Not Rated Centum Electronics Ltd for the Target Rs NA by Emkay Global Financial Services Ltd
We recently visited Centum Electronics (Centum) plants in Bengaluru and met members of the senior management team. Centum was founded in 1993 and is a leading player in strategic electronics manufacturing, serving sectors such as Space, Defense, Aerospace, Railways, Industrials, and Medtech, among others. The company operates two models: 1) EMS, which follows a Build-to-Print (BTP) contract manufacturing model forming ~70% of the total revenue, with ~10% EBITDAM and ~90-100 NWC days, and 2) Build to Specification (BTS), which is the design to manufacturing model forming ~30% of total revenue, with ~20-25% EBITDAM but ~180-200 NWC days. Management expects ~30% revenue growth in the medium term. Centum is trading at