that opportunity
having supplied the front fuselage for LCA, middle fuselage for F-15EX and rear
fuselage for Su-30MK-I. Besides, the company has indigenised foldable strut
mechanism for ALH Dhurv that facilitates opening and closing of helicopter door
during rugged environmental condition. DTL is the single source supplier to HAL for
this product and has also received patent for the same. The company has also
developed complex machined beams and frames for complex naval application
(replacing imports) for BEL. On UAV front, the company has partnered with Israel
Aerospace Industries (IAI) for manufacturing of UAVs in India and entered into
tripartite agreement with HAL, IAL and Dynamatic for manufacturing, sales and
service of large UAVs in India to cater the requirements of the Indian Defence and
Central Armed Police Force (CAPF). DTL’s new plant’s location in Bengaluru and
sharing the wall with international airport at Bengaluru are likely to be advantageous
to the company for testing of such products. Besides, there is enough land available to
cater to any future needs.
Earnings accretion and low capex to lead to FCF generation
We expect EBITDA CAGR of 15-20% over the next couple of years based on the
current order backlog of Airbus and the recent orders won by the company. Post covid,
build rates have improved across global OEMs and they are interested in developing
vendors outside China (China plus one policy). The ramp up in execution of the recent
orders won for doors of A-220 aircraft and partnership with Deutsche Aircraft for
D328eco could further propel earnings. Besides, we have not considered the
opportunities from domestic defence ecosystem in our workings, but from its past
association with HAL, in both LCA and Su-30 platforms, we believe the involvement of
DTL could be significant. While we expect net working capital days to increase to 165
days (FY23: 150 days) on the back of higher development activities in case of new
orders, the need for incremental capex would not be there over the next couple of years
as the company has already invested about INR 4.75bn in the past seven years in
building capabilities. We expect net debt at INR 3.5bn (down 30% YoY) by FY24E,
utilising the cash received from the sale of wind farm at Coimbatore (in Tamil Nadu),
which will be used to develop Defence corridor, in which DTL will have major strategic
presence. We expect DTL to be net cash by FY27E, hence, the company may have
enough balance sheet headroom to aggressively pursue growth opportunities.
Besides, DTL has generated free cashflow in each year over the past five years. With
new contracts (particularly in aerospace segment) and improving prospects of
metallurgy segment, we expect cash generation to improve. Over the next three years
(FY25-27E), we expect cumulative free cash generation of ~INR 5.5-6bn,
approximately 12-13% of the current market cap.
Reasonable valuations
We see good opportunities for DTL in both commercial and defence segments in
aerospace. Besides, the global leadership in gear pumps is likely to result in stable
performance from hydraulics segment. Compared to peers in aerospace ecosystem,
that are trading at relatively rich valuations of 45-60x on FY26E (due to firm earnings
growth prospects of 35-40%), DTL is a rare stock in the segment, trading at sub-35x
FY26E EPS. While EBITDA CAGR is likely to sustain at 15-20% over FY27E, without
considering the incremental earnings from domestic aerospace segment, we see
stable cashflow and low capex requirement as comforting factors. We peg target
multiple of DTL at 45x considering the higher earnings growth potential beyond FY26E
due to the recently won contracts, higher wallet share from customers and
opportunities available in domestic defence space.

Key risks
Exacerbating geopolitical uncertainties
We expect DTL to be impacted by geopolitical uncertainties as these have a bearing
on the movement of material from one plant to the other. Besides, the ongoing
geopolitical crisis threatens to push global recovery and exacerbate the inflationary
environment. Combined with high interest rate scenarios and elevated raw material
prices, it has resulted in capital becoming more expensive in most industries. As DTL
operates in capital-intensive sector, it is vulnerable to these external factors that could
impact build rates of aeroplanes and earnings growth for the company.
Customer and product concentration risk in aerospace segment
Currently, the company is significantly dependent on Airbus (major customer) and
FTBs (major product) in aerospace. As per our analysis, Airbus and FTBs account for
almost 45-50% of the revenue in aerospace segment. However, DTL is the sole supplier
of FTBs for A320 and A330 series and the increasing reliance of Airbus is manifested
in the recent order of doors for A220 series. Besides, Boeing and Bell together account
for another 50% of the aerospace revenue. That said, even in aerospace segment, the
company is diversifying its revenue across customers, products and segments. All
these may reduce product cyclicality. In hydraulics, accounting for 33% of revenue,
customers are fairly diversified, mitigating this risk to an extent.
Competition
The business environment in which DTL operates is highly competitive in nature due
to constant innovations and evolution. Most OEMs maintain multiple suppliers for their
products and do not prefer exclusive contracts to ensure redundancy in the supply
chain, particularly post covid. In case of DTL, China plus one sourcing is of great
advantage. Besides, DTL’s long-standing relationship with customers and efforts to
further penetrate in their supply chains is an effective mitigation measure. DTL is also
taking lead on collaboration with players in domestic aerospace supply chain, ensuring
that it moves from being just a component manufacturer to the lead integrator of
systems and assemblies.
Technological changes
The segments in which DTL operates are subject to constant technological changes
and there are new players emerging within the global aerospace ecosystem. DTL
endeavours to mitigate this risk by constantly upgrading the existing technologies in
order to meet customer needs. For instance, the company worked with Airbus to
reduce the number of components in FTB for A320 by suggesting a monolithic
structure with the change in material from titanium to aluminium, thus saving cost. In
case of Bell helicopter, the company is entrenched in the supply chain to the extent of
final assembly and analysed the components individually, re-modelled the entire
fuselage, even going to the extent of making detailed drawings. The superior
machining facilities in overseas operations and engineering infrastructure in India
enable the company to adopt the technological changes rapidly, in line with customer
requirements.
High dependence on promoters and senior management: The company is highly
dependent on the promoter and management team, senior management and key
managerial personnel. The loss of any key team member may adversely affect the
business performance.

Investment theme
Sole supplier of FTBs for Airbus A-320 and A-330 family aircraft
DTL is the world’s largest single source supplier of FTBs for Airbus (source: annual
report). It currently supplies FTBs for A-320 family (A318, A319, A320 & A321) and A-
330 family. These FTBs are class-1 flight critical assemblies that are connected to
wings. DTL has been supplying flight critical FTBs assemblies to Airbus for the past 17
years, first as FTB Tier II and then as Tier I supplier. It has delivered more than 7,000
aircraft sets of FTBs till date and has also successfully completed the A-320 re-design
of the FTB with a monolithic structure working closely with Spirit Aero Systems. The
company delivers close to 800 aircraft ship sets annually.
In CY23, Airbus had delivered 735 commercial aircraft globally (aircraft type comprised
68 nos. of A220 family (53 nos. in CY22), 571 nos. of A320 family (516 nos. in CY22),
32 nos. of A330 family (32 nos. in CY22) and 64 nos. of A350 family (60 nos. in CY22)).
Further, Airbus commercial aircraft business registered 2,094 net new orders in CY23.
The end-CY23 order backlog stood at 8,598 aircraft, majority of which is for A320
family (~84%).
As per Global Market Forecast (GMF-23) of Airbus: “Passenger traffic growth is

expected to be ~3.6% (2019-2042 CAGR) and freight traffic is expected to grow ~3.2%
(CY19-CY42 CAGR). Further, fleet in service beginning of CY20 is ~22,880 aircraft,
which is expected to increase to ~46,560 aircraft by CY42, and new deliveries are
expected to be 40,850 aircraft over the next 20 years”.
Exhibit 1: Annual order summary of Airbus aircraft from past 8 years

New Orders (net of cancellation) CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23
A220 0 0 135 63 30 38 105 141
A320 Family 607 1,054 541 654 263 437 770 1,675
A330 83 21 27 89 -14 30 -65 -3
A350 41 36 40 32 -11 2 10 281
Net orders inflow 731 1,111 743 838 268 507 820 2,094
Source: I-Sec research, Airbus
Exhibit 2: Historical annual orders and delivery

No. of aircrafts CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23
New orders 731 1111 743 838 268 507 820 2,094
Delivery 688 718 800 863 566 611 661 735
New order to delivery (times) 1.1 1.5 0.9 1.0 0.5 0.8 1.2 2.8
Order Backlog 7,171 7,564 7,507 7,482 7,184 7,080 7,239 8,598
Delivery 688 718 800 863 566 611 661 735
Exhibit 3: Orderbook and backlog of A-320 aircraft of Airbus

A 320 families CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23
Net order 607 1054 541 654 263 437 770 1,675
Delivery 545 558 626 642 446 483 516 571
Order Back log 5,643 6,139 6,054 6,066 5,883 5,837 6,091 7,195
Order Book to bill (times) 10.4 11.0 9.7 9.4 13.2 12.1 11.8 12.6

Exhibit 4: Order backlog of Airbus (Dec’23 end)

As on Dec'23end No. of aircrafts % of total aircraft
Order Book 8,598 100%
A- 320 7,195 84%
A- 220 602 7%
A- 350 621 7%
A- 330 180 2%
New order to delivery ratio of 2.9x (highest) and book to bill of 12.6x (highest)
As mentioned in the above tables, DTL supplies FTBs to A-320 family and A-330
family, which comprises 84% and 2%, respectively, of total order backlog of Airbus.
New order inflow for Airbus had been highest in CY23 with net order inflow of ~1,675
nos. of A-320 family aircraft which translates into new order to delivery ratio of 2.9x
(highest) and book to bill of 12.6x (highest). This provides sufficient revenue visibility
over the next 10-12 years, as Airbus has 7,195 aircraft under its order backlog of A-
320 family and 180 aircraft for A-330 family.
Boeing-DTL partnership to bear results; a foray into international defence

DTL is the sole global supplier of power and mission cabinets for Boeing’s P8 Poseidon
aircraft. The company manufacturers Aft Pylon Assembly and Cargo Ramp Assembly
for CH-47 Chinook helicopters. This is Boeing’s largest export programme outside
India.
Exhibit 5: Power and mission cabinets for P8 Poseidon Exhibit 6: Pylon and ramp assembly for CH-47
Source: I-Sec research, Company data11 Source: I-Sec research, Company data
DTL has been awarded a contract for manufacturing assemblies for Boeing’s newest
tactical fighter, F-15EX Eagle II. This is the first time when aero structures for the latest
and most advanced F-15EX Eagle II will be made in India. DTL has recently delivered
Boeing MQ25 whiffletree assemblies. These whiffletree assemblies are for static and
fatigue testing of control surfaces of MQ25 Unmanned Fueler Aircraft Program.
1
Company data refers to information related to the company available in public domain including (but not
limited to), Annual Report, Presentations, Earnings release, YouTube videos and management interviews
Exhibit 7: Key Boeing platforms and DTL’s contribution

Platform Outlook
In 2021, Boeing and US Navy conducted three historic un-crewed aerial refuelling missions with MQ-25 T1 test asset, transferring fuel
for the first time to an F/A-18 Super Hornet, E-2D Hawkeye and F-35C Lightning II. The F/A-18 flight marked the first time in history
an un-crewed aircraft refuelling another aircraft. Following this, Boeing had announced a new USD 200mn, 300,000-sq-ft MQ-25
production facility, scheduled for completion in CY24 at Mid America St. Louis Airport in Illinois.
Boeing MQ25 In 2020, US Navy exercised an option for three additional MQ-25s, the service’s first operational carrier-based un-crewed aircraft.
Boeing is manufacturing seven aircraft and two test articles under the initial contract awarded in 2018, and the US Navy’s stated
requirement is for >70 nos. of MQ-25s.
DTL contribution: DTL has delivered Boeing MQ25 whiffletree assemblies (these whiffletree assemblies are for static and fatigue
testing of control surfaces of MQ25 Unmanned Fueler Aircraft Program).
Boeing’s defence platform includes the digitally transformed F-15EX Eagle II; the Block III F/A-18 Super Hornet and F/A-18 Super
Hornets that have gone through Service Life Modification (SLM) line, the EA-18G Growler, and the T-7A advanced pilot training system.
Two F-15EX Eagle II were delivered to US Air Force in 2021, ahead of schedule, and performed full-scale operational testing six months
Boeing F-15EX later, achieving impressive results with their advanced survivability, weapons payload and networking capabilities.
DTL contribution: DTL has designed and delivered Boeing F-15EX assemblies, which involved developing 3D models, tooling for detail
parts and assembly, and manufacturing detail parts and assembly in record time by adapting APQP methodology: first time right,
every time right.
After US Air Force awarded Boeing the Advanced Pilot Training System contract in 2018, the T-X aircraft was officially named T-7A
Red Hawk in 2019. The contract is for 351 jets, 46 high-resolution simulators and associated ground equipment. To date, more than
450 successful engineering and manufacturing development flight tests have been accomplished at advanced trainer stages for initial
T-7A Red Hawk production. The first EMD T-7A Red Hawk was officially rolled out for US Air Force on Apr 28, ’22.
DTL contribution: DTL has been awarded a contract for the delivery of tools for static and fatigue testing of control surfaces of Boeing-
SAAB T-7A Red Hawk Program.
In 2022, Boeing achieved two key international vertical lift down-select awards. In Jun’23, Germany selected Chinook (60 aircraft) as
its future heavy-lift aircraft, and in Sep’23, Polish government chose Apache (96 aircraft) as its upcoming attack helicopter. For
CH-47 Chinook Chinook, Boeing received awards to produce six more MH-47G aircraft and two more CH-47F Block II. In Dec’23, Boeing also received
Helicopters a contract to produce two more Block I Chinooks for the Army and 12 for the Egyptian Air Force.
DTL contribution: The company manufacturers Aft Pylon Assembly and Cargo Ramp Assembly. This is Boeing Defence system’s
largest export programme outside India.
In Feb’22, Boeing delivered the 12th P-8I, which was the fourth aircraft to be delivered under an option contract for four additional
P8 Poseidon aircraft that the Indian MoD placed in 2016. The P-8 program has delivered nine of nine P-8A Poseidon aircraft to the United Kingdom
Maritime and five of five P-8A Poseidon aircraft to Norway. In Dec’22, Boeing delivered the first P-8A to New Zealand. This delivery also marked
Reconnaissance the 155th P-8 aircraft delivered to global customers.
Aircraft
DTL contribution: The company is sole global supplier of power and mission cabinets for Boeing’s P8 Poseidon Maritime
Reconnaissance Aircraft.
Source: I-Sec research, Boeing annual report
Recent orders in aerospace segment diversify the earnings base

DTL has received three recent orders in aerospace segment: i) long-term contract for
manufacturing and assembling of flight critical aero structures for Falcon 6X (business
jet) with Dassault Aviation, ii) contract for manufacturing doors for A220 aircraft
(commercial aircraft), and iii) strategic partnership with Deutsche Aircraft to
manufacture rear fuselage for D328eco (regional aircraft). We believe these orders are
significant and diversify DTL’s earnings across different aircraft types, suppliers and
components.
In Jan’24, DTL won an order for manufacturing and assembling of flight critical aero
structures for Falcon 6X from Dassault aviation. This contract provides the company
an opportunity to foray into business jet segment.
Close on the heels of executing a contract with Airbus for manufacturing the Escape
Hatch Door (EHD) for Airbus A220 aircraft, DTL executed a new contract in Feb’24
with Airbus to manufacture and supply the main passenger doors, service doors, cargo
doors and over-wing emergency exit doors for A-220 aircraft. The existing backlog of
602 aircraft and book/bill of 8.9 years present a significant long-term opportunity for
the company. This contract is significant as it may leverage the strength of the Indian
aerospace ecosystem to deeply industrialise airplane doors for the global aviation
industry. The company intends to work with large supplier partners like Mahindra
Aerostructure, Motherson Aerospace, Aequs, Wipro Aerospace and Ferra Aerospace.

A-220 family CY18 CY19 CY20 CY21 CY22 CY23
Net order 135 63 30 38 105 141
Delivery 20 48 38 50 53 68
New order to delivery (times) 6.8 1.3 0.8 0.8 2.0 2.1
Order Back log 482 497 489 477 529 602
Book to bill (times) 24.1 10.4 12.9 9.5 10.0 8.9
In Mar’24, DTL has signed a contract with Deutsche Aircraft to manufacture rear
fuselage for D328eco regional turboprop aircraft. These aircraft would connect tier 2
and tier 3 cities in Europe and has an estimated potential for 500 aircraft spread over
10 years. This contract is for the life of the aircraft and has significant potential trickle-
down effect for the domestic market as well. In India, the Civil Aviation Ministry has
notified the Small Aircraft Scheme (SARAS) under the regional connectivity scheme
UDAN, with an aim to stimulate regional and hinterland air connectivity. The focus of
the scheme is to encourage the operations of small aircraft with 20 seats and below,
which can operate to and from airports and do not require significant infrastructure.
We peg the total orderbook from these three recent orders in Q4FY24 at INR 60bn
spread over 10 years. This is in addition to the orderbook of INR 50-60bn from the
ongoing platforms.
Value addition to customers’ supply chain

In our view, DTL is not just the supplier, but also focuses on value engineering, supply
chain consolidation and simplification. We mention below two case studies, merit
attention in this regard:
Bell 407 programme
The Bell 407 is the world’s largest selling helicopter and DTL has been contracted as
a single source supplier of major airframe assemblies for the Bell 407 helicopter for the
life of programme. The industrialisation programme at DTL entailed digitisation of over
2,000 detailed parts, followed by development of tooling, processes and part
manufacturing. These are supplied as five major fuselage assemblies instead of 1,600
part numbers before. As a result of digitisation, DTL was able to produce sheet metal
parts to a better standard and at a lower cost than incumbent suppliers in North
America, besides providing an optionality to further evolve Bell 407 airframe.
As a result of supply chain consolidation and digitisation, 56 incumbents were replaced
by just 1, legacy discrepancies were removed and new baseline configuration evolved.

