Buy Centum Electronics Ltd for the Target Rs.5,150 by Choice Institutional Equities Ltd
Accelerating Growth and Margin Upside Support Valuation Upgrade
Centum Electronics (CTE) delivered a strong Q2FY27 performance, with revenue growing 59% YoY to INR 3,118 Mn and PAT increasing 52% YoY to INR 229 Mn. Growth was driven by strong execution across both BTS and EMS businesses, while the order book grew 38% YoY to ~INR 2,000 Cr (2.1x of FY26 revenue), providing healthy revenue visibility.
We believe the BTS business is gaining traction, supported by repeat orders for tactical air navigation systems, satellite payload electronics and a ~INR 300 Mn export order for advanced electronic warfare subsystems. We expect a rising contribution from higher-value, technology-intensive BTS programmes to drive potential margin expansion of 100–200 bps over the medium term. Meanwhile, the EMS business benefits from rising semiconductor demand, customer diversification and with new engagements across defence, transportation and industrial segments strengthening long-term growth visibility.
Strong Sequential Recovery, YoY Margin Remain Soft
* Revenue for Q2FY27 was up 58.6% YoY and 52.9% QoQ at INR 3,121 Mn (vs CIE est. of INR 2,996 Mn)
* EBITDA for Q2FY27 was up 49.7% YoY and 68.4% QoQ at INR 397 Mn (vs CIE est. of INR 449 Mn). EBITDA margin stood at 12.7%, contracted by 75 bps YoY (vs CIE est. of 15.0%)
* PAT for Q2FY27 was up 52.3% YoY and 104.1% QoQ at INR 229 Mn (vs CIE est. of INR 265 Mn). PAT margin stood at 7.4%, contracted by 30 bps YoY (vs CIE est. of 8.9%)
View & Valuation
We remain constructive on Centum’s medium-term growth outlook, supported by a rising order book, a strong order pipeline and increasing traction across defence, space and semiconductor applications. The growing contribution from higher-value, system-level solutions and design-led manufacturing provides further scope for revenue growth and margin expansion. The management remains confident of sustaining 25–30% medium-term revenue growth, with EBITDA margin targeted at 12.5–13% and potential for further improvement over the coming years.
Accordingly, we revise our estimates and now project Revenue/EBITDA/PAT CAGR of 29.5%/28.7%/30.2%, respectively, over FY26–29E. Given the improving growth visibility, strong order book and robust pipeline, we raise our target price to INR 5,150 (earlier INR 3,875) and upgrade our rating to BUY from ADD. We also raise our valuation multiple to 40x (earlier 35x), valuing the stock on Sep-2028E EPS, reflecting our confidence in its medium-term growth prospects.
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