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View and valuation: DCX has also established a joint venture to enhance its overall profitability. The JV with ELTA focuses on railway products, with production slated to commence in FY25 under a product development category that offers significantly higher margins compared to the build-to-print (BTP) category. Additionally, the backward integration with Raneal Advanced Systems for PCB assembly is projected to boost margins by approximately 100-150 basis points. The company is also exploring opportunities for further expansion in the domestic defence sector. We anticipate that DCX's Revenue/EBITDA/PAT will grow at compound annual growth rates (CAGR) of 19%/31%/32%, respectively, over FY24-26, driven by the ELTA JV, backward integration, and new orders in both export and domestic defence markets. We maintain our positive view on DCX Systems with an "Outperform“ rating, setting a target price of Rs.470, based on a 30x (PE) ratio for FY26E EPS.

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