IGI Logo

In Q2FY25 the company DPIL reported below expectations numbers, Revenue for the quarter de-grew by 16.0% YoY to Rs. 910mn (vs est Rs 1,353mn) Vs last Rs 1,083mn in Q2FY24. Revenue for the quarter was impacted due to deferment of delivery schedule by the customer, of completed products. Gross Margin increased from 69% in quarter ended September 30, 2023 to 76% for the quarter ended September 30, 2024. EBIDTA came at Rs 343mn (-16%/-8% YoY/QoQ) (vs est Rs 460mn), Margin came at 37.7% (+5 bps YoY) (vs CEBPL est. of 34.0%), margins improved due to lower staff cost and cost control measures. PAT decreased significantly by -10.4% on YoY basis to Rs 303mn (vs our est. Rs 391mn) and PAT margins came 33.3% (+207bps/176bps YoY/QoQ) vs our est. 28.9%.

*  Well Positioned to benefit make in India opportunity: DPIL is strategically well-positioned to benefit from the "Make in India" initiative, particularly through its involvement in defense platform modernization and indigenization programs. The company focuses on developing locally manufactured products to replace imported defense systems, which has been a key growth driver. With a rich history in defense modernization, DPIL participates in several high-profile programs, including Aarudhra Radar, Ashwini LLTR, Dharashakti, Mi-17 and Dornier upgrades, Aerostat upgrades, lightweight EW systems, airborne surveillance radar, radar warning receivers, and next-gen systems for LCA Mk-1A and Sukhoi30MKI platforms. These programs are expected to drive DPIL's core business in the short to medium term. The company is also actively expanding into international markets, supplying products to the UK and Europe, with additional orders expected from other countries. Furthermore, DPIL has strategically positioned itself across the entire value chain, from components and subsystems to complete defense systems, enabling it to capture a broader range of business opportunities within the defense sector.

* Revenue to grow at healthy rate: Management has guided around 20-25% top-line growth in FY25 with a margin in the range of 35-40% and expected to deliver a PAT growth of 30%+. Company’s DPIL current order book stood Rs 9.7bn (as on Sep 2024) which is ~1.88x of FY24 sales, with an order pipeline of Rs.20bn by FY26, of which Rs.10bn could inflow in FY25. The company planning for additional annual capex of Rs. 150 crore in next two years. The company order book comprises production-45%, development program-64% and service-4%. DPIL currently engages in various programs such as RADAR program with BEL and Avionics & Radar with HAL for LCA/LAH and domier and Early Warning systems with DRDO. Further, it also participates in various programs released by MoD.

* View and valuation: We like to maintain our positive view on DPIL, due to large localization opportunities from the defence sector and in-house technology developed in the last 4-5 years making DPIL more competitive over its peers. Further DPIL is 1) Engagement in high growth category product such as Radar, E&W, BrahMos Missile, Avionics etc. in most of the defence modernization programs, 2) Well-Positioned to benefit from Make in India Opportunity, 3) Decent size of order book (~1.88x of FY24 revenue) will support the growth of the company. Following a recent correction in the stock price, we upgraded our rating from SELL to “BUY” rating on the stock with a TP of Rs 2,608, which reflects a valuation of 45x of FY27E EPS after factoring all the positives.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131