Buy Centum Electronics Ltd for the Target Rs. 3,300 by Choice Institutional Equities
India Business Momentum Remains Strong
We believe CTE’s story this quarter is less about growth and more about quality of earnings reset. The management is effectively exiting lossmaking European subsidiaries, which had been masking a structurally healthy India business; importantly, no further major P&L shocks are expected and deconsolidation is imminent. Reported numbers may look volatile in the near term, but economically, the business is becoming simpler, more domestic and margin-accretive. The real signal is underlying segments (BTS plus EMS) are already compounding 25– 30%, implying that future growth will look optically stronger once the restructuring is complete.
The more interesting angle is strategic positioning, not just growth. We expect CTE to move up the value chain, from EMS (~10% margins) to BTS (~20%+ margins) while building proprietary defence/space IP and full-system capabilities. This creates a dual engine for steady annuity-like EMS, plus high-margin, long-cycle BTS programmes (radars, space systems). However, this transition comes with risks – dependence on anchor customers (especially in semicon), supply-chain tightness and potential customer overlap as it moves upstream. Furthermore, we believe CTE is evolving from a contract manufacturer to a defencetech platform and, if execution holds, valuation could re-rate – but the journey will be lumpy, not linear.
Subsidiary Losses Continue to Drag Financial Performance
* Revenue for Q4FY26 was up by 28.5% YoY and up by 44.1% QoQ at INR 3,441 Mn
* EBIDTA for Q4FY26 was up by 12.9% YoY and up by 54.5% QoQ at INR 523 Mn. EBITDA margin stood at 15.4%, declined by 197 bps YoY
* PAT from continuing operations for Q4FY26 was up by 16.0% YoY at INR 350 Mn. PAT (from continuing operations) margin declined by 110 bps YoY, reaching 10.2%
View & Valuation: We maintain our positive stance on CTE. We give ‘ADD’ rating on the stock, with an upgraded target price of INR 3,300 (earlier INR 3,000) on the basis of a 35x P/E multiple (on the PAT of continued operations), implying a PEG ratio of 1.8 (on EPS from cont. ops. growth rate from FY26–29E).
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