Exhibit 9: 5 major assemblies supplied for Bell 407 airframe
Source: I-Sec research, Company data1
Monolithic FTB for A-320

DTL through its UK subsidiary, Dynamatic-Oldland Aerospace, Swindon, worked
closely with Airbus and Spirit Aerosystems in developing a monolithic version of A320
FTB, where the number of parts went down from over 200 to under 20 per assembly.
Besides positioning DTL as an elite supplier capable of engineering new iterations of
flight-critical class-1 aero-structures for global OEMs, the development increases the
work-share of DTL per aircraft as it was involved in machining 100% of these
monolithic parts, in house.
Exhibit 10: Monolithic beam for A-320
Source: I-Sec research, Company data

Taking advantage of west-east complementarity

DTL operates advanced machining plants in the west while assembly (manpower
intensive) activities are carried out in its India plants. Acquired in 2008, DTL’s UK facility
has complex five axis machining capabilities for the manufacturing of a vast range of
machines, finishing, assembly and inspection operations. The facility has long-term
contracts with OEMs and tier 1 suppliers and is a certified supplier to Airbus UK,
Boeing, GKN Aerospace, Magellan Aerospace, GE Aviation Systems, Lockheed Martin,
Augsta Westland, Spirit AeroSystems, UK.
DTL acquired hydraulics business in the UK in CY07. The plant produces performance
engineering hydraulic products such as aluminium and cast iron gear pumps, fan drive
system and engineered packages etc. The unit is a supplier to leading global tractor
OEMs including John Deere and Case New Holland. The unit has comprehensive
product testing and validation capabilities with advanced design knowledge for mobile
hydraulics sector and is an approved supplier to ADL, Terex Limited and ZF.
DTL’s Eisenwerk Erla GmbH foundry is one of the finest ferrous foundries in Europe
with specialisation in high-grade alloys such as Si-Mo, Ni-Resist, Heat Resistant Steel
and Core Making Technology of Turbocharger castings. The foundry has over 12.5%
share of global Petrol Turbocharger market. Currently, the foundry is in the process of
transformation from an automotive/foundry-focus to aerospace business. The foundry
is also expanding its presence in defence sector. In view of the current geopolitical
situation, Germany is looking to increase its defence spending to 3.5% of GDP from 2%
currently. Among other defence products, the focus is to develop artillery shell arsenal.
We believe Erla can have a meaningful share of artillery shell market in the future.
In India, DTL does manpower intensive assembly process by utilising locally available
skills including artisanal workmanship. The complementary skills of west and east aid
the company as having complex machining and casting units in the west is helpful as
cost of capital is lower and breakdown maintenance can be done in a timely manner,
while assembling units in India helps DTL to do manpower intensive engineering
processes in a cost efficient manner.
Opportunities in domestic aerospace sector

DTL has been associated with HAL for various platforms. In the past, DTL was the only
private vendor to be collocated with HAL in Nashik facility for manufacturing Su-30
MKI. DTL has been associated with Lakshya Pilotless Target Aircraft for Wings and
rear fuselage, HJT 36 Intermediate Jet Trainer for Ailerons and flaps and Su-30 MKI for
vertical fins, slats, cannards, Stabilisers, air brakes and ventral fins (marked in green).
Exhibit 11: Lakshya, HJT36 & Su-30 MK1 (in order)
In addition, DTL has been chosen as the supplier of front fuselage assembly for LCA
Tejas by HAL.

Exhibit 12: LCA Tejas: DTL’s scope of work
Going ahead, we expect DTL to be associated with HAL as the production of LCA Tejas
Mk-1A (83 nos ordered and AoN for 97 nos. issued), LCA Tejas Mk-2 (probable orders
for 200 nos) and AMCA (probable orders for 200 nos.) commences. That said, we do
not expect DTL to be dependent on HAL for its earnings growth as its current
orderbook is significant.
Exhibit 13: LCA Tejas: Front fuselage
A well-diversified revenue base with competitive market standing

DTL operates in three business segments: i) Hydraulics, ii) aerospace & defence and iii)
metallurgy. While each of the segment contributes ~1/3rd of the revenue, aerospace
contributed >50% of its consolidated EBITDA, followed by hydraulics contributing
~39% of EBITDA and metallurgy segment contributing ~8% of overall EBITDA of the
company. The European market (incl. UK) contributes 55% of the revenue, while
domestic market contributes ~25%; USA contribution is ~11-12%. DTL’s majority of
metallurgical segment revenue comes from the European market.
Exhibit 14: Revenue contribution - geographical wise

Revenue (%) FY18 FY19 FY20 FY21 FY22 FY23
India 26.6% 30.9% 27.1% 25.4% 25.5% 23.5%
Europe (ex-UK) 45.4% 40.2% 34.8% 39.0% 45.7% 36.8%
UK 14.9% 13.8% 17.0% 13.3% 13.2% 19.2%
USA 12.5% 12.0% 13.8% 17.5% 9.0% 11.5%
Canada 0.0% 0.0% 6.1% 4.1% 3.5% 4.0%
RoW 0.7% 3.2% 1.1% 0.7% 3.0% 5.0%
Source: I-Sec research

Exhibit 15: Segmental revenue distribution

% of revenue FY18 FY19 FY20 FY21 FY22 FY23
Hydraulics 23.8% 24.2% 24.0% 26.6% 33.8% 35.1%
Aerospace 26.8% 31.3% 40.5% 33.4% 28.7% 33.2%
Metallurgy 49.4% 44.5% 35.4% 39.5% 37.1% 31.7%
Consol revenue (INR mn) 14,084 15,788 13,600 12,106 12,735 13,158
Source: Company data, I-Sec research
Exhibit 16: Segmental key numbers

(INR in mn) FY17 FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Aerospace – Segment
Revenue 3,457 3,564 4,689 4,976 3,740 3,601 4,374 3,682
EBITDA 1,047 814 1,168 1,525 1,113 990 1,168 864
EBITDA Margin (%) 30.3% 22.9% 24.9% 30.7% 29.8% 27.5% 26.7% 23.5%
Hydraulics – Segment
Revenue 2,768 3,155 3,631 2,950 2,976 4,237 4,617 3,259
EBITDA 398 371 416 229 311 732 875 307
EBITDA Margin (%) 14.4% 11.7% 11.4% 7.7% 10.4% 17.3% 18.9% 9.4%
Metallurgy – Segment
Revenue 8,836 6,556 6,683 4,350 4,419 4,650 4,166 3,647
EBITDA 294 257 251 297 182 203 171 231
EBITDA Margin (%) 3.3% 3.9% 3.8% 6.8% 4.1% 4.4% 4.1% 6.3%
The contribution from hydraulics segment and aerospace segment has increased over
the years while contribution from metallurgy segment has declined over the years.
Historically, EBITDA margin of aerospace segment is >20%, while for hydraulics
segment margin has been volatile. Metallurgical segment’s EBITDA margin stood at
~4-6% between FY16-FY23. FY23 had witnessed the highest margin (in the last 5
years) in aerospace and hydraulics segments led by better revenue mix, while
metallurgical segment witnessed a decline in margin due to increased input costs.

Story in charts
Exhibit 17: See higher revenue contribution from aerospace segment in future
Hydraulics Aerospace Metallurgy
100%
80%
60%
40%
20%
0%
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Exhibit 18: Expect EBITDA margin above 15% by FY26E
EBITDA EBITDA margin

3000 16.0%
15.0%
2500
14.0%
2000
(INR mn)
13.0%
1500
12.0%
1000
11.0%
500 10.0%
Exhibit 19: Net debt may come off and leverage is set to improve
Net Debt Net debt/EBITDA

7500 5.0
4.5
6100 4.0
3.5
4700 3.0
(INR mn)
2.5
3300 2.0
1.5
1900 1.0
0.5
500 -

Exhibit 20: Capex and free cashflow progression

1600 Capex Free Cashflow
1200
800
(INR mn) 400
0
-400
Exhibit 21: RoE and RoCE expected to improve
15.0 RoCE RoE 25.0
20.0
12.0
15.0
9.0
10.0
(%)
5.0
6.0
-
3.0
-5.0
0.0 -10.0
Exhibit 22: Highest Book-to-Bill ratio among peers (below)
12
10
6
(x)
0
Dynamatics Azad Engineering Datapatterns Astra Microwave MTAR
Technologies
Source: I-Sec research, Bloomberg, Company data

Financial analysis
Healthy orderbook gives significant revenue visibility
DTL’s total current orderbook is at a healthy INR 160-170bn, implying book/bill of 12-
13x. The orderbook for aerospace stands at INR 110-120bn (25-27x (ttm) revenue).
This orderbook is likely to be executed over the next 10 years, hence, we expect overall
and aerospace revenue to rise to 3x and 2x, respectively, compared to FY23 levels.
Going ahead, we expect revenue growth at 11% YoY through to FY26E compared to
FY23 levels. Revenue in 9MFY24 was impacted by the shifting of aerospace facility
(from Peenya) to the current location (near Bengaluru international airport). As the
approvals are site specific, this resulted in a delay in revenue recognition, which is now
back on track. Beyond FY26E, we expect recently won new orders to contribute
significantly to growth.
Exhibit 23: Revenue progression through to FY26E

20000
17000
14000
(INR mn)
11000
8000
5000
As growth in aerospace is likely to be faster, we expect the division to contribute 45%

of overall revenue by FY30E compared to 33% in FY23.
Exhibit 24: See higher revenue contribution from aerospace segment in future
100%
80%
60%
40%
20%
0%

The European market (incl. UK) contributes 55% of the revenue of the company, while
domestic market contributes ~25%; USA’s contribution is ~11-12%. DTL’s majority of
metallurgical segment revenue comes from the European market. We expect this trend
to continue and exports, overall to contribute almost 3/4th of overall revenue.
Exhibit 25: Geographical revenue distribution

Revenue (%) FY18 FY19 FY20 FY21 FY22 FY23
India 26.6% 30.9% 27.1% 25.4% 25.5% 23.5%
Europe (ex-UK) 45.4% 40.2% 34.8% 39.0% 45.7% 36.8%
UK 14.9% 13.8% 17.0% 13.3% 13.2% 19.2%
USA 12.5% 12.0% 13.8% 17.5% 9.0% 11.5%
Canada 0.0% 0.0% 6.1% 4.1% 3.5% 4.0%
RoW 0.7% 3.2% 1.1% 0.7% 3.0% 5.0%
EBITDA margin may increase as contribution from aerospace rises

While each of the segment contributes ~1/3rd of the revenue, aerospace contributed
>50% of its EBITDA, followed by hydraulics contributing ~39% of EBITDA and
metallurgy segment contributing ~8% of overall EBITDA. Historically, EBITDA margin
of aerospace segment is >20%, while hydraulics segment margin has been volatile.
Metallurgical segment’s EBITDA margin stood at ~4-6% in FY16-FY23. FY23 had
witnessed the highest margin (in the last 5 years) in aerospace and hydraulics
segments led by better revenue mix, while metallurgical segment witnessed a decline
in margin due to increased input costs.
Going ahead, we expect EBITDA margin to improve owing to higher share of profitable
aerospace segment on incremental earnings from the recent orders flowing through.
As a result, overall EBITDA margin is likely to rise to 15.2% by FY26E compared to
13.8% in FY23.
Exhibit 26: Expect EBITDA margin above 15% by FY26E
EBITDA EBITDA margin

3000 16.0%
15.0%
2500
14.0%
2000
(INR mn)
13.0%
1500
12.0%
1000
11.0%
500 10.0%

We expect aerospace segment to contribute almost 60% of overall EBITDA by FY26E.

This proportion may go up further as the revenue from the recently won new orders
flows in.
Exhibit 27: EBITDA contribution from aerospace segment is likely to increase

3300
2600
1900
(INR mn)
1200
500
-200 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
PAT margin in FY24 is aided by exceptional gains, to normalise from FY26E

We expect DTL’s PAT and PAT margin at INR 1.4bn and 8%, respectively, by FY26E
aided by higher revenue share of aerospace & defence segment. Besides, the reduction
of debt is pursuant to: 1) Receipt of net gains of INR 346.2mn from approval of
restructuring plan at Erla and; 2) an estimated gain of INR 600mn from the sale of wind
farms lands (measuring 357.9 acres at Coimbatore to Tamil Nadu Industrial
Development Corporation (TIDCO) for setting up of the Southern Defence Industrial
Corridor for a compensation of INR 1.07bn) may reduce the interest cost.
Exhibit 28: PAT margin may improve
1600 PAT PAT margin 10%
8%
1200
6%
800
4%
(INR mn)
2%
400
0%
0
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E (2.0)%
-400 (4.0)%

Expect debt to go down from FY24

The external borrowings of the company have largely been range bound at INR 6bn
for the past 7-8 years (though term loans have declined over the years) and the
average finance cost has declined over the years. During Mar’23, DTL raised INR
1.13bn through the preferential allotment of equity shares and the fund infusion has
supported the company’s deleveraging efforts.
Exhibit 29: Borrowing profile of the company

(INR mn) FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Long term borrowings 5,038 5,092 4,893 4,432 3,876 4,269 3,781 3,612 3,174
Short term borrowings 920 1,559 2,209 2,160 2,200 1,505 1,654 2,572 2,169
Total external borrowings 5,958 6,651 7,102 6,592 6,075 5,774 5,435 6,184 5,343
Lease liabilities 1,353 1,665 1,432 1,351 1,293
Total liabilities 5,958 6,651 7,102 6,592 7,428 7,439 6,867 7,535 6,636
Finance expenses paid 728 784 744 795 805 700 590 654
Average cost of borrowings 11.8% 10.7% 11.6% 11.5% 9.4% 8.2% 9.1%
The gross debt (external debt) to EBITDA ratio of the company had declined to 3.4x in
FY23 (5.1x in FY18) mainly on account of improvement in EBITDA as well as a decline
in debt. Going forward, we expect debt to EBITDA to remain at sub 3x levels. As a
result of cash inflow from restructuring at Erla in Q1FY24 and receipt of compensation
for land in Q4FY24, we expect gross debt to come off by 25% YoY at INR 3.5bn by
Mar’24. We expect net debt to further come off as peak capex appears to be over. We
expect maintenance capex of INR 300mn over the next couple of years.
Exhibit 30: Net debt may come off and leverage is set to improve
Net Debt Net debt/EBITDA

7500 5.0
4.5
6100 4.0
3.5
4700 3.0
(INR mn)
2.5
3300 2.0
1.5
1900 1.0
0.5
500 -
Significant FCF generation likely to result in DTL being net cash by FY27E
Unlike its peers in aerospace & defence space, DTL has been free cash positive in all
the years since FY19. Cumulatively, DTL has incurred capex of INR 4.75bn in the past
seven years and majority of its capex was incurred in aerospace segment. DTL has
invested ~INR 1.8bn in aerospace segment in the past six years.
Owing to lower interest repayments and peak capex behind us, we expect substantial
free cashflow from FY25E. As a result, we expect DTL to be net cash positive by FY27E.

Exhibit 31: Capex and free cashflow progression

1600 Capex Free Cashflow
1200
800
(INR mn) 400
0
-400
RoE and RoCE profile may improve further

The implied RoCE calculation, based on the segmental results of the company,
suggests RoCE of hydraulics segment is the highest, while metallurgy segment has
witnessed single low digit to negative RoCE.
Exhibit 32: Segmental RoCE

RoCE % FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Hydraulics 18.5 22.9 17.6 20.7 6.1 12.6 36.4 39.6
Aerospace 23.3 26.5 15.1 22.5 25.4 17.9 12.2 14.4
Metallurgy 4.6 1.6 4.7 3.6 2.4 (0.1) 2.4 (0.2)
Going forward, we believe aerospace segment may witness significant growth in

revenue and margins led by the recent contract wins. While aerospace segment is the
best, in terms of revenue, EBITDA margin, RoCE profile etc, the performance of other
segments is also likely to improve on the back of cost optimisation and improvement
at Erla. We expect RoCE and RoE to improve to above 15% by FY26E. That said, we
believe the full impact of the recent contract wins on earnings may be visible only post
FY27E.
Exhibit 33: RoE and RoCE expected to improve
15.0 RoCE RoE 25.0
20.0
12.0
15.0
9.0
10.0
(%)
5.0
6.0
-
3.0
-5.0
0.0 -10.0

Performance of overseas operational subsidiaries

Eisenwerk Erla and Dynamatic had contributed 37-38% and 26%, respectively, to
DTL’s consolidated revenue in FY23. The performance of DTL’s key operational
subsidiaries, Eisenwerk Erla (Germany) (100% shareholding) and Dynamatic Ltd (the
UK) (100%), has improved in FY23. Key points: 1) Revenue of Eisenwerk Erla (Germany)
declined to EUR 49.8mn in FY23 mainly due to the ongoing Ukraine conflict, which had
triggered inflation, surge in gas and electricity cost and supply-chain disruptions
across Europe; 2) revenue of DTL (UK) improved to GBP 34.4mn (GBP 24mn in FY22),
driven largely by the revenues from new projects, which moved from limited to full scale
production, improved tractor market demand in the US and better supply chain; 3)
Eisenwerk is currently in the process of transformation from an automotive/foundry-
focus to aerospace business; 4) Dynamatic-Oldland Aerospace® division in the UK
continues to prosper with a good mix of business across a varied range of aircraft in
commercial and military markets, and has achieved sales of GBP 20.2mn in FY23.
Eisenwerk Erla (Germany)

Revenue of Eisenwerk Erla (Germany) declined to EUR 49.8mn in FY23 mainly due to
the ongoing Ukraine conflict, which had triggered inflation, supply-chain disruptions
for OEMs and unpredictable surge in gas and electricity costs for corporations across
Europe, particularly in Germany. However, the German Government’s protective
policies and support for industry have helped the company minimise the impact and at
the end, the situation showed improvement in revenue due to successful negotiations
for price increase from all customers.
DTL plans to expand its operations significantly in Germany and is currently in the
process of transformation from an automotive/foundry-focus to aerospace business.
Considering the various challenges such as supply-chain crisis at OEMs, current
inflation in Europe, steep and unpredictable increase in the cost of gas and electricity
being faced by corporations across Europe, Eisenwerk undertook corporate
restructuring measures through ‘Protective Shield process by self -administration’
under applicable German Laws. We believe the company is entitled to additional
revenue from its customers under the government’s protective shield policy.
Exhibit 34: Key financial numbers (KFIs) of Eisenwrek Erla

(in EUR mn) FY20 FY21 FY22
Net Sales 55.0 51.3 53.8
Gross Margin 18.6 15.2 16.4
Gross Margin (%) 33.7% 29.6% 30.5%
EBITDA 3.0 1.0 1.2
EBITDA Margin (%) 5.4% 2.0% 2.3%
PAT -3.9 -1.8 1.0
PAT Margin (%) -7.0% -3.5% 1.9%

Dynamatic Limited (UK)
DTL (UK) has achieved a revenue of GBP 34.4mn (up 43% YoY) and EBITDA grew to
GBP 6mn (up 131% YoY). This growth was driven largely by the revenues from new
projects which moved from limited to full scale production, improved tractor market in
the US and better supply chain. Dynamatic has continued its cost optimisation and risk
mitigation initiatives which reflects in its overall performance. The supply-chain
situation in Europe and UK have improved significantly post covid-19 led disruptions.
However, due to high inflation and increased power cost, margins may be under
tremendous pressure in the near term.
Dynamatic-Oldland Aerospace® division in the UK continues to prosper with a good
mix of business across a varied range of aircraft in commercial and military markets.
This includes Airbus Flap track parts for A318, A319, A320, A321 & A330, Airbus -
flaps, landing gear, wing structural items for A400M & A330. C130J engine structural
parts, plus the Boeing Chinook pylon and ramp monolithic machined components.
Exhibit 35: Key financial numbers (KFIs) of Dynamatic Limited (UK)

(GBP mn) FY19 FY20 FY21 FY22 FY23
Net Sales 28.8 26.8 17.7 24.0 34.4
Gross Margin 15.8 13.9 10.0 13.2 18.7
Gross Margin (%) 54.9% 51.9% 56.5% 55.0% 54.5%
EBITDA 1.9 2.1 0.9 2.6 6.0
EBITDA Margin (%) 6.5% 7.7% 4.9% 10.8% 17.4%
PAT 0.6 -0.7 -1.7 -0.5 2.2
PAT Margin (%) 2.0% -2.6% -9.8% -2.0% 6.5%
Gross Debt 3.2 2.6 4.3 7.5 8.8
Net Debt 3.1 1.4 2.4 7.1 8.6
Capital Employed 22.5 21.0 21.0 23.7 27.6
Working capital as % of sales 20.9% 12.2% 15.8% 10.2% 11.6%
RoCE % 3.6% -1.9% -7.0% -0.1% 11.6%

Business Profile
DTL operates in three business segments: i) Hydraulics, ii) aerospace & defence and iii)
metallurgy. While each of the segment contributes ~1/3rd of the revenue, aerospace
contributed >50% of its EBITDA, followed by hydraulics contributing ~39% of EBITDA
and metallurgy contributing ~8% over FY20-FY23.
Exhibit 36: Organisation structure
Aerospace & defence: DTL manufactures precision flight critical, complex airframe
structures and aerospace components. It is a tier-I supplier to global aerospace OEMs
and primes such as Airbus, Boeing, BEL, Bell Helicopters, Dassault Aviation, Hindustan
Aeronautics Limited and Spirit Aero systems. The company designs and builds
unmanned aerial, unmanned & manned ground Intelligence Surveillance &
Reconnaissance (ISR) platforms for military and paramilitary.
Hydraulics segment: DTL is one of the world’s largest manufacturers of hydraulic gear
pumps with over 1.5mn pumps produced among its facilities in India and overseas. As
per the annual report, DTL has ~80% share of the Indian OEM tractor market and
~38% of the global tractor market.
Metallurgy: DTL manufactures high quality ferrous and non-ferrous automotive
components for highway, off-highway and technology-oriented applications for
leading global automotive OEMs. The company has modern ferrous, non-ferrous
foundries and modern state-of-the-art automotive component manufacturing facilities
in India and Germany.

Exhibit 37: Segmental numbers

(INR mn) FY17 FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Aerospace – Segment
Revenue 3,457 3,564 4,689 4,976 3,740 3,601 4,374 3,682
EBITDA 1,047 814 1,168 1,525 1,113 990 1,168 764
EBITDA Margin (%) 30.3% 22.9% 24.9% 30.7% 29.8% 27.5% 26.7% 20.7%
Hydraulics – Segment
Revenue 2,768 3,155 3,631 2,950 2,976 4,237 4,617 3,259
EBITDA 398 371 416 229 311 732 875 307
EBITDA Margin (%) 14.4% 11.7% 11.4% 7.7% 10.4% 17.3% 18.9% 9.4%
Metallurgy – Segment
Revenue 8,836 6,556 6,683 4,350 4,419 4,650 4,166 3,647
EBITDA 294 257 251 297 182 203 171 231
EBITDA Margin (%) 3.3% 3.9% 3.8% 6.8% 4.1% 4.4% 4.1% 6.3%
Historically, EBITDA margin of aerospace segment is >20%, while hydraulics segment

margin has been volatile. Metallurgical segment’s EBITDA margin stands at ~4-6%
over FY16-23. FY23 has witnessed the highest margin (in the last 5 years) in aerospace
and hydraulics segments led by better revenue mix, while metallurgical segment
witnessed a decline in margin due to increased input costs.
The European market (incl. UK) contributes 55% of the revenue, while domestic market
contributes ~25%; USA’s contribution is ~11-12%. DTL’s majority metallurgical
segment revenue comes from European market.
Aerospace & defence segment

DTL manufactures precision flight critical, complex airframe structures and aerospace
components. It is a tier-I supplier to global aerospace OEMs and primes such as Airbus,
Boeing, BEL, Bell Helicopters, Dassault Aviation, Hindustan Aeronautics Limited and
Spirit Aero systems. DTL has been supplying flight critical FTBs assemblies to Airbus
for the past 17 years, first as tier II and then as tier I. Details of its key facilities are
mentioned below.
Exhibit 38: Key facilities of the company

Facility Brief details
Its products include the wing and rear fuselage of the India’s pilotless target aircraft - LAKSHYA, the Ailerons & wing
flaps for the Intermediate Jet Trainer HJT-36 and major airframe structures for the Sukhoi 30 MKI. The company also
works closely with EADS and Spirit AeroSystems to assemble flap track beams for the Airbus Single Aisle A-320
DYNAMATIC-OLDLAND Family of Aircrafts on a single source basis. This is the first time that a functional aero-structure of a major
AEROSPACE®, India commercial jet is being manufactured in the Indian private sector. The company has state-of-art facilities for heat
(Indian Facility) treatment of aluminum alloys, fluorescent penetrant inspection, resistant spot welding and measurement and
inspection (CMM, laser tracker and articulated arm) which are NADCAP accredited and approved by primes like
Airbus, Boeing, Bell Helicopter and HAL.
The UK manufacturing facility is a state-of-the-art aeronautical manufacturing facility with complex 5 axis machining
DYNAMATIC-OLDLAND
capabilities for the manufacturing of aerospace components and tooling. This high-end precision engineering
AEROSPACE®, UK (United
company is a certified supplier to Airbus UK, Boeing, GKN Aerospace, Magellan Aerospace, GE Aviation Systems,
Kingdom (UK) Facility)
Lockheed Martin, Agusta Westland, Spirit AeroSystems (UK).
Dynamatic Manufacturing DML is a subsidiary of Dynamatic Technologies Limited (DTL). DML will be involved in engineering, manufacturing,
Limited (DML) and delivering components for different aircraft parts.

Details of key aerospace products manufactured by DTL

For Airbus: DTL is the world’s largest single source supplier of the FTBs for Airbus. It
currently supplies (single source) FTBs for A-320 family (A318, A319, A320 & A321)
and A330 family. These FTBs are class-1 Flight Critical Assemblies that are connected
to wings. DTL has delivered more than 7,000 aircraft sets of FTBs till date and has also
successfully completed the A320 re-design of the FTB with a monolithic structure
working closely with Spirit Aero Systems. The company delivers close to 800 aircraft
ship sets annually, making it the largest producer of FTBs globally. Further in FY23
(June’22), DTL won the contract to manufacture the Escape Hatch Door (EHD) for
Airbus A220 aircraft. The contract was placed by the recently established Stelia
Aeronautique Canada Inc., a subsidiary of Airbus Atlantic SAS. In Feb’24, the company
announced a new contract with Airbus to manufacture and supply the main passenger
doors, service doors, cargo doors and over-wing emergency exit doors for the A-220
aircraft. The management mentioned: “This export award is amongst the largest ever
placed on an Indian manufacturer by any global aviation OEM, and is a strong
testament to Make-In-India. Company is delighted to have been chosen by Airbus to
produce the doors for the A220, which is the most advanced and efficient aircraft in its
class”.
For Boeing: DTL is the sole global supplier of power and mission cabinets for Boeing’s
P8 Poseidon aircraft. The company manufacturers the Aft Pylon Assembly and Cargo
Ramp Assembly for CH-47 Chinook helicopters. This is the Boeing’s largest export
programme out of India. DTL has been awarded a contract for manufacturing
assemblies for Boeing’s newest tactical fighter, F-15EX Eagle II. This is the first time
when aero structures for the latest and most advanced F-15EX Eagle II will be made
in India. DTL has recently delivered Boeing MQ25 whiffletree assemblies. These
whiffletree assemblies are for static and fatigue testing of control surfaces of the MQ25
Unmanned Fueler Aircraft Program.
For Hindustan Aeronautics: DTL is a work share partner on the Su-30MKI. Over 1/6th
of the airframe structure including critical control surfaces are manufactured by DTL.
Further, DTL has been chosen as the supplier for Tejas LCA’s Front Fuselage Assembly
from HAL. This is a long-term contract for DTL, which includes manufacturing of
detailed parts and assemblies along with jigs and fixture equipment.
For Bell: Bell 407 is one of the world’s largest selling helicopters. DTL has been
contracted as a single source supplier of major airframe assemblies for Bell 407
Helicopter for the ‘life of programme’.

Exhibit 39: Journey of DTL in aerospace & defence (some examples)

Key Product Achievements
In the early 1990s, following the collapse of the USSR, Dynamatic partnered with the MoD to indigenise critical hydraulic
transmission systems, steering control system, turret control system, brake actuating system on T-72 Battle Tank. Subsequently,
Dynamatic became a developmental partner with the DRDO on Arjun Main Battle Tank. This was the first defence programme of
Dynamatic Technologies in 1993-94. Further, DTL had manufactured rear fuselage and wing for Lakshya Pilotless Target Aircraft
(PTA) programme during 1995-98. During 1999-2000, DTL was the developmental partner with HAL for development and
prototyping of Ailerons & Flaps of Intermediate Jet Trainer HJT-36.
Arjun Main Battle
Tank
In 2004, DTL became a work-share partner with HAL on the Sukhoi 30MKI for major control surface assemblies. Over 1/6th of the
Intermediate Jet
airframe structure, including critical control surfaces were manufactured at its facility co-located at HAL-Nasik, and was the
Trainer HJT-36
largest PPP for manufacturing between HAL and an Indian private sector.
Sukhoi 30 MKI
LCA-Tejas
In 2015, DTL became a supplier for Tejas assembly for HAL and inaugurated front fuselage assembly line facility and in Nov’ 20,
it received the Final Operation Clearance (FOC) configuration for HAL.
This is a long-term contract, which includes manufacturing of detailed parts and assemblies along with jigs and fixture
requirements. This is the first time a complex fuselage section for a supersonic fighter aircraft was built by a private sector
company.
BEL In Oct’20, DTL supplied the first batch of critical beam assemblies for complex naval application to Bharat Electronics Limited.
DTL started its Airbus Single Aisle programme (Flap-Track-Beam assemblies) in 2007-08. It is the sole supplier of Class 1, flight
Flap-Track-Beam
critical Flap-Track-Beam assemblies for every major variant of Airbus aircraft produced worldwide. DTL delivers close to 800
assemblies
aircraft ship sets annually, making it the largest producer of FTBs globally.
In the early 1990s, following the collapse of the USSR, Dynamatic partnered with the MoD to indigenise critical hydraulic
transmission systems, steering control system, turret control system, brake actuating system on T-72 Battle Tank. Subsequently,
Dynamatic became a developmental partner with the DRDO on Arjun Main Battle Tank. This was the first defence programme of
Dynamatic Technologies in 1993-94.
Arjun Main Battle
Tank
Further, DTL had manufactured rear fuselage and wing for Lakshya Pilotless Target Aircraft (PTA) program during 1995-98.
Intermediate Jet
Trainer HJT-36
During 1999-2000, DTL was the developmental partner with HAL for development and prototyping of Ailerons & Flaps of
Sukhoi 30 MKI
Intermediate Jet Trainer HJT-36.
In 2004, DTL became a work-share partner with HAL on the Sukhoi 30MKI for major control surface assemblies. Over 1/6th of the
airframe structure, including critical control surfaces were manufactured at its facility co-located at HAL-Nasik, and was the
largest PPP for manufacturing between HAL and an Indian private sector.
In 2015, DTL became a supplier for Tejas assembly for HAL and inaugurated front fuselage assembly line facility and in Nov’ 20,
it received Final Operation Clearance (FOC) configuration for HAL.
LCA-Tejas
This is a long-term contract, which includes manufacturing of detailed parts and assemblies along with jigs and fixture
requirements. This is the first time a complex fuselage section for a supersonic fighter aircraft was built by a private sector
company.
Exhibit 40: Aerospace journey – Indian customers

Exhibit 41: Major achievements of DTL in the recent past

Key Product Achievements
The MQ25 unmanned aircraft is an all-air refuelling drone designed by Boeing for the US Navy. The aircraft will
provide robust refuelling capability, thereby, extending the combat range of the deployed Boeing F/A- 18 Super
Hornet, Boeing EA-18G Growler, and Lockheed Martin F-35C fighters.
Dynamatic delivers Boeing DTL has delivered MQ25 whiffletree assemblies. These whiffletree assemblies are for static and fatigue testing
MQ25 whiffletree assemblies of control surfaces of MQ25 Unmanned Fueler Aircraft Program. Around 20 tons of tool steel material has been
converted into 3,784 parts/ 2,900 bearings/ 3,100 bushes, and 22,000 fasteners, which have been engaged to
assemble 32 heavy assemblies in 100 days with a quick turnaround.
DTL delivers Boeing F15ex DTL designed and delivered Boeing F15EX assemblies, which involved developing 3D models, tooling for detail
assemblies parts and assembly, and manufacturing detailed parts and assembly in record time by adapting APQP
methodology. This is the first time the company is partnering with Boeing for a supersonic fighter jet programme.
A321- Xlr (long range)
AIRBUS A-321 series Beam 2 Flap Track is modified to the current design of A320 Flap Track Beams. DTL will
continue to build both current design and XLR for A321 series.
DTL completes 200th ship sets

of Airbus long range flap track
DTL is the single source manufacturer of Flap-Track-Beam assemblies for Airbus wide bodied aircraft A-330.
beams
DTL has won the contract to manufacture the Escape Hatch Door for Airbus A220 aircraft. This contract marks a
DTL signs the contract for the
milestone in the workshare of A-220 supply chain in India.
manufacturing of escape hatch
door for A220 aircraft
DTL to supply Airbus A-220 In Feb’24, DTL has announced a new contract with Airbus to manufacture and supply the main passenger
doors doors, service doors, cargo doors and over-wing emergency exit doors for the A-220 aircraft.
DTL has successfully indigenised the manufacturing of major helicopter assemblies in collaboration with Bell
Helicopter. Dynamatic is approved for the necessary Bell processes, which are unique for manufacturing of
Bell 407 fuselage assembly
these aero structures.
parts
Dynamatic has the capacity to produce 9 sets of aft fuselage, turnover bulkhead, nose, roof, and beam
assemblies, and its on-time delivery rating is 100%. Bell has renewed the contract for the next 5 years, until
2027. This includes the supply of detailed parts and assemblies.
DTL delivers Boeing F15ex DTL designed and delivered Boeing F15EX assemblies, which involved developing 3D models, tooling for
assemblies detailed parts and assembly, and manufacturing detailed parts and assembly in record time by adapting APQP
methodology. This is the first time the company is partnering with Boeing for a supersonic fighter jet programme.
A321- Xlr (long range) Airbus A-321 series Beam 2 Flap Track is modified to the current design of A320 Flap Track Beams. DTL will
continue to build both current design and XLR for A321 series.
DTL completes 200th ship sets
of AIRBUS long range flap DTL is the single source manufacturer of Flap-Track-Beam assemblies for Airbus wide bodied aircraft A-330.
track beams

DTL-Airbus partnership
DTL is the world’s largest single source supplier of the FTBs for Airbus. It currently
supplies (single source) FTBs for A-320 family (A318, A319, A320 & A321) and A330
family. Further in FY23 (June’22), DTL won the contract to manufacture the Escape
Hatch Door (EHD) for Airbus A220 aircraft. In Feb’24, the company announced a new
contract with Airbus to manufacture and supply the main passenger doors, service
doors, cargo doors and over-wing emergency exit doors for A-220 aircraft.
DTL is the single source supplier of Flap-Track-Beam (FTB) for Airbus A-320 family
and A-330 family aircraft
DTL is the world’s largest single source supplier of the FTBs for Airbus. It currently
family. These FTBs are class-1 Flight Critical Assemblies that are connected to wings.
DTL has delivered more than 7,000 aircraft sets of FTBs till date and has also
ship sets annually, making it the largest producer of FTBs globally.
Airbus has delivered 735 commercial aircraft globally (up 11% YoY) in CY23 (aircraft
type comprised 68 nos. of A220 family (53 nos. in CY22), 571 nos. of A320 family (516
nos. in CY22) (DTL’s FTBs), 32 nos. of A330 family (DTL’s FTBs) (32 nos. in CY22) and
64 nos. of A350 family (60 nos. in CY22)) and the commercial aircraft
business registered 2,319 gross new orders (2,094 net) in CY23. The CY23-end order
backlog stands at 8,598 aircraft, majority of which is for A320 family.
expected to be ~3.6% (2019-2042 CAGR) and freight traffic is expected to grow of
~3.2% (2019-2042 CAGR). Further, fleet in service in the beginning of 2020 was
~22,880 aircraft and is expected to increase to ~46,560 aircraft by 2042; new
deliveries are expected to be 40,850 aircraft over the next 20 years”.
Exhibit 42: Annual order summary of Airbus aircraft of past 8 years

A220 0 0 135 63 30 38 105 141
A320Family 607 1,054 541 654 263 437 770 1,675
A330 83 21 27 89 -14 30 -65 -3
A350 41 36 40 32 -11 2 10 281

A- 320 7,195 84%
A- 220 602 7%
A- 350 621 7%
A- 330 180 2%
As mentioned in the above tables, DTL supplies FTBs to A-320 family, which comprises
~84% of total order backlog of Airbus. New order inflow has been the highest in CY23
with net order inflow of ~1675 A-320 family aircraft which translates into new order
to delivery ratio of 2.9x (highest) and order book to bill of 12.6 (highest). This provides
sufficient revenue visibility over the next 10-12 years as Airbus has more than 7,000
aircraft under its order backlog of A-320 family.

Going forward, we believe, DTL is in an advantageous position with surge in orderbook

of A320 family, for which it is the single source supplier of FTBs. Also, as per GMF-23,
Airbus mentioned new deliveries are likelyto be 40,850 aircraft over the next 20 years,
which denotes positive outlook for DTL.
Encashing new opportunities; DTL to supply Airbus A-220 doors (opportunity size
is expected to be ~INR 40bn)
DTL has been supplying flight critical FTBs assemblies to Airbus for the past 17 years,
first as tier II and then as tier I. Today, it produces FTB assemblies on a global single
source basis directly for A330 aircraft and indirectly for A320 family aircraft.
In Feb’24, the company announced a new contract with Airbus to manufacture and
supply the main passenger doors, service doors, cargo doors and over-wing
emergency exit doors for the A-220 aircrafts. The management mentioned: “This
export award is amongst the largest ever placed on an Indian manufacturer by any
global aviation OEM, and is a strong testament to Make-In-India. Company is delighted
to have been chosen by Airbus to produce the doors for the A220, which is the most
advanced and efficient aircraft in its class”.
Manufacturing Escape Hatch Door (EHD) for Airbus A220 aircraft
In FY23 (June’22), DTL won the contract to manufacture the Escape Hatch Door (EHD)
for Airbus A220 aircraft. The contract was placed by Stelia Aeronautique Canada Inc.,
a subsidiary of Airbus Atlantic SAS. This contract marks a significant milestone in the
workshare of A-220 supply chain in India and extends company’s capabilities for
manufacturing critical aero structure for Airbus. Further, DTL has modified Airbus A-
321 series Beam 2 Flap Track to the current design of A-320 FTB.
Exhibit 44: Orderbook and backlog of A-220 aircraft of Airbus (DTL’s point of
view)
Net order 135 63 30 38 105 141
Delivery 20 48 38 50 53 68
Order Back log 482 497 489 477 529 602
Boeing-DTL partnership
In 2010, Boeing team visited facilities of the company and DTL supplied power and
mission cabinets for Boeing’s P8 Poseidon aircraft in the same year. The Chinook
program started in 2013 (first set delivered in 2015).
DTL is the sole global supplier of power and mission cabinets for Boeing’s P8 Poseidon
aircraft. The company manufacturers the Aft Pylon Assembly and Cargo Ramp
Assembly for CH-47 Chinook helicopters. This is the Boeing’s largest export
whiffletree assemblies are for static and fatigue testing of control surfaces of the MQ25
Unmanned Fueler Aircraft Program.

Exhibit 45: Key platforms delivered/ordered by/for Boeing’s defence platforms

(units) CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22
P8 Poseidon
Orders 86 92 128 112 94 97 97 85
Delivery 14 18 19 16 18 15 16 12
CH-47 Chinook
Delivery 57 50 44 30 35 30 30 28
T-7A Red Hawk

Orders 351 351 351 351 350
Delivery 1
F-15 Models
Delivery 12 15 16 10 11 4 16 12
Source: I-Sec research, Boeing

Platform Outlook
In 2021, Boeing and the US Navy conducted three historic un-crewed aerial refuelling missions with the MQ-25 T1 test asset,
transferring fuel for the first time to an F/A-18 Super Hornet, E-2D Hawkeye and F-35C Lightning II. The F/A-18 flight marked the
first time in history an un-crewed aircraft refuelled another aircraft. Following this, Boeing has announced a new USD 200mn,
300,000-sq-ft MQ-25 production facility, scheduled for completion in CY24 at Mid America St. Louis Airport in Illinois.
Boeing MQ25 In 2020, the US Navy exercised an option for three additional MQ-25s, the service’s first operational carrier-based un-crewed
aircraft. Boeing is manufacturing seven aircraft and two test articles under the initial contract awarded in 2018, and the US Navy’s
stated requirement is for >70 nos. of MQ-25s.
testing of control surfaces of the MQ25 Unmanned Fueler Aircraft Program).
Boeing’s defence platform includes the digitally transformed F-15EX Eagle II; the Block III F/A-18 Super Hornet and F/A-18 Super
Hornets that have gone through the Service Life Modification (SLM) line; the EA-18G Growler; and the T-7A advanced pilot training
system.
Boeing F-
Two F-15EX Eagle II were delivered to the US Air Force in 2021 ahead of the schedule and performed full-scale operational testing
15EX
six months later, achieving impressive results with their advanced survivability, weapons payload and networking capabilities.
DTL contribution: DTL has designed and delivered Boeing F-15EX assemblies, which involved developing 3D models, tooling for
detailed parts and assembly, and manufacturing detailed parts and assembly in record time by adapting APQP methodology
After the US Air Force awarded Boeing the Advanced Pilot Training System contract in 2018, T-X aircraft was officially named the
T-7A Red Hawk in 2019. The contract is for 351 jets, 46 high-resolution simulators and associated ground equipment. To date,
T-7A Red more than 450 successful engineering and manufacturing development flight tests have been accomplished at the advanced
Hawk trainer stages for initial production. The first EMD T-7A Red Hawk was officially rolled out for the US Air Force on Apr 28, ’22.
DTL contribution: DTL has been awarded a contract for the delivery of tools for static and fatigue testing of control surfaces of
Boeing- SAAB T-7A Red Hawk Program.
In 2022, Boeing achieved two key international vertical lift down-select awards. In Jun’23, Germany selected the Chinook (60
aircraft) as its future heavy-lift aircraft, and in Sep’23, the Polish government chose the Apache (96 aircraft) as its upcoming attack
CH-47
helicopter. For Chinook, Boeing received awards to produce six more MH-47G aircraft and two more CH-47F Block II. In Dec’23,
Chinook
Boeing also received a contract to produce two more Block I Chinooks for the Army and 12 for the Egyptian Air Force.
Helicopters
DTL contribution: The company manufacturers the Aft Pylon Assembly and Cargo Ramp Assembly. This is Boeing Defence
system’s largest export programme out of India.
aircraft that the Indian MoD placed in 2016. The P-8 program has delivered nine of nine P-8A Poseidon aircraft to the United
P8 Poseidon
Kingdom and five of five P-8A Poseidon aircraft to Norway. In Dec’22, Boeing delivered the first P-8A to New Zealand. This delivery
Maritime
also marked the 155th P-8 aircraft delivered to global customers. First deliveries to Korea and Germany are scheduled to take
Reconnaissan
place in CY23 and CY24, respectively.
ce Aircraft
DTL contribution: The company is the sole global supplier of power and mission cabinets for Boeing’s P8 Poseidon Maritime

DTL’s defence segment

DTL builds cutting edge security solutions for countering modern day security threats.
The company designs and builds unmanned aerial, unmanned & manned ground
Intelligence Surveillance & Reconnaissance (ISR) platforms for military and
paramilitary. It has DSIR (Department for Scientific & Industrial Research) approved
R&D capabilities critical for developing cutting edge security solutions.
Unmanned Aerial Vehicles (UAVs)
DTL has partnered with Israel Aerospace Industries (IAI) for manufacturing UAVs in
India. The company has entered into a tripartite agreement with IAI and HAL for
manufacturing, sales and service of large UAVs in India to cater to the requirements of
Indian defence and CAPF. IAI is a globally recognised leader in the delivery of state-
of-the-art systems for defence and commercial markets. It offers unique solutions for
a broad spectrum of requirements in space, air, land, sea, cyber, and HLS.
IAI is today a world leader in UAVs with over 1,400,000 accumulated operational flight
hours. Indian Military is effectively using HERONS & SEARCHER UAVs from IAI, in
surveillance missions in high-altitude mountainous region and also for acquiring
critical information to manoeuvre elements in the country’s western deserts.
Dynamatic KRISH-E: An indigenously designed and built multi-rotor UAV
Dynamatic Krish-E is an indigenously designed and built multi-rotor UAV for farm
application and is aimed at spraying pesticides, water, seeds, weed-removal, crop and
soil condition monitoring. The current version weighs 30 kg (with payload of 7 kg) and
has an endurance of 20 minutes. This is being offered to farming sector and the
company intends to start the production soon. The entire development including the
software and UI has been done in-house with focus on ease of operation and reliability.
Exhibit 47: Key financials of aerospace & defence segment
Aerospace (INR mn) FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Revenue % to consol. Revenue 26.8% 31.3% 40.5% 33.4% 28.7% 33.2%
Revenue 3,564 4,689 4,977 3,740 3,602 4,373 3682
EBIT 682 1,026 1,120 781 565 791 764
EBIT Margin (%) 19.1% 21.9% 22.5% 20.9% 15.7% 18.1% 20.7%
Segment Assets 5,222 5,185 6,048 5,743 5,964 6,678
Segment Liabilities 704 624 1,644 1,379 1,340 1,184
Capital Employed 4,517 4,560 4,404 4,364 4,624 5,493
RoCE (%) 15.1% 22.5% 25.4% 17.9% 12.2% 14.4%
Exhibit 48: Performance of aerospace segment over the years

Previous
Key comments on the performance
years
Aerospace segment witnessed modest growth supported by strong commercial orderbook and slight improvements in supply chain. The
aerospace segment reported a growth of 15.8% YoY in 9MFY24 driven by resilient performance of the aviation industry. Commercial deliveries
9MFY24 and ramp-up of parts for F-15EX Eagle started and First Article build of Escape Hatch Doors for Airbus A220 aircraft is completed as planned.
The same will contribute to the new business opportunities and a strong orderbook by major aircraft producers will drive both defence and
commercial coupled with the recently announced contract with Airbus Aerostructures to produce high-volume detail parts and Airbus doors.
In FY23, aerospace segment witnessed moderate growth supported by improvement in order execution and delivery. The segment reported a
FY23 growth of 21.4% YoY driven by resilient performance of air transport industry. Ramp-up of assemblies for F-15EX Eagle and commercial deliveries
of Escape Hatch Doors for Airbus A220 aircraft will start in coming quarters and will contribute to the topline and new business opportunities.
In FY22, aerospace segment was impacted primarily by the pandemic-led travel-related restrictions. Various travel bans between countries
and a decline in passenger traffic due to covid-19 continued to impact the performance of civil aviation sector. The performance of the
FY22
segment was impacted by global supply chain related challenges and manpower shortage in ancillary industries. The company was awarded
an order from Boeing for manufacturing assemblies for its tactical fighter, F-15EX Eagle II.
In FY21, aerospace segment was impacted primarily due to travel-related restrictions and pandemic. Various travel bans between countries
FY21 and a decline in passenger traffic due to covid-19 continued to impact the performance of civil aviation sector. The company won orders
from the Indian DPSUs to mitigate the slowdown in civil aviation sector.
In FY20, aerospace segment was impacted owing to covid, which led to a drop demand primarily because of customer order deferment.
FY20 Continuing orderbook execution and delivery led to revenue growth in FY20, in particular, ramp up of orders from Bell helicopters. The last
quarter was partially impacted by covid-induced lockdowns and subsequent postponement of deliveries.
In FY19, aerospace segment’s continuous orderbook execution and delivery led to substantial revenue growth, in particular, ramp up of orders
FY19
for Bell helicopters.

Hydraulics segment
World’s largest hydraulic gear pumps manufacturer with >1/3rd of global
(organised) market share
DTL is one of the world’s largest manufacturers of hydraulic gear pumps with over
1.5mn pumps produced among its facilities in India and overseas. The company has
leadership position in hydraulic gear pumps market for over 45 years. DTL also
manufactures automotive turbochargers. It has the capability to build customised
solutions for any application ranging from farm mechanisation - agricultural tractors
and harvesters, off-highway vehicles, construction equipment, metal cutting & metal
forming, material handling and mining equipment. The company has one of the most
expansive ranges of pumps (gear pumps, axial piston pumps in aluminium and cast
iron construction) for the most rigorous hydraulic applications and designed bespoke
for pressure, flow, efficiency, size, weight and noise requirements. It also designs and
builds a wide range of control valves, rockshaft assemblies and integrated hydraulic
solutions. As per the annual report, DTL has ~80% share of the Indian OEM tractor
(organised) market and ~38% of the global tractor (organised) market.
The product portfolio includes aluminium body, hydraulic gear pumps and motors from
low to very high pressure ratings, integrated gear and piston pump packages designed
for energy saving and overall equipment, heavy duty yet compact cast iron gear
pumps, fan drive motors with integrated control valves and a wide range of valves for
pressure and flow controls for use on integrated hydraulic packages. Details of the
product profile is mentioned in Annexure 1.
Manufacturing facilities: The company has three state-of-art manufacturing facilities
located in: i) India (Bengaluru), ii) UK (Swindon) and iii) USA (Milwaukee). Its facilities
in the UK and India are ISO 9001:2015 certified; Indian facility is also certified with ISO
14001:2015 and ISO 45001:2018.
Exhibit 49: Details of plants/facilities
Place Brief details
It manufactures a wide range of sophisticated hydraulic valves and custom tailored hydraulic solutions extending from simple hydraulic
Bangalore pumping units to complex marine power packs and aircraft ground support systems to Turnkey industrial installations. It also
(India) manufactures an extensive range of hydraulic gear pumps in cast iron and aluminium that find application in agricultural equipment,
construction equipment, material handling equipment, mining and drilling equipment and in marine applications.
Its facility in UK has over 50 years of experience in design and manufacturing of gear pumps and supplies products to agricultural,
Swindon construction and off-highway vehicle manufacturers in UK, Europe and USA. Its products include combined variable and fixed
(UK) displacement pump packages, temperature controlled fan drive systems and fixed displacement pumps in aluminium and cast iron with
a range of additional integrated valve options.
Exhibit 50: Hydraulics journey
Exhibit 51: Key financials of hydraulics segment

Hydraulics – Segment (INR mn) FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Revenue 2,614 2,769 3,111 3,631 2,949 2,977 4,236 4,607 3,259
EBITDA 326 398 370 415 193 311 731 855 307
EBITDA Margin (%) 12.5% 14.4% 11.9% 11.4% 6.5% 10.4% 17.3% 18.6% 9.4%

Exhibit 52: Performance of hydraulics segment over the years

Previous
years
Hydraulics segment showed a decline of 5.0% YoY in 9MFY24 due to unfavourable monsoon conditions in India and UK, deliveries started
9MFY24 ramping up after a temporary pause in production to implement a design modification to one of its major products that has impacted revenue
and margins in both UK and India. However, revenue is likely to bounce back in coming quarters.
In FY23, hydraulics segment recorded top-line growth of 9% YoY along with improvement in profitability. Margin enhancement was driven
FY23 by development of new products, addition of new applications, resulting in better product mix. Continuous process improvement measures
further helped in improving efficiencies and margins.
FY22 In FY22, hydraulics segment recorded a robust top-line growth of >42% YoY along with significant improvement in profitability.
In FY21, hydraulics segment was severely impacted in the first half of the year due to global slowdown and pandemic-related lockdowns.
FY21 However, in H2FY21, demand increased significantly, resulting in moderate growth in revenue and improvement in profitability. The margin
enhancement was driven by strong demand across our product portfolio and better product mix.
In FY20, hydraulics segment was severely impacted by the global slowdown and the pandemic led lockdowns. Q4FY20 witnessed reduced
FY20 aftermarket sales that impacted growth. The company is focused on shifting from outsourcing to in-house production for reducing
dependency on third-party vendors, increasing utilisation levels, minimising wastages, and enhancing cost controls.
In FY19, hydraulics segment growth was led by improved agri market in the US, resulting in an increase in ractor production and demand
from major OEMs. The year also saw an increase in demand for after sales market, in particular for gold value pumps in European market.
FY19 Influx of low-cost products from China and other countries over the last couple of years resulted in a decline in demand for these pumps.
However, due to poor performance of these pumps, most of the demand is returning to better quality and reliable products. The business has
improved and the outlook looks even better.
Source: I-Sec research, Company Data
Hydraulics: Industry size and outlook

Industry size: Global tractors market size is estimated at USD 83.56bn in CY24, and is
likely to reach USD 110.76bn by CY29, growing at a CAGR of 5.80% during the forecast
period (CY24-CY29). The Indian agricultural tractor market size is estimated at USD
2.37bn in CY24, and is likely to reach USD 3.13bn by CY29, growing at a CAGR of
5.80% during the forecast period (CY24-CY29). Governments in emerging markets are
encouraging farmers in their countries and providing farm equipment at subsidised
and low interest rates. Asia-Pacific region is likely to witness significant growth in the
next five years as emerging key economies like India, China, and Japan are
encouraging farmers in their countries by offering subsidised farm equipment and low
credit rates to encourage tractor adoption. (Link)
The Indian construction equipment (CE) industry recorded an excellent 26% YoY
growth with sales crossing the 1,00,000 units’ in FY23. The significant growth in FY23
was driven by all four sub-segments of CE industry: i) Road construction equipment, ii)
material handling equipment, iii) earthmoving equipment and iv) tele-handler.
Outlook: The tractor industry is likely to record low single digit growth in FY24 due to
forecast of subdued monsoons. The demand from the market in Europe and USA
continues to remain stable. However, higher commodity prices, inflation, power
surcharge and removal of subsidy on power by the UK government may put pressures
in DTL’s UK business. In case of construction equipment industry, a strong recovery is
anticipated on the back of export potential and the government’s continued thrust on
infrastructure development through National Infrastructure Pipeline, Gati Shakti
Masterplan, National Monetisation Plan, constitution of National Bank for Financing
Infrastructure and Development. DTL continues to focus on increasing market share
and improving efficiencies. Furthermore, the company is likely to focus on developing
new products to increase its wallet share.
Additionally, given the growth potential in construction equipment sector, DTL is
investing in development of high pressure, heavy-duty cast iron pumps to cater to
construction equipment sector. These products are in various stages of development
and testing which will cater to global OEMs. Some of these products will undergo
production phase in coming years, with supplies to global OEMs and aftermarket. The
key customers of the company include M&M, John Deere, Escorts, MACDON, Mexico
Alexander Dennis (UK), TEREX, CNH, Wirtgen, Atlas, Cocpco Itl, JCB, TAFE, VST, HAL,
SDF, Cummins, Ace, MTPF and DLW.

Metallurgy segment
In Metallurgy, DTL manufactures high quality ferrous and non-ferrous automotive
components for highway, off-highway and technology-oriented applications for
leading global automotive OEMs. The company has modern ferrous, non-ferrous
foundries and modern state-of-the-art automotive component manufacturing facilities
in India and Germany.
EISENWERK ERLA GmbH, Germany
Eisenwerk Erla GmbH, Germany, a subsidiary of Dynamatic Technologies, is a preferred
supplier of precision, complex metallurgical products to leading global OEMs. The
Eisenwerk Erla site has been in business for over 630 years, having one of the finest
ferrous foundries in Europe, capable of manufacturing extremely intricate ferrous
castings from difficult-to-cast materials, and strong R&D capabilities with patented
technologies specific to the automotive industry. Eisenwerk Erla GmbH is a preferred
supplier of precision, complex metallurgical products for automotive engines and
turbochargers to leading global automotive OEMs including Audi, BMW, Borg Warner
Turbo Emission Systems, Volkswagen and Daimler. Eisenwerk Erla is also implementing
its transition plan to build up a further line of business for manufacturing of components
for aircraft applications at the EEL site, in addition to the existing production.
DTL plans to expand its operations significantly in Germany and is currently in the
process of transformation from an automotive/foundry-focus to aerospace business.
Considering the various challenges such as supply-chain crisis at OEMs, current
inflation in Europe, steep and unpredictable increase in the cost of gas and electricity
being faced by corporations across Europe, Eisenwerk undertook corporate
restructuring measures through ‘Protective Shield process by self -administration’
under applicable German Laws. We believe the company is entitled to additional
revenue from its customers under the government’s protective shield policy.
Exhibit 53: Key financials of metallurgy segment
Hydraulics - Segment FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Revenue 9,605 8,834 6,944 6,683 5,261 4,658 4,650 4,166 3,647
EBITDA 393 294 238 251 212 132 203 172 231
EBITDA Margin (%) 4.1% 3.3% 3.4% 3.8% 4.0% 2.8% 4.4% 4.1% 6.3%
Exhibit 54: Performance of metallurgical segment over the years

Previous
years
Metallurgy segment remained under pressure due to demand shortage, German economy being in recession, resulting in weak business
9MFY24 prospects and geopolitical uncertainties. Going forward, the segment’s performance will be majorly driven by the availability of raw
materials, input commodity prices and cost of financing to end customers.
In FY23, metallurgy segment was impacted strongly by unprecedented inflation and instability in Europe caused by Russia - Ukraine conflict
FY23
and other supply-chain challenges.
FY22 In FY22, metallurgy segment saw a decline in production after the peak of covid-19 pandemic, followed by supply-chain interruptions.
In FY21, metallurgy segment saw a reduction in top-line profitability due to covid-19 pandemic. The auto industry showed resilience during
FY21
the second half of the year which supported moderate top line growth of the segment.
FY20 In FY20, metallurgy segment saw a reduction in top-line growth due to slowdown of global and domestic auto industry.
In FY19, metallurgy segment took a conscious step to enhance margins by rationalising product mix. New order execution in India resulted in
FY19
top-line growth across business division. This is a result of volume growth from investments made by the company in new product development.

Industry Section
Aerospace & defence
Aerospace industry
The global commercial aircraft market is dominated by Boeing Company and Airbus
SE – together have more than 90% of global commercial aircraft market. A few other
players such as Pratt & Whitney, ATR, Bombardier and Embraer also manufacture
aircraft, but have a much smaller share. Newer players like China’s COMAC
(Commercial Aircraft Corporation of China) and Russia’s Irkut Corporation have also
emerged, but are yet to make a mark (source: Industry reports). Airbus and Boeing
have an order backlog of >12,000 units. Nearly 87% of these backlog orders were for
narrow body aircraft like Airbus A220, A320 and Boeing 737. Both global majors
(Airbus and Boeing) estimate more than 40,000 aircraft requirement over the next
20 years.
expected to be ~3.6% (2019-2042 CAGR) and freight traffic is expected to grow
~3.2% (2019-2042 CAGR). Further, fleet in service beginning of 2020 is ~22,880
aircraft and is expected to increase to ~46,560 aircraft by 2042, and new deliveries
are expected to be 40,850 aircraft over the next 20 years”.
As per Global Market Forecast (GMF-23) of Boeing: “Fleet in service beginning of 2022
is ~24,500 aircraft, which is expected to increase to ~48,600 aircraft by 2042, and
new deliveries are expected to be 42,595 aircraft over 2023-2042”.
Dynamatic Technologies: DTL manufactures precision flight critical and complex
airframe structures and aerospace components. It is a tier-I supplier to global
aerospace OEMs and primes such as Airbus, Boeing, BEL, Bell Helicopters, Dassault
Aviation, Hindustan Aeronautics Limited and Spirit Aero systems. DTL has been
supplying flight critical FTBs assemblies to Airbus for the past 17 years, first as tier II
and then as tier I. Today, it produces FTBs assemblies on a global single source basis
directly for A330 aircraft and indirectly for A320 family aircraft.
For Airbus: DTL is the world’s largest single source supplier of the FTBs for Airbus. It
currently supplies (single source) FTBs for A-320 family (A318, A319, A320 & A321)
and A330 family. These FTBs are class-1 Flight Critical Assemblies that are
connected to wings. DTL has delivered more than 7,000 aircraft sets of FTBs till date
and has also successfully completed the A320 re-design of the FTB with a monolithic
structure working closely with Spirit Aero Systems. The company delivers close to
800 aircraft ship sets annually, making it the largest producer of FTBs globally.
Further in FY23 (June’22), DTL won the contract to manufacture the Escape Hatch
Door (EHD) for Airbus A220 aircraft. The contract was placed by the recently
established Stelia Aeronautique Canada Inc., a subsidiary of Airbus Atlantic SAS.
This contract marks a significant milestone in the workshare of the A-220 supply
chain in India.
In Feb’24, the company announced a new contract with Airbus to manufacture and
supply the main passenger doors, service doors, cargo doors and over-wing
emergency exit doors for the A-220 aircraft. The management mentioned: “This
global aviation OEM, and is a strong testament to Make-In-India. Company is
delighted to have been chosen by Airbus to produce the doors for the A220, which is
the most advanced and efficient aircraft in its class”.
For Boeing: DTL is the sole global supplier of power and mission cabinets for Boeing’s

whiffletree assemblies are for static and fatigue testing of the control surfaces of
MQ25 Unmanned Fueler Aircraft Program.
For Bell: Bell 407 is one of the world’s largest selling helicopters. DTL has been
contracted as a single source supplier of major airframe assemblies for Bell 407
Helicopter for the ‘life of programme’.
Exhibit 55: Bell Textron Inc. Bell 407 deliveries

No. of helicopters CY20 CY21 CY22 CY23
Bell - 407 deliveries 54 56 49 53
Source: I-Sec research, Textron
Let’s get deeper into Indian aviation market

India is the largest growing commercial and defence aircraft market in the world. Civil
aviation is one of the fastest-growing sectors in India. India is projected to have more
than 500mn domestic and international air travellers by CY30 and has the potential
to become the world’s leading aviation market by CY47. The number of airports in
India had increased to 147 in CY22 from 74 in CY14 and may reach 220 by CY25
(source: Industry reports). With rising passenger traffic and increasing military and
defence expenditures, demand for aircraft and its supply chain is increasing in India.
In CY16, the Ministry of Civil Aviation (MCA) released the National Civil Aviation
Policy (NCAP) which included objectives such as: i) Promoting the rapid growth of the
sector, ii) improving the ease of doing business, iii) advancing regional connectivity,
and iv) opening opportunities for additional players in the market to meet India’s
largely untapped and growing demand. To address the supply-demand gap in India,
a key component of the NCAP is “Ude Desh ka Aam Naagrik,” (UDAN) an
initiative that includes a Regional Connectivity Scheme (RCS) to make air travel more
affordable and add routes and flights for unserved and underserved airports. As of
Aug 28, ’23, 481 out of 1,000 routes had been operationalised under the RCS scheme,
with the goal of 50 additional airports, heliports and water aerodromes.
Airbus on India in Wings India (March’22): According to Airbus’ India Market

Forecast (Mar’22), India will require 2,210 new aircraft over the next 20 years. That
fleet could comprise 1,770 new small and 440 medium and large aircraft. The annual
passengers’ growth is likely at 6.2% (vs global average 3.9%). Airbus annually sources
more than USD 650mn from India. (Link)
Some key policies introduced by the Indian government in aviation sub-

sectors
Maintenance, Repair, and Overhaul (MRO): The Indian government has revised its
MRO policy with the goal of making India a global leader in MRO sector.
Approximately 90% of India’s MRO activity occurs outside India, predominantly in
Sri Lanka, Singapore, and Malaysia. Indian MRO sector is at a nascent stage and
efforts are underway to make India a regional hub for MRO services, given its
advantageous geographic location between Europe and Southeast Asia and its
proximity to the Middle East.
As per the annual report of the DTL (FY23), Indian civil aviation MRO market, at
present, stands at around USD 900mn and is anticipated to grow to USD 4.33bn by

CY25, increasing at a CAGR of about 14-15%. To accommodate this booming industry,

the government plans to invest INR 350bn (USD 4.99bn) over the next four years and
further develop airport infrastructure.
Helicopters: To encourage demand and usage of helicopters, the government has

recently issued its “Policy for Promotion of Helicopter Operations,” which invites
opportunities to increase fleet size and usage beyond the traditional short-haul
travel, tourism, disaster management, and emergency response sectors. India has
approximately 90 helicopter operators, including non-scheduled operators, private
companies, state governments, and public sector utility companies, comprising a
combined fleet of 280 turbine helicopters – a small fraction of 14,000 helicopters
in service in the United States. As this segment grows, there are burgeoning
opportunities in fleet sales, MRO and helicopter pilot training services and facilities.
Unmanned Aircraft Systems (UAS): In Feb’22, the Directorate General of Foreign

Trade (DGFT) banned the importation of foreign drones. However, an exemption is in
place for research and development (R&D), defence and security purposes. The
importation of drone components will not require approvals. Imports are also allowed
in the form of completely built up, completely knocked down or semi knocked down
units for R&D purposes by entities such as the central or state government,
government-recognised R&D institutions, and indigenous manufacturers. In Aug’21,
the Indian government released its “Drone Rules 2021,” with the goal of making
India a global hub for drone R&D, testing, manufacturing, and operations.
According to EY, India could have the capacity to manufacture drones worth USD
4.2bn by CY25 and USD 23bn by CY30.

Indian defence industry

India ranks third in the world in terms of defence expenditure. India’s military
expenditure, as a share of GDP, has been consistent at ~2.5% over the last 5 years.
Indian government’s Union Budget of FY25 allocated INR 5,960bn towards the
Ministry of Defence (MoD). The MoD budget in India is split across defence services,
MoD civil services and pensions. Defence services expenditure is the largest segment
accounting for ~72-73% allocation of the annual defence budget in FY25. India has
been increasing the allowance for defence services over the years and actual
expenditure has been consistently higher than the initial estimate of the budget over
the last 5 years.
Increase in defence capital budget – The defence capital budget increased at a CAGR
of ~3.8% from FY14-FY19; however, since FY19, it has increased by 9.1% CAGR.
Exhibit 56: Defence budget of India

1,600 9.1% Capital budget CAGR
Army Navy IAF over last 5 years (FY19-
1,400 24E)
1,200
3.8% Capital budget CAGR
over last FY14-19E
1,000
(Rs bn)
800
600
400
200
-
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24BE
Source: I-Sec research, Ministry of Defence
Trends in defence production in India

Although India has a wide system of defence PSUs, ordnance factories and private
players in defence manufacturing space, it is highly dependent on imports for its
advanced military equipment. The country has consistently ranked among the top
importers of major arms. According to SIPRI, India ranked first in the world in terms of
major arms imports during CY18-22 with 11% share in total global imports.
To boost local manufacturing and reduce its dependence on imports, Indian
government recognised the defence segment as a core sector for achieving
‘Aatmanirbharta’ in CY20. The scheme pushed for reforms across verticals and
adequate funding to achieve ‘self-reliance’. Post the launch of the scheme, defence
production has grown at 12% between FY21 and FY23 and defence exports by 37%
during the same period.

Exhibit 57: Trends in defence production in India (INR cr) (FY18-23)

Private Companies DPSUs Others PSUs JVs
6%
79,820 81.120 79,071 84,643 94,845 106,813
100% 6%
6% 7% 8% 7% 8%
80%
60% 72%
74% 72% 72% 71% 75%
40%
20%
19% 21% 20% 20% 21% 19%
0%
FY18 FY19 FY20 FY21 FY22 FY23
Source: I-Sec research, Azad prospectus
The “Aatmanirbharta” (self-reliance) is perhaps the biggest strategic development

related to the defence sector, with the goal of achieving domestic manufacturing
turnover of USD 25bn. In 2016-2017, the MoD began efforts to institutionalise,
streamline, and simplify procurement procedures. These procedures were revised in
the DAP 2020, an attempt by the MoD to refine procurement procedures with focus on
self-reliance. To attract FDI from foreign OEMs, DAP 2020 increased the FDI limit to
74% and encourages foreign manufacturers to establish operations in
defence industrial corridors in Uttar Pradesh and Tamil Nadu. DAP 2020 includes five
procurement categories: (1) Buy; (2) buy and make; (3) make; (4) leasing; (5) design
and development/innovation. These categories include subcategories listing details on
indigenous content requirements. Details of some other initiatives are mentioned
below:
 Indigenisation thrust – The increase in allocation for procurement from domestic

industry (indigenisation) has increased to ~75% from less than 50% in FY19.
 Other initiatives- Defence Acquisition Procedure (DAP)-2020, Positive

Indigenisation Lists (PILs), launch of Innovations for Defence Excellence (iDEX)
scheme, launch of an indigenisation portal “SRIJAN” and reforms in Offset policy
have given a push to the growth of industries. Further, the ease of DAP 2020,
government’s focus on increased private participation, focus on defence exports,
increased R&D budget etc. have created positive environment.
 Defence exports- Indian defence exports have risen by more than 10 times since
2016-17. In 2016-17, defence exports were worth INR 15.2bn, which has gone up
to INR 160bn in FY23.
The Indian government’s initiative to expand indigenous defence

manufacturing demonstrates the country’s determination to become more self-reliant
in the sector. However, demand for innovative, next-generation technologies in a wide
range of subsectors will remain. It is worth noting that certain types of defence
equipment not manufactured in India are exempted from basic customs duties. The
Indian government’s approach to the development of indigenous manufacturing is also
outlined in the Defence Production and Export Promotion Policy 2020.

In Focus: Boeing and Airbus

(combined market share of >90% in commercial aviation)
The global commercial aircraft market is dominated by Boeing Company and Airbus
SE – together have more than 90% of global commercial aircraft market (source:
Industry reports). Airbus and Boeing have an order backlog of >12,000 units. Nearly
87% of these backlog orders were for narrow body aircraft like Airbus A220, A320 and
Boeing 737. Both the global majors (Airbus and Boeing) estimate more than 40,000
aircraft requirement over the next 20 years.
Boeing: An Indian perspective
India operates a large range of Boeing platforms, including C-17s, AH-64 Apaches,
CH-47 Chinooks, P-8Is, VVIP aircraft (737 airframe) and Head of State aircraft (777
airframe), making India one of the largest defence markets for Boeing. In civil aviation,
India’s airlines operate 737-BCFs, 737 MAX, 787 Dreamliner and 777X airplanes etc.
Boeing annually procures >USD 1bn from 300+ suppliers from India and its USD
200mn investment in Bengaluru is the largest such facility outside the US.
Exhibit 58: Boeing’s operational fleets in India

Commercial Defence
 22 nos. of 777s and 27nos. of 787s with Air India  12 nos. of P-8Is with Indian Navy
 26 nos. of 737NGs with Air India Express  11 nos. of C-17 Globemaster IIIs
 19 nos. of 737 MAXs with Akasa Air  15 nos. of CH-47 Chinooks with the IAF
 1 nos. of 777 with IndiGo  22 nos. of AH-64 Apaches with the IAF
 18 nos. of 737 MAXs and 29 nos. of 737NGs with SpiceJet  2 nos. of 777-300ER Head of State aircraft
 4 nos. of 787s and 2 nos. of 737NGs with Vistara  3 nos. of 737 Boeing Business Jets with IAF for VVIP flight
 6 nos. of 757s and 2 nos. of 737BCFs with Blue Dart
 2 nos. of 737BCFs with Quikjet
Source: I-Sec research; American chamber of commerce in India (Sept-23 report)
Boeing in civil aviation

In civil aviation, Boeing customers include Air India, Air India Express, Akasa Air,
SpiceJet, Vistara and cargo operator Blue Dart, and Quikjet.
Some of the recent orders placed by Indian players: Air India will purchase 190 nos.
of 737 MAX, 20 nos. of 787 Dreamliner and 10 nos. of 777X airplanes, with options for
50 additional 737 MAXs and 20 nos. of 787-9. Akasa Air has placed an order of 72
nos. of 737 MAX airplanes to build its fleet. SpiceJet has an order of several airplanes,
which includes 155 new 737 MAX 8, 9 and 10 airplanes, as well as purchase rights for
50 additional airplanes. Vistara has an order of six, 787-9 Dreamliners with purchase
rights for four more. Blue Dart, India’s largest express cargo operator, uses the 757
Freighter. SpiceXpress, SpiceJet’s cargo division, operates the 737-BCFs, first one to
operate in South Asia.
Boeing’s global outlook
As per Global Market Forecast (GMF-23) of Boeing: “Fleet in service beginning of 2022 is
~24,500 aircraft and which is expected to increase to ~48,600 aircraft by 2042, and
new deliveries are expected to be 42,595 aircraft over 2023-2042”.
Exhibit 59: Global Market Forecast by Boeing (CY23-42)

DELIVERIES Africa China Eurasia Latin Middle East North Northeast Oceania South Southeast World
(2023-2042) America America Asia Asia Asia
Regional Jet 20 350 145 <5 35 1,210 <5 5 <5 45 1,810
Single Aisle 730 6,470 7,870 1,930 1,570 6,810 790 540 2,320 3,390 32,420
Widebody 250 1,550 1,480 170 1,350 810 520 160 380 770 7,440
Freighter 25 190 150 5 70 420 40 <5 5 20 925
Total 1,025 8,560 9,645 2,105 3,025 9,250 1,350 705 2,705 4,225 42,595
Source: Boeing, I-Sec research

Exhibit 60: Boeing’s commercial market outlook (2023-2042) from GMF-23
Source:Boeing, I-Sec research
Exhibit 61: Global fleet to double by 2042, nearly half of the deliveries are for
replacement
Source:Boeing, I-Sec research
Boeing in defence
India operates a large range of Boeing platforms, including 11 nos. of C-17s, 22 nos.
of AH-64 Apaches (with six more on order), 15 nos. of CH-47 Chinooks, 12 nos. of P-
8Is, 3 nos. of VVIP aircraft (737 airframe) and two Head of State aircraft (777 airframe),
making India one of the largest defence markets for Boeing. Boeing annually procures
>USD 1bn from 300+ suppliers from India and its USD 200mn investment in Bengaluru
is the largest such facility outside the US.

Exhibit 62: Key domestic suppliers of Boeing

Supplier Key components
DTL has been manufacturing the ramp and complex Aft Pylon for Chinook heavy-lift helicopters, and P8 cabinets. DTL has recently
Dynamatic
won the contract to supply the F-15EX Eagle II programme. This is a first where aero structures for the latest and most advanced F-
Technologies
15EX Eagle II will be made in India.
It manufactures wire harness and electrical panel for AH-64 Apache, and the harness for several Boeing Defence, Space & Security
(BDS) platforms including V-22 Osprey, CH-47 Chinook, F-15 and F/A-18 Super Hornet. Rossell Techsys entered into an agreement
Rossell Techsys with Boeing to manufacture and supply wire harnesses for the T-7A Red Hawk platform. Rossell will be manufacturing Electrical
Wiring and Interconnect System (EWIS) parts and the deliveries will continue through FY32, covering a total of 84 unique parts. All
parts will be manufactured at Rossell’s Center of Excellence (COE) set-up exclusively for Boeing.
SASMOS HET
It manufactures electrical panel assemblies for F/A-18 Super Hornet and F-15 Strike Eagle.
Technologies
HAL HAL manufactures F/A-18 gun bay doors.
BEL BEL manufactures IFF (Identify Friend/Foe) and speech secrecy system for P-8I.
Jaivel will manufacture and supply aircraft protection system products for Boeing T-7A Red Hawk aircraft. Working with Boeing
Jaivel Aerospace teams in India and the US, Jaivel Aerospace has developed entirely new capabilities for this product range, for the first time in India.
These products will be manufactured at the company’s manufacturing facility at Sanand Industrial Estate in Ahmedabad.
Source: I-Sec research; American chamber of commerce in India (Sept-23 report)
Boeing JV with Tata: Tata Boeing Aerospace Limited (TBAL), Boeing’s joint venture
(JV) with Tata was established in Jun’16 as a state-of-the-art manufacturing facility in
Hyderabad. It manufactures aero-structures for Boeing’s AH-64 Apache helicopter,
including fuselages, secondary structures and vertical spar boxes for customers
worldwide. TBAL has manufactured and delivered more than 200 Apache fuselage
units till date. The JV has the capacity to produce up to 8 fuselages every month. The
JV delivered its first Indian Army configuration Apache fuselage on Jan 19, 2023 and
has shipped over 1,500+ secondary structures and vertical spar box for the same
platform. On the commercial side, TBAL has shipped more than 90 uplock boxes for
777/777X programme till date. A new production line to manufacture complex vertical
fin structures for 737 family of airplanes has been added and the first 737 vertical fin
structure has been delivered recently.
Boeing and Dynamatic Technology
The company is the sole global supplier of power and mission cabinets for Boeing’s
whiffletree assemblies are for static and fatigue testing of control surfaces of the
MQ25 Unmanned Fueler Aircraft Program.
Exhibit 63: Key platforms delivered/ordered by/for Boeing’s defence platforms

(units) CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22
P8 Poseidon
Orders 86 92 128 112 94 97 97 85
Delivery 14 18 19 16 18 15 16 12
CH-47 Chinook
Delivery 57 50 44 30 35 30 30 28
T-7A Red Hawk

Orders 351 351 351 351 350
Delivery 1
F-15 Models
Delivery 12 15 16 10 11 4 16 12
Source: I-Sec research, Boeing


Platform Outlook
In 2021, Boeing and the US Navy conducted three historic un-crewed aerial refuelling missions with MQ-25 T1 test asset,
transferring fuel for the first time to an F/A-18 Super Hornet, E-2D Hawkeye and F-35C Lightning II. The F/A-18 flight marked the
first time in history an un-crewed aircraft refuelled another aircraft. Following this, Boeing announced a new USD 200mn, 300,000-
sq-ft MQ-25 production facility, scheduled for completion in CY24 at Mid America St. Louis Airport in Illinois.
Boeing MQ25 In 2020, the US Navy exercised an option for three additional MQ-25s, the service’s first operational carrier-based un-crewed
aircraft. Boeing is manufacturing seven aircraft and two test articles under the initial contract awarded in 2018, and the US Navy’s
stated requirement is for >70 nos. of MQ-25s.
testing of control surfaces of the MQ25 Unmanned Fueler Aircraft Program).
Boeing defence platform includes the digitally transformed F-15EX Eagle II; the Block III F/A-18 Super Hornet and F/A-18 Super
Hornets that have gone through the Service Life Modification (SLM) line; the EA-18G Growler; and the T-7A advanced pilot training
system.
Boeing F-
Two F-15EX Eagle II were delivered to US Air Force in 2021, ahead of the schedule and performed full-scale operational testing
15EX
six months later, achieving impressive results with their advanced survivability, weapons payload and networking capabilities.
DTL contribution: DTL has designed and delivered Boeing F-15EX assemblies, which involved developing 3D models, tooling for
detailed parts and assembly, and manufacturing detailed parts and assembly in record time by adapting APQP methodology
After US Air Force awarded Boeing the Advanced Pilot Training System contract in 2018, the T-X aircraft was officially named the
T-7A Red Hawk in 2019. The contract is for 351 jets, 46 high-resolution simulators and associated ground equipment. To date,
more than 450 successful engineering and manufacturing development flight tests have been accomplished as the advanced
T-7A Red
trainer stages for initial production. The first EMD T-7A Red Hawk was officially rolled out for US Air Force on Apr 28, ’22.
Hawk
DTL contribution: DTL has been awarded a contract for the delivery of tools for static and fatigue testing of control surfaces of
Boeing- SAAB T-7A Red Hawk Program.
In 2022, Boeing achieved two key international vertical lift down-select awards. In Jun’23, Germany selected the Chinook (60
aircraft) as its future heavy-lift aircraft, and in Sep’23, Polish government chose the Apache (96 aircraft) as its upcoming attack
CH-47
helicopter. For Chinook, Boeing received awards to produce six more MH-47G aircraft and two more CH-47F Block II. In Dec’23,
Chinook
Boeing also received a contract to produce two more Block I Chinooks for the Army and 12 for the Egyptian Air Force.
Helicopters
DTL contribution: The company manufacturers the Aft Pylon Assembly and Cargo Ramp Assembly. This is Boeing Defence
system’s largest export programme out of India.
aircraft that the Indian MoD placed in 2016. The P-8 program has delivered nine of nine P-8A Poseidon aircraft to the United
P8 Poseidon
Kingdom and five of five P-8A Poseidon aircraft to Norway. In Dec’22, Boeing delivered the first P-8A to New Zealand. This delivery
Maritime
also marked the 155th P-8 aircraft delivered to global customers. First deliveries to Korea and Germany are scheduled to take
Reconnaissan
place in CY23 and CY24, respectively.
ce Aircraft
DTL contribution: The company is Boeing’s sole global supplier of power and mission cabinets for Boeing’s P8 Poseidon Maritime

Airbus: An Indian perspective

Airbus in Indian civil aviation
India operates a large fleet of Airbus aircraft. Airbus’ relationship with India started
some half a century ago with the delivery of the first Airbus A300 twin-aisle aircraft to
the erstwhile Indian Airlines, now Air India. It has a proud and prominent presence in
the Indian skies, accounting for a vast majority of the in-service fleet and with about
500 aircraft still to be delivered.
Airbus on India in Wings India (March’22): According to Airbus’ latest India Market
Forecast, India will require 2,210 new aircraft over the next 20 years. That fleet could
comprise 1,770 new small and 440 medium and large aircraft. The annual passengers’
growth is expected at 6.2% (vs global average 3.9%). Airbus annually sources more
than USD 650mn from India. (Link)
Airbus recently announced a landmark deal with Air India that includes the acquisition
of 40 next generation A350 aircraft and 210, A-320 family aircraft. The A-350 is set
to become the unmatched, new flagship for Indian aviation and will bring India closer
to the world.
IndiGo, India’s largest airline by market share, has placed a firm order for 500 nos. of
A-320 family aircraft, setting the record for the biggest single purchase agreement in
the history of commercial aviation. The latest agreement takes the total number of
Airbus aircraft on order by IndiGo to 1,330, establishing its position as the world’s
biggest A-320 family customer.
Exhibit 65: Airbus group supplier in India

Sectors Airbus group suppliers India
PSU HAL, ISRO, BEL
Aequs, Alpha Design, Ankit Fasteners, CIM Tools, Deutsch Connectors, Dynamatic Technologies, Eaton, EIS Electronics, Garcher,
Private sector Pranita Engineering, Honeywell, Lakshmi Precision Screws, Machaero, Mahindra Aerospace, Maini Precision, Moog, Rangsons,
(Manufacturing) Recaero, San Auto, Sansera, Sefee, Tata Advanced Materials, Tata Advanced Systems, TAL Manufacturing Solutions, TE
Connectivity, Thales, Titeflex India, Triveni Hitech, UTC Aerospace, Wipro - CESA, XOL Technologies
Private sector Accenture, Alten India, Altran India, Assystem, Cades, Capgeminin Cyent, Geometric Technologies, HCL Technologies, HP, Infosys,
(Services) L&T Infotech, P3 Voith, Quest, Sopm, Steria, Tata Consultancy Services, Tata Technoogies, Tech Mahindra, Wipro
Global outlook: As per the GMF-23: “Passenger traffic growth is expected to be ~3.6%
(2019-2042 CAGR) and freight traffic is expected to growth ~3.2% (2019-2042
CAGR). Further, fleet in service beginning of 2020 is ~22880 aircraft and which is
expected to increase to ~46560 aircraft by 2042, and new deliveries are expected to
be 40,850 aircraft over the next 20 years”.
Exhibit 66: Global demand for passenger and freighter aircraft over CY23-CY42 (40,850 aircraft)
Single Aisle Wide body
Expected demand 32,630 8,220
80% share of total new deliveries 20% share of total new deliveries
Exhibit 67: Global demand for freighters (2,510 freighters)

Single Aisle Freighter Wide body
Expected demand 1020 890 600
Source: I-Sec research; Airbus

Exhibit 68: Regional demand growth forecast

Passenger + Freighter aircraft
Region Start Fleet 2020 Region
Africa 670 Africa
Asia-Pacific (excl. PRC) 3,960 Asia-Pacific (excl. PRC)
PRC 3,810 PRC
Europe/CIS 6,010 Europe/CIS
Latin America 1,440 Latin America
Middle East 1,280 Middle East
North America 5,710 North America
World 22,880 World
Exhibit 69: Demand for new passenger and freighter aircraft (Airbus GMF-23)
Airbus and Dynamatic Technologies

Single source supplier of Flap-Track-Beam (FTB) for Airbus A-320 family and A-
330 family aircraft
DTL is the world’s largest single source supplier of the FTBs for Airbus. It currently,
family. These FTBs are class-1 Flight Critical Assemblies that are connected to wings.
DTL has delivered more than 7,000 aircraft sets of FTBs till date and has also
ship sets annually, making it the largest producer of FTBs globally.
Airbus has delivered 735 commercial aircraft globally (up 11% YoY) in CY23 (aircraft
type comprised 68 nos. of A220 family (53 nos. in CY22), 571 nos. of A320 family (516
nos. in CY22) (DTL’s FTBs), 32 nos. of A330 family (DTL’s FTBs) (32 nos. in CY22) and
64 nos. of A350 family (60 nos. in CY22)) and the commercial aircraft
business registered 2,319 gross new orders (2,094 net) in CY23. The CY23-end order
backlog stands at 8,598 aircraft, majority of which is for A320 family.
Exhibit 70: Annual order summary of Airbus aircraft of past 8 years

A220 0 0 135 63 30 38 105 141
A320Family 607 1,054 541 654 263 437 770 1,675
A330 83 21 27 89 -14 30 -65 -3
A350 41 36 40 32 -11 2 10 281

Exhibit 71: Historical annual orders and delivery

No. of aircrafts CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23
New orders 731 1111 743 838 268 507 820 2,094
Delivery 688 718 800 863 566 611 661 735
Order Backlog 7,171 7,564 7,507 7,482 7,184 7,080 7,239 8,598
Delivery 688 718 800 863 566 611 661 735

A 320 families CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23
Net order 607 1,054 541 654 263 437 770 1,675
Delivery 545 558 626 642 446 483 516 571
Order Back log 5,643 6,139 6,054 6,066 5,883 5,837 6,091 7,195
Order Book to bill (times) 10.4 11.0 9.7 9.4 13.2 12.1 11.8 12.6

A- 320 7,195 84%
A- 220 602 7%
A- 350 621 7%
A- 330 180 2%
As mentioned in the above tables, DTL supplies FTBs to A-320 family, which comprises
~84% of total order backlog of Airbus. New order inflow has been highest in CY23 with
net order inflow of ~1675 A-320 family aircraft which translates into new order to
delivery ratio of 2.9x (highest) and orderbook to bill of 12.6 (highest) which provides
sufficient revenue visibility over the next 10-12 years, as Airbus has more than 7000
aircraft under its order backlog of A-320 family.
Going forward, we believe, DTL is in an advantageous position, with surge in the
orderbook of A320 family, for which it is the single source supplier of FTBs. Also, as per
GMF-23, Airbus mentioned new deliveries are likely at 40,850 aircraft over the next 20
years, which denotes positive outlook for DTL.
Encashing new opportunities; DTL to supply Airbus A-220 doors (opportunity size
is likely to be ~INR 40bn)
In Feb’24, the company had announced a new contract with Airbus to manufacture
and supply the main passenger doors, service doors, cargo doors and over-wing
emergency exit doors for the A-220 aircrafts. The management mentioned: “This
global aviation OEM, and is a strong testament to Make-In-India. Company is delighted
to have been chosen by Airbus to produce the doors for the A220, which is the most
advanced and efficient aircraft in its class”.
Manufacturing the Escape Hatch Door (EHD) for Airbus A220 aircraft. In FY23
(Jun’22), DTL won the contract to manufacture the EHD for Airbus A220 aircraft. The
contract was placed by the Stelia Aeronautique Canada Inc., a subsidiary of Airbus
Atlantic SAS. This contract marks a significant milestone in the workshare of A-220
supply chain in India and extends company’s capabilities for manufacturing critical
aero structure for Airbus. Further, DTL has modified Airbus A-321 series Beam 2 Flap
Track to the current design of A-320 FTB.


Net order 135 63 30 38 105 141
Delivery 20 48 38 50 53 68
Order Back log 482 497 489 477 529 602

Hindustan Aeronautics Limited (HAL) and Dynamatic Technologies

The Indian Air Force (IAF) has been undergoing a modernisation programme to replace
and upgrade outdated equipment since the late CY90s to meet modern standards. For
that reason, it has started procuring and developing aircraft, weapons, associated
technologies, and infrastructures. Some of these programmes date back to the late
CY80s. The primary focus of current modernisation and upgrades is to replace aircraft
purchased from the Soviet Union that currently form the backbone of the IAF. The fleet
size of the IAF has decreased to 33 squadrons during this period because of the
retirement of older aircraft. To deal with the depletion of force levels, the IAF has
started to modernise its fleet. This includes both the upgrade of existing aircraft,
equipment and infrastructure as well as induction of new aircraft and equipment, both
indigenous and imported. As new aircraft enter service and numbers recover, the IAF
plans to have a fleet of 42 squadrons, along with likely 3 additional squadrons from
the AMCA programme. Taking the IAF fleet to an optimal 45 squadrons (according to
defence standing committee).
Exhibit 75: Details of key platforms used by IAF

Aircraft Variant In Service On Order Notes
Mk1 /Mk1A 33 83+97 Additional 97 planned (AoN granted)
HAL Tejas
Mk2 Under Development
Upgrades have begun under Super Sukhoi
Sukhoi Su-30 MKI 260 12
program
Dassault Rafale EH/DH 36 Expected additions under MRFA program
SEPECAT Jaguar IM/IS 160 Phased out by CY35
Mirage Mirage 2000 75 Phased out by CY30
MiG-29 MiG29 UPG 75 Phased out by CY30
MiG-21 MiG21 UPG 40 Phase-out process is going on
Source: I-Sec research, Industry articles/reports
Sukhoi-30
The Sukhoi Su-30MKI is a multirole combat fighter aircraft jointly developed by the
Sukhoi Design Bureau and HAL for the Indian Air Force (IAF). Based on the Su-
30 fighter aircraft, Su-30MKI is equipped with thrust vectoring control and canards.
Sukhoi built two prototypes of the Su-30MKI between CY95-98.
India signed a MoU with Russia in Oct 2000, to start the licence production of Su-
30MKIs at HAL’s plant. As of CY17, HAL manufactures more than ~80% of the aircraft.
In June CY20, India decided to place an order for 12 more Su-30MKI. The Su-30MKI
order is to compensate for losses due to crashes to maintain the sanctioned strength
of 272 Su-30MKIs.
The Super Sukhoi is a programme to upgrade IAF's Sukhoi Su30MKI fleet. The upgrade
will be carried out by HAL with the support of DRDO and several private companies.
The Defence Acquisition Council (DAC) has granted the Acceptance of Necessity (AoN)
for INR 600bn upgrade programme.
Exhibit 76: Super Sukhoi Upgradation
Equipment Current Upgrade
Engine AL-31FP AL-41F1S
Radar N011M PESA Uttam AESA
Digital Flight Control Computer MC486 & DP30MK
Cockpit 2 LCD with Multi-function with VACs
Radar Warning Receiver RWR-118 Dhruti DR118 (Digital)
Missile Warning system MAWS
Self-Protection (Jammer) SAP-518 ELL-8222SB / DARE AESA
Search & Track (IRST) OLS30 Indigenous (BEL system)
Integrated Communication INCOM12108 Indigenous SDRs

The Russia-Ukraine conflict has raised concerns among the Indian armed forces due
to their heavy dependency on Russian spares. With ~70% of India's armed hardware
sourced from Russia, the ongoing conflict and heavy sanctions pose challenges in
obtaining spares for maintenance. Thus, IAF has decided to increase the indigenous
content in Su-30 MKI upgrades.
DTL contribution in Su-30 aircraft: In 2004, DTL became a work-share partner with
HAL on Sukhoi 30MKI for major control surface assemblies. Over 1/6th of the airframe
structure, including critical control surfaces are manufactured at its facility co-located
at HAL-Nasik, and is the largest PPP for manufacturing between HAL and Indian
private sector.
LCA-Tejas fighter aircraft

The HAL Tejas is an Indian single engine, delta wing, light multirole fighter designed
by the Aeronautical Development Agency (ADA) in collaboration with Aircraft
Research and Design Centre (ARDC) of HAL. It was developed from Light Combat
Aircraft (LCA) programme, which began in CY80s to replace India's ageing MiG-21
fighters but later became a part of the general fleet modernisation programme. In
CY03, LCA was officially named ‘Tejas’. It is the smallest and the lightest in its class of
contemporary supersonic combat aircraft. As of CY22, the indigenous content in Tejas
Mark 1 is 59.7% by value and 75.5% by the number of line replaceable units. The
indigenous content of Tejas Mk 1A is likely to surpass 70% in the next four years.
Production partners of HAL LCA Tejas are as follows:
Exhibit 77: Production partners of HAL LCA Tejas

Parts Company
Front Fuselage Dynamatic Technologies, Bengaluru
Centre Fuselage VEM technologies, Hydrabad
Rear Fuselage Alpha Tocol, Bengaluru
Wings L&T, Coimbatore
Tail Fin & Rudder NAL & Tata Advanced Materials
Exhibit 78: HAL LCA Tejas timeline

Year Event
2006 Indian Government places an initial order for 20 LCA Tejas from HAL
2010 Indian Government orders twenty additional LCA Tejas, from HAL
2011 Tejas is inducted with its first operational clearance
2016 First Tejas IAF squadron is formed
2019 Tejas achieves final operational clearance
2020 Second Tejas IAF squadron is formed
2021 Indian Air force orders 83 Tejas LCA Mk1A from HAL
2023 AoN grated for additional 97 Tejas LCA Mk1A
HAL to deliver first Tejas Mark 1A by Mar’24. The order of 83 aircraft for IAF is likely to
complete by CY28. The original two Tejas production lines were located in HAL's
Bengaluru facility and have a combined production capacity of 16 aircraft per year. In
order to speed up delivery, a third production line in HAL's Nashik factory with a
capacity of 8 Tejas aircraft per year was inaugurated in Apr’23, taking the production
capacity of Tejas LCA to a total of 24 aircraft per year.
DTL’s contribution: In 2015, DTL becomes a supplier for Tejas assembly for HAL and
inaugurated front fuselage assembly line facility and in Nov’ 20, company received
Final Operation Clearance (FOC) configuration for HAL. This is a long-term contract,
which includes manufacturing of detailed parts and assemblies along with jigs and
fixture requirements. This is the first time a complex fuselage section for a supersonic
fighter aircraft has been built by a private sector company.

Hydraulics segment
DTL is one of the world’s largest manufacturers of hydraulic gear pumps with over
1.5mn pumps produced among its facilities in India and overseas. The company has
leadership position in hydraulic gear pumps market for over 45 years. DTL also
manufactures automotive turbochargers. It has the capability to build customised
solutions for any application ranging from farm mechanisation - agricultural tractors
and harvesters, off-highway vehicles, construction equipment, metal cutting & metal
forming, material handling and mining equipment. The company has one of the most
expansive ranges of pumps (gear pumps, axial piston pumps in aluminium and cast
iron construction) for the most rigorous hydraulic applications and designed bespoke
for pressure, flow, efficiency, size, weight and noise requirements. It also designs and
builds a wide range of control valves, rockshaft assemblies and integrated hydraulic
solutions. As per the annual report, DTL has ~80% share of the Indian OEM tractor
market and ~38% of the global tractor market.
Furthermore, with given growth potential in construction equipment sector,
Dynamatic is investing in the development of high pressure, heavy-duty cast iron
pumps to cater to construction equipment sector. These products are in various
stages of development and testing, which will cater to global OEMs. Some of these
products will undergo production phase in coming years, with supplies to global OEMs
and aftermarket.
Farm Mechanisation
Global market size: Global tractors market size is estimated at USD 83.56bn in CY24,
and is likely to reach USD 110.76bn by CY29, growing at a CAGR of 5.80% during the
forecast period (2024-2029) (source: Mordor intelligence). Governments in emerging
markets are encouraging farmers in their countries and providing farm equipment at
subsidised and low interest rates. Asia-Pacific region is expected to witness
significant growth in the next five years as emerging key economies like India, China,
and Japan are encouraging farmers in their countries by offering subsidised farm
equipment and low credit rates to encourage tractor adoption. (Link)
Indian market size: The Indian agricultural tractor market size is estimated at USD
2.37bn in CY24, and is likely to reach USD 3.13bn by CY29, growing at a CAGR of
5.80% during the forecast period (2024-2029). Government initiatives towards rural
development, farm mechanisation, and various factors such as high rural wages and
scarcity of farm labour, may increase tractor volume over the long term. In terms of
units, India is one of the largest tractor markets globally, selling 600,000 to 700,000
tractors per annum on average between CY18-CY21.
India remains a highly lucrative tractor market because of the decreasing availability
of farm labour and the rise of innovative business models, such as custom hiring
solutions for tractors. In India, under the mechanisation component of the macro-
management scheme of agriculture by the Indian government, there is a subsidy for
promoting agricultural mechanisation, including 25% of the cost limited to INR 30,000
for buying tractors of up to 35 PTO HP. Thus, with the rising government support for
enhancing farm mechanisation and expansion in crop production, the sale of
agricultural tractors is anticipated to rise in upcoming years. (Link)
Tractor production in India in FY23 recovered marginally on YoY basis. The industry
witnessed a growth rate of ~7% in FY23, with India accounting for ~45% of global
tractor volumes produced during this period. Over the past couple of years, there has
been significant progress in agriculture mechanisation in India. This shift can be
attributed to various factors, including easy availability of credit, government
incentives, increased agricultural productivity, the emergence of contract farming, and
rising rural incomes. The farm mechanisation in India is roughly around 50~52%
compared to Europe and USA where it is more than 85%.
Industry outlook: The Indian tractor industry might witness low single digit growth in
FY24 owing to below normal monsoon levels forecast (source: Industry reports). CY24
is likely to report moderate growth in India and the UK. However, higher commodity
prices, inflation, power surcharge and removal of subsidy on power by the UK
government, may put pressures in its UK business. Indian industry will thus witness
steady growth in exports.
Construction and material handling equipment
The Indian Construction Equipment (CE) industry recorded an excellent 26% YoY
growth with sales crossing 1,00,000 units in FY23. The significant growth in FY23 was
driven by all four sub-segments of CE industry: i) Road construction equipment, ii)
material handling equipment, iii) earthmoving equipment and iv) tele-handler. Road
construction equipment recorded a slight decline in growth of 3%. A total of 77,164
units of earthmoving equipment were sold in FY23, a 23% jump in sales as compared
to 62,629 units sold in FY22. The material handling equipment segment recorded an
impressive 47% growth, driven by 25% surge in sales volume of pick and carry cranes,
accounting for more than 80% of total sales in this category. A significant increase in
tele-handler sales was also witnessed with 713 units sold in FY23 compared to 342
units in FY22. Enhanced government focus on infrastructure development and steady
revival of real estate industry were other factors that contributed to the growth of the
industry and resulted in higher demand for construction equipment during the year
(Source: ICEMA).
In construction equipment industry, a strong recovery is anticipated on the back of

export potential and the government’s continued thrust on infrastructure development
through National Infrastructure Pipeline, Gati Shakti Masterplan, National
Monetisation Plan, constitution of National Bank for Financing Infrastructure and
Development. DTL continues to focus on increasing market share and improving
efficiencies. Furthermore, the company will focus on developing new products to
increase its wallet share.
Additionally, with given growth potential in construction equipment sector, DTL is
investing in the development of high pressure, heavy-duty cast iron pumps to cater
to construction equipment sector. These products are in various stages of
development and testing, which will cater to global OEMs. Some of these products will
undergo production phase in coming years, with supplies to global OEMs and
aftermarket.

Peer benchmarking
We benchmark DTL against private players in aerospace & defence space in India. As
the tables illustrate, DTL’s revenue growth until FY26E is may be lower than most
private players mainly as the impact of the recently won orders in aerospace is likely
to be reflected adequately only post FY27E.
Exhibit 79: Revenue comparison with peers

Revenue (INR mn) FY23 FY24E FY25E FY26E CAGR (FY23-26E)
Dynamatics Technologies 13,158 14,841 16,755 18,571 12.2
Azad Engineering 2,517 3,400 4,658 6,011 33.7
Data Patterns 4,535 5,789 7,723 10,063 30.4
Astra Microwave 8,155 8,727 10,872 11,491 12.1
MTAR 5,738 6,714 9,792 13,991 34.6
Source: Isec Research, Bloomberg
Among peers, DTL enjoys the highest book/bill at 10.8x, hence, revenue visibility is
significantly higher. We believe orderbook may be boosted further as there is
significant scope to enhance the wallet share.
Exhibit 80: Book/bill ratio

(INR mn) Orderbook Revenue Book/Bill (x)
Dynamatics Technologies 1,60,000 14,841 10.8
Azad Engineering 20,000 3,400 5.9
Data Patterns 9,628 5,789 1.7
Astra Microwave 18,130 8,727 2.1
MTAR 11,789 6,714 1.8
Source: Isec Research, Bloomberg
On EBITDA front as well, we expect DTL’s CAGR through to FY26E to be lower

compared to peers as the impact of the recently won (higher margin) orders in
aerospace segment is likely to be reflected only post FY27E. Hence, we expect DTL’s
EBITDA CAGR (FY23-FY26E) at 15.8% compared to 32% on average for peers.
Exhibit 81: EBITDA comparison with peers

EBITDA (INR mn) FY23 FY24E FY25E FY26E CAGR (FY23-26E)
Dynamatics Technologies 1,813 1,664 2,416 2,814 15.8
Azad Engineering 723 1,089 1,635 2,118 43.1
Data Patterns* 1,718 2,283 3,142 4,225 35.0
Astra Microwave 1,476 1,837 2,684 2,823 24.1
MTAR* 1,540 1,488 2,477 3,630 33.1
Source: Isec Research, Bloomberg*
On PAT front, however, we expect DTL’s CAGR through to FY26E to be 53% compared
to an average of 40% for peers. This is due to lower interest payment from FY25E as
debt is likely to be substantially lower with declining capex requirements, leading to
higher cash generation (and consequently other income).
Exhibit 82: PAT comparison with peers

PAT (INR mn) FY23 FY24E FY25E FY26E CAGR (FY23-26E)
Dynamatics Technologies 428 1,396 1,180 1,545 53.4
Azad Engineering 85 423 915 1,181 140.7
Data Patterns* 1,240 1,801 2,376 3,170 36.7
Astra Microwave 848 1,262 1,798 1,896 30.8
MTAR* 1,034 871 1,509 2,294 30.4
Source: Isec Research, Bloomberg*

In near term, DTL’s RoE and RoCE are likely to be lower than peers. However, we
expect them to pick up once the recently won orders are executed and capex remains
at a low level.
Exhibit 83: RoE comparison with peers

RoE (INR mn) FY23 FY24E FY25E FY26E
Dynamatics Technologies 7.9 20.5 14.8 16.2
Azad Engineering 4.2 6.5 12.3 13.7
Data Patterns* 14.2 13.8 15.7 17.8
Astra Microwave 13.2 16.6 19.3 17.1
MTAR* 18.1 15.1 19.7 24.6
Source: I-Sec research, Bloomberg*
Exhibit 84: RoCE comparison with peers

RoCE (INR mn) FY23 FY24E FY25E FY26E
Dynamatics Technologies 11.2 9.2 12.1 13.4
Azad Engineering 15.4 13.6 17.5 18.9
Data Patterns* 4.1 5.5 5.7 6.5
Astra Microwave 15.6 15.4 19.9 18.3
MTAR* 1.2 2.7 4.1 3.7
Source: I-Sec research, Bloomberg*
However, free cash accretion of DTL is likely to be higher than peers on an average.
DTL has historically generated free cash every year since FY18 and we expect the
trend to sustain. Over FY24-26E, we expect free cash generation to be 7.3% of the
market cap.
Exhibit 85: FCF accretion compared to peers

FCF (FY24-
Cumulative
FCF (INR mn) FY23 FY24E FY25E FY26E 26E)/current
(FY24-FY26E)
market cap
Dynamatics Technologies 461 713 1,514 1,522 3,749 7.3
Azad Engineering -958 -882 -473 -315 -1,670 -2.2
Data Patterns* -568 312 861 1,145 2,318 1.7
Astra Microwave 939 1,205 969 1,819 3,992 7.6
MTAR* -1,132 367 -313 135 189 0.4
Source: I-Sec research, Bloomberg

Valuation: We value DTL stock at INR 10,250/share

Despite lower near-term earnings growth potential, DTL offers significant advantages
compared to peers :1) DTL’s book/bill ratio at 10.8x is higher compared to peers giving
significant visibility; 2) market leadership position with Airbus in FTBs and global
(organised) tractor market; 3) lower leverage and working capital days; and 4) higher
FCF generation potential in the near term.
Unlike peers, whose earnings are significantly dependent on domestic defence
spending, pacing and distribution, DTL has significant chunk of revenue from non-
defence overseas segment.
As seen in Exhibit 81, except Azad Engineering, target P/E of all peers in domestic
defence space is 30x-40x. In case of DTL, we would ascribe a slight premium due to
better orderbook position, working capital cycle and higher execution. We value DTL
stock at 45x FY26E EPS, resulting in TP of INR 10,250/share. We initiate coverage on
DTL with BUY rating.
Exhibit 86: Trading multiple of peers

P/E 1 Yr fwd 2 Yr fwd Target P/E
Dynamatics Technologies 44.0 33.6 45.0
Azad Engineering 83.1 64.3 80.0
Datapatterns* 62.0 49.1 41.0
Astra Microwave 36.8 29.7 40.1
MTAR* 33.5 20.9 30.0
Source: I-Sec research, Bloomberg

Exhibit 87: Board and management profile

Name Description Other directorship
 Greenearth Biotechnologies Ltd
 Christine Hoden (India) Pvt Ltd
 Primella Sanitary Products P. Ltd
 Airoplat Pvt Ltd
Mr. Malhoutra is the CEO & Managing Director of the company and has been associated  JKM DAE RIM Automotive Ltd
with the company for over three decades. He is credited with building and nurturing a  Raghbir Agro Enterprises Pvt Ltd
world class management team and transforming the company into a knowledge-based  San Engineering & Locomotive
Dr. Udayant organisation with global operations. He has served as the Chairman of the National Company Ltd
Malhoutra Sector Skills Council for Strategic Manufacturing, and Chairman of the National Institute  Camfit Sanitary Napkin (India) Pvt
CEO & MD of Design, Amravathi. He has been conferred the degree of Doctor of Engineering & Ltd
Technology (Honoris-Causa) from the University of Engineering and Management,  JKM Holdings Pvt Ltd
Kolkata, in recognition of his outstanding contribution in the field of technology &  Conbar India Pvt Ltd
innovation and his dedicated service to the nation.  JKM Offshore (India) Pvt Ltd
 Vita Pvt Ltd
 Centrust Financial Pvt Ltd
 Udyant Malhoutra & Company Pvt
Ltd
Dr. Ajay Kumar is the former Defence Secretary of India an advisor for electronics
development projects. He is an IAS from the 1985 batch. Dr. Ajay Kumar is an alumnus
Dr. Ajay Kumar
of IIT Kanpur and the University of Minnesota. Dr. Kumar currently holds the position of  Cyiet DLM Ltd
Independent Director
Distinguished visiting professor in Department of Management Sciences and the
Department of Economic Sciences at the IIT, Kanpur.
Ms. Gaitri Issar Kumar is a retired Indian Foreign Service (IFS) officer from the 1986
batch. After serving in several roles, including as the social secretary to the President of
Ms. Gaitri Isaar Kumar India in 2012, Ms. Kumar was appointed Ambassador to Belgium and the European
Independent Director Union on 14 June 2017. Her last posting was as the High Commissioner of India to the
United Kingdom. As High Commissioner, Ms. Kumar prioritized deepening IndoUK ties
and trade post-Brexit.
Prof. Pradyumna Vyas was the former Director of National Institute of Design (NID). He
is currently a Senior Advisor of Design Promotion and Innovation at Confederation of
Indian Industry (CII). He acquired Masters in Industrial Design from the Indian Institute  Carsil Ltd
Mr. Pradyumna Vyas of Technology, Bombay and was awarded an ‘Honorary Master of Arts’ degree in 2010  JKM Erla Automoyive Ltd
Independent Director from the University for Creative Arts in Farnham, United Kingdom. With more than 36  Titan Company Ltd
years of professional and teaching experience in different spheres of design, Prof. Vyas  Dynamatic Manufacturing Ltd
had been associated with NID for 30 years, first as a faculty member and later as the
Director of the Institute (2009 - 2019).
Mr. Pierre de Bausset has over 37 years of experience in Europe, Asia and North America.
Mr. Pierre de Bausset He joined Airbus in 1989 and held various important management roles, including
Independent Director President and Managing Director of Airbus Group India and General Secretary of the
Airbus. Prior to joining Airbus, he worked with Banque Indosuez, in Beijing and Paris.
Mr. Dietmar Hahn Mr. Hahn has over two decades of experience in operations, sales and development,
Non-Executive and having worked in leadership positions at Eisenwerk Erla GmbH. He is the Executive
Non-Independent Director, Eisenwerk Erla GmbH, Germany. He holds a diploma for Foundry Engineer from
Director the University of Freiberg, Germany.
Mr. Tucker was formerly the Managing Director of Aerospace Dynamatic Limited UK, He
Mr. James Tucker
has technical and operational experience in aeronautical manufacturing as well as
Non-Executive and
customer liaison skills, having managed global aerospace majors like Boeing, Airbus,
Non-Independent
GKN Aerospace, G.E Aerospace & Leonardo. He is currently the Global COO, Dynamatic-
Director
Oldland Aerospace & Aerospace Dynamatic Limited UK.
Mr. P S Ramesh is the ED - Group Technical Services & HR. He has been with DTL since
 JKM Research Farm Ltd
Mr. P S Ramesh 1999 and has served in various positions of seniority. His career spans over three and a
 Harasfera Design Pvt Ltd
Executive Director- half decades, including a 12 years’ service with Hindustan Aeronautics Limited (HAL),
 JKM automotive Ltd
Group Technical where he was associated with the manufacturing of Jaguar and TEJAS. He also served
 JKM Erla Automoyive Ltd
Services and Human for 5 years as the Head of Quality and Technical Services in SMEA, the State Owned
 Dynamatic Manufacturig Ltd
Resource Malaysian Aircraft Industry. He holds a Master’s degree in Aircraft Production
Engineering from IIT Madras.
Mr. Chalapathi P is a qualified CA and a post graduate in Commerce. He has been  Dynamatic Manufacturig Ltd
Mr. Chalapathi P
working with Dynamatic since 2009. Prior to joining Dynamatic, he was working with  JKM Global Pte. Ltd.
CFO
US-based manufacturing MNC M/s Interplex Electronics India Pvt. Ltd, Bangalore.
Mr. Shivaram V Mr. Shivaram is a qualified company secretary and a law graduate and holds over 15 years
Head-Legal, of experience in the company secretarial / legal matters. He also holds a post graduate
Compliance and diploma in business administration from Symbiosis University, and a PG diploma in foreign
Company Secretary trade. He has expertise in handling M&As, equity issues and board management.

Exhibit 88: Board has 4 Independent Directors out of 8 Directors

Key Committees Chairman Description
Audit Committee Pierre de Bausset (Independent Director) 5 members with 4 Independent Director
Nomination & Remuneration Committee Pradyumna Vyas (Independent Director) 3 members with 3 Independent Director
Stakeholders Relationship Committee Pradyumna Vyas (Independent Director) 2 members with 1 Independent Director
CSR Committee Gaitri Kumar (Independent Director) 3 members with 2 Independent Director
Finance Committee 4 members with 3 Independent Director
Risk Management Committee Pierre de Bausset (Independent Director) 5 members with 4 Independent Director
Share Transfer Committee Udyant Malhoutra (CEO & MD) 1 members with 0 Independent Director
1 Board Committees with 100% of Independent Directors
Source: Company data
Related-party transactions
Exhibit 89: Name of related parties and description of relationship

Name of the related party Description of relationship
JKM Holdings Private Limited Entities over which key executive management personnel or
relatives of such personnel are able to exercise significant
Wavell Investments Private Limited
influence and have transactions during the year.
Mr. Vivek Malani Relative of Promoter Group
Daughter of Mr. Udayant Malhoutra (Promoter) (Joined with
Ms. Ahilya Malhoutra
effective from Sept’21)
Exhibit 90: KMPs & Designation
KMPs Designation
Udayant Malhoutra Chief Executive Officer and Managing Director (CEO & MD)
P.S. Ramesh Executive Director, Group Technical Services and Human Resource (ED)
Chalapathi P Chief Financial Officer (CFO)
Shivaram V Head Legal, Compliance & Company Secretary (CS)
Exhibit 91: List of subsidiaries

Holding as at
Name of the entity Subsidiary / Step Subsidiary Country of domicile 31 March 2023 31 March 2022
JKM Erla Automotive Limited (“JEAL”) Subsidiary India 99.99% 99.99%
JKM Research Farm Limited (“JRFL”) Subsidiary India 99.99% 99.99%
JKM Global Pte Limited (“JGPL”) Subsidiary Singapore 100% 100%
Dynamatic Manufacturing Limited
Step Subsidiary India 99.99% 99.99%
(formerlyknown as JKM Ferrotech Limited) (“DML”)
Dynamatic Limited (“DLUK”) Step Subsidiary United Kingdom 100% 100%
Yew Tree Investments Limited (“YTIL”) Step Subsidiary United Kingdom 100% 100%
Dynamatic US, LLC (“DUS”) Step Subsidiary USA 100% 100%
JKM Erla Holdings GmbH (“JEHG”) Step Subsidiary Germany 100% 100%
Eisenwerk Erla GmbH (“EEG”) Step Subsidiary Germany 100% 100%
JKM Automotive Limited (“JAL”) Step Subsidiary India 100% 100%

Exhibit 92: Related-party transactions

Related Party Transaction FY19 FY20 FY21 FY22 FY23
Dynamatic (UK) Sale of manufactured goods 14.5 7.2 18.2 61.7 236.7
Purchase of raw materials 144.1 127.1 73.3 30.3 -
Management fees 27.0 30.2 1.1 0.7 -
Corporate guarantee - (22.7) 13.5 30.4 27.2
Rent - 17.5 19.7 31.0 42.4
Reimbursement of Expenditure 15.1 0.5 - - -
JKM Research Farm Rent 4.8 4.8 4.8 4.8 4.8
Dynamatic –
Manufacturing
(formerly known as
JKM Ferrotech) Sale of raw materials 6.8 1.5 - 66.7 22.2
Purchase of raw materials 256.6 162.8 25.0 - 4.8
Interest Income 30.0 44.3 4.5 6.2 -
Corporate guarantee - (86.8) 33.4 15.5 -
Assets purchase agreement - - - - (23.6)
Reimbursement Capital &
Revenue Expenditure 8.7 5.5 - - 59.8
Purchase of PP&E 5.4
Trade Advances 618.9
JKM Holdings Rent 0.4 0.4 0.4 0.4 0.4
Wavell Investments Purchase of raw materials 34.9 74.0 45.5 55.7 46.2
Eisenwrek Erla Equity Purchase - - - - 6.1
Management fees 56.2 - - 13.4 -
JKM Global Investment - - - - 96.4
JKM Erla Auto Equity Investment - 40.0 44.0 - -
Vivek Malani Rent - - - 2.7 2.2
Ahilya Malhuatra Remuneration - - - 0.4 1.2
Exhibit 93: Compensation of KMPs

Name (INR mn) Designation FY19 FY20 FY21 FY22 FY23
Udyant Malhoutra CEO & MD 8.4 7.9 7.9 10.5 11.4
PS Ramesh Executive Director 7.6 9.0 8.5 10.1 11.0
Arvind Mishra Executive Director 7.6 9.0 8.4 10.1 11.0
Chalapathi CFO 4.8 7.0 6.3 8.1 9.8
Shivaram Head Legal & CS 0.3 3.1 3.0 4.0 4.8
Govid Mirchandani Independent Director 1.0 0.9 1.0 0.9 1.6
Malavika Jayaram Independent Director 0.3 0.1 0.4 0.2 0.5
Pradymna Vyas Independent Director - 0.4 0.7 0.6 0.1
Pierre de Bausset Independent Director 0.1 0.5 0.7 0.5 1.0
Source: Annual report, I-Sec research
Exhibit 94: Subsidiary wise net profit contribution

Consolidated total
Consolidated net assets Consolidated profit or loss Consolidated OCI
Comprehensive income
Name of the Subsidiary Percentage Amount Percentage Amount Percentage Amount Percentage Amount
Dynamatic Technologies Ltd (Standalone) 94% 51,033 69% 2,965 81% -335 68% 2,630
Foreign Subsidiaries:
Dynamatic Limited UK* 34% 18,156 52% 2,236 - - 58% 2,236
Eisenwerk Erla GmbH # 34% 18,179 9% 388 - - 10% 388
JKM Global Pte Limited, Singapore 10% 5,572 1% 39 - - 1% 39
Indian Subsidiaries:
JKM Erla Automotive Limited 24% 13,243 0% -8 - - 0% -8
Dynamatic Manufacturing Limited
2% 828 -20% -875 - - -23% -875
(formerly known as JKM Ferrotech Ltd)
JKM Research Farm Limited 5% 2,638 1% 35 - - 1% 35
JKM Automotive Limited - - - - - - - -
Consolidated adjustments -103% -55,452 -12% -501 19% -81 -15% -582
Total 100% 54,197 100% 4,279 100% -416 100% 3,863
Source: Company data, I-Sec research * includes results of Yew Tree Investments Limited, UK and Dynamatic US LLC # includes results of JKM Erla Holdings GmbH, Germany

Exhibit 95: DTL Shareholding pattern

Category FY21 FY22 FY23
No. of Shares (%) No. of Shares (%) No. of Shares (%)
Promoters Holding
JKM Holdings Pvt. Ltd. 9,12,538 14.38 11,12,538 17.54 11,12,538 16.38
Udayant Malhoutra 6,20,179 9.77 5,23,460 8.25 5,23,460 7.71
Udayant Malhoutra & Co. Pvt. Ltd. 6,42,011 10.12 6,42,011 10.12 6,42,011 9.45
Wavell Investments Pvt. Ltd. 4,48,281 7.06 95,000 1.50 - -
JKM Offshore India Pvt. Ltd. 4,42,071 6.97 4,42,071 6.97 4,42,071 6.51
Greenearth Biotechnologies Ltd. 22,927 0.36 22,927 0.36 22,927 0.34
Barota Malhoutra 4,938 0.08 4,938 0.08 4,938 0.07
Vita Pvt. Ltd. 100 0.00 100 0.00 100 0.00
Christine Hoden (India) Pvt. Ltd. 100 0.00 100 0.00 95,100 1.40
Primella Sanitary Products Pvt. Ltd. 100 0.00 100 0.00 100 0.00
Total 30,93,245 48.75 28,43,245 44.84 28,43,245 41.87
Non-Promoters Holding
Mutual Funds / UTI 5,43,228 8.56 4,34,536 6.85 4,13,691 6.09
Financial Institutions / Banks 4,173 0.07 383 0.01 383 0.01
Government - - - - - -
Venture Capital Funds - - - - - -
Insurance Companies - - - - - -
Foreign Institutional Investors 7,30,070 11.51 6,89,648 10.88 11,37,784 16.75
Total 12,77,471 20.13 11,24,567 17.73 15,51,858 22.85
Others
Private Corporate Bodies 252300 3.98 3,34,295 5.27 2,85,395 4.20
Indian Public 1582885 24.95 17,37,391 27.40 15,45,461 22.76
Clearing Agents 20576 0.32 3,081 0.05 475 0.01
NBFC Registered with RBI 0 - - - - -
NRIs/OCBs 66354 1.05 69,217 1.09 72,066 1.06
Trust 3796 0.06 4,396 0.07 3,846 0.06
IEPF 48572 0.77 48,572 0.77 48,572 0.72
HUF - - 1,73,820 2.56
Alternative Investment Fund 1,76,679 2.79 2,66,705 3.93
Total 19,74,483 31.12 23,73,631 37.43 23,96,340 35.28
Grand Total 63,45,199 100.00 63,41,443 100.00 67,91,443 100.00

Exhibit 96: Shareholding pattern Exhibit 97: Price chart

% Jun‘23 Sep‘23 Dec‘23 8200
7200
Promoters 41.9 41.9 41.9 6200
Institutional investors 27.1 27.7 28.1 5200
MFs and other 5.8 5.7 5.7 4200
Banks/ FIs 0.0 0.0 0.0 3200
(INR)
2200
Insurance Cos. 4.7 5.3 5.7
1200
FIIs 16.5 16.7 16.7 200
Others 31.1 30.4 30.0
Mar-21
May-21
Jul-21
Mar-22
May-22
May-23
Jul-22
Nov-22
Mar-23
Jul-23
Mar-24
Nov-21
Nov-23
Sep-21
Sep-22
Sep-23
Jan-22
Jan-23
Jan-24
Source: Bloomberg, I-Sec research Source: Bloomberg, I-Sec research

Annexure 1: Hydraulics product profile

Exhibit 98: Hydraulics products profile of DTL
Products Use
Tractor Hydraulics
Power Steering Valves The valve allows fluid to flow to the cylinder which provides steering assistance
Pumps Lifting heavy loads in excavators or jacks to being used in hydraulic splitters
Pressure & Flow Control Control the rate of flow to hydraulic cylinders and motors & manage energy transfer rate
Hitch Control Valve Helps keep operators safe and gives them precise control for optimized machine performance
Electronic Control Valve Control the rotation degree of rotary actuators by releasing pressurized gas or liquid to specific places on the shaft
Electronic LH Assy Ability to transfer a substantial amount of power through flexible hoses and small tubes
Power Steering Cylinder Hydraulic ram that is attached to the steering linkage
Hydraulics - India
Aluminum Body Pump High resistance body for hydraulics for water source
Cast Iron Gear Pump External gear motors are hydraulic machines converting hydraulic power into mechanical power
Cummins Lube Oil Pumps Circulate oil through the engine to lubricate its moving parts and reduce friction.
Quadruple Pump Lower's energy waste and lower energy consumption
Tractor Hitch Control Valves Attaching and operating various Agricultural Implements and for operating tipping trailer
Rockshaft Assembly Allows easy removal and replacement of the hydraulic lift cylinder
BTP Tractor Control Valves Allows fluid flow into different paths from one or more sources
Keeping operating machinery including engines, and constantly lubricated and to ensure the cooling of all working
Lube Oil Pump Marine
parts
Gear Motor Used in applications that require high output torque and lower output shaft rotational speed
Internal Gear Pump Pumping high viscosity fluids such as oil, paints, resins or foodstuffs.
Medium Pressure Pump Transport hydraulic fluid from one location to another in order to generate hydraulic energy and pressure
Hydraulics - UK
Aluminum Body Gear Pump Used in water source to convert the high-speed motion of the electric motor into low-speed rotation for the propeller
Integrated Gear/Piston Pump Pumping high viscosity fluids such as oil, paints, resins
Cast Iron Gear Pumps Used in high pressure to convert the high-speed motion of the electric motor into low-speed rotation for the
Fan Drive Motor Allows variable fan speed independent of the engine speed
Integrated Control Valve Control the flow, pressure, level or even the direction of the fluid according to the need of the process
Tandem Gear Pump Displace a fixed volume of fluid per revolution

Financial Summary
Exhibit 99: Profit & Loss Exhibit 102: Cashflow statement
(INR mn, year ending March) (INR mn, year ending March)
FY23A FY24E FY25E FY26E FY23A FY24E FY25E FY26E

Operating Cashflow 1,310 1,313 1,814 1,822
Net Sales 13,158 14,841 16,755 18,571 Working Capital Changes (592) (412) (489) (785)
Operating Expenses 5,035 5,629 6,145 6,648 Capital Commitments (849) (600) (300) (300)
EBITDA 1,813 1,664 2,416 2,814 Free Cashflow 461 713 1,514 1,522
EBITDA Margin (%) 13.8 11.2 14.4 15.2 Other investing cashflow 20 976 - -
Depreciation & Amortization 704 688 688 687 Cashflow from Investing
(830) 376 (300) (300)
EBIT 1,108 976 1,728 2,127 Activities
Interest expenditure 654 618 435 375 Issue of Share Capital 1,129 - - -
Other Non-operating Interest Cost (545) (618) (435) (375)
98 1,042 280 308
Income Inc (Dec) in Borrowings 624 (1,831) (600) (600)
Recurring PBT 552 1,399 1,573 2,060 Dividend paid (19) - - -
Profit / (Loss) from Others - - - -
- - - -
Associates Cash flow from Financing
723 (2,450) (1,035) (975)
Less: Taxes 124 180 393 515 Activities
PAT 428 1,219 1,180 1,545 Chg. in Cash & Bank
1,203 (760) 479 547
Less: Minority Interest - - - - balance
Extraordinaries (Net) - - - - Closing cash & balance 1,378 848 1,327 1,874
Net Income (Reported) 428 1,396 1,180 1,545
Source Company data, I-Sec research
Net Income (Adjusted) 428 1,396 1,180 1,545
Source Company data, I-Sec research
Exhibit 103: Key ratios
(Year ending March)
Exhibit 100: Balance sheet
(INR mn, year ending March) FY23A FY24E FY25E FY26E
Per Share Data (INR)
FY23A FY24E FY25E FY26E Reported EPS 67.3 179.6 173.7 227.5
Total Current Assets 8,885 9,274 10,766 12,127 Adjusted EPS (Diluted) 67.3 219.6 185.6 243.1
of which cash & cash eqv. 1,609 848 1,327 1,874 Cash EPS 178.1 306.9 275.1 328.6
Total Current Liabilities & Dividend per share (DPS) - - - -
3,522 4,076 4,512 4,480
Provisions Book Value per share (BV) 852.8 1,003.7 1,177.4 1,404.9
Net Current Assets 5,363 5,198 6,254 7,647 Dividend Payout (%) - - - -
Investments 3 3 3 3
Net Fixed Assets 5,481 5,393 5,005 4,618 Growth (%)
ROU Assets 1,091 1,091 1,091 1,091 Net Sales 5.0 12.8 12.9 10.8
Capital Work-in-Progress 785 785 785 785 EBITDA 7.1 (8.2) 45.2 16.4
Total Intangible Assets 245 245 245 245 EPS (INR) 33.2 166.7 (3.3) 31.0
Other assets 198 198 198 198
Deferred Tax Assets - - - - Valuation Ratios (x)
Total Assets 13,166 12,914 13,581 14,588 P/E 110.7 41.5 42.9 32.8
Liabilities P/CEPS 41.9 24.3 27.1 22.7
Borrowings 6,184 4,353 3,753 3,153 P/BV 8.7 7.4 6.3 5.3
Deferred Tax Liability 103 103 103 103 EV / EBITDA 28.7 30.6 20.6 17.3
provisions 319 503 590 652 Dividend Yield (%) - - - -
other Liabilities 1,140 1,140 1,140 1,140
Equity Share Capital 68 68 68 68 Operating Ratios
Reserves & Surplus 5,352 6,747 7,927 9,472 Gross Profit Margins (%) 52.0 50.9 48.9 49.1
Total Net Worth 5,420 6,815 7,995 9,539 EBITDA Margins (%) 13.8 11.2 14.4 15.2
Minority Interest - - - - Effective Tax Rate (%) 22.5 12.9 25.0 25.0
Total Liabilities 13,166 12,914 13,581 14,588 Net Profit Margins (%) 3.3 8.2 7.0 8.3
Source Company data, I-Sec research Net Debt / Equity (x) 0.8 0.5 0.3 0.1
Net Debt / EBITDA (x) 2.5 2.1 1.0 0.5
Exhibit 101: Quarterly trend Fixed Asset Turnover (x) 1.8 2.0 2.1 2.2
(INR mn, year ending March) Inventory Turnover Days 89 95 101 100
Receivables Days 77 84 86 85
Mar-23 Jun-23 Sep-23 Dec-23 Payables Days 68 79 83 73
Net Sales 3,679 3,625 3,509 3,455
% growth (YOY) 17.5 (1.5) (3.2) (1.5) Profitability Ratios
EBITDA 494 370 389 407 RoCE (%) 8.5 8.0 11.3 13.4
Margin % 13.4 10.2 11.1 11.8 RoE (%) 9.9 26.1 17.5 19.0
Other Income 72 203 79 89 RoIC (%) 9.3 8.7 12.7 15.2
Extraordinaries - (176) - -
Adjusted Net Profit 175 414 121 112
Source Company data, I-Sec research Source Company data, I-Sec research

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BUY

31 March 2024 India | Equity Research | Initiating Coverage

On the runway; set to soar further!

Aerospace to be the primary growth vector Amit Dixit

Please refer to important disclosures at the end of this report

Returns set to improve

Creating opportunities, reaping the benefits

Outlook: An active beneficiary of aerospace ecosystem

India | Equity Research 2

Executive summary .............................................................................................................................. 4

Key risks ................................................................................................................................................... 6

Investment theme ................................................................................................................................. 7

Story in charts ..................................................................................................................................... 15

Business Profile .................................................................................................................................. 24

Industry Section .................................................................................................................................. 36

Aerospace & defence................................................................................................................. 36

Indian defence industry............................................................................................................. 39

In Focus: Boeing and Airbus ................................................................................................... 41

Airbus: An Indian perspective ................................................................................................... 45

Hindustan Aeronautics Limited (HAL) and Dynamatic Technologies ......................... 49

Peer benchmarking ........................................................................................................................... 53

Valuation: We value DTL stock at INR 10,250/share ............................................................ 55

Annexure 1: Hydraulics product profile ...................................................................................... 60

India | Equity Research 3

India | Equity Research 4

Favourable industry tailwinds in defence

India | Equity Research 5

India | Equity Research 6

As per Global Market Forecast (GMF-23) of Airbus: “Passenger traffic growth is

Exhibit 1: Annual order summary of Airbus aircraft from past 8 years

Exhibit 2: Historical annual orders and delivery

Exhibit 3: Orderbook and backlog of A-320 aircraft of Airbus

India | Equity Research 7

Exhibit 4: Order backlog of Airbus (Dec’23 end)

Boeing-DTL partnership to bear results; a foray into international defence

Exhibit 7: Key Boeing platforms and DTL’s contribution

Recent orders in aerospace segment diversify the earnings base

Exhibit 8: Orderbook and backlog of A-220 aircraft of Airbus

Value addition to customers’ supply chain

India | Equity Research 10

Exhibit 9: 5 major assemblies supplied for Bell 407 airframe

Source: I-Sec research, Company data1

Monolithic FTB for A-320

Exhibit 10: Monolithic beam for A-320

Source: I-Sec research, Company data

India | Equity Research 11

Taking advantage of west-east complementarity

Opportunities in domestic aerospace sector

Exhibit 11: Lakshya, HJT36 & Su-30 MK1 (in order)

Source: I-Sec research, Company data

India | Equity Research 12

Exhibit 12: LCA Tejas: DTL’s scope of work

Source: I-Sec research, Company data

Exhibit 13: LCA Tejas: Front fuselage

Source: I-Sec research, Company data

A well-diversified revenue base with competitive market standing

Exhibit 14: Revenue contribution - geographical wise

India | Equity Research 13

Exhibit 15: Segmental revenue distribution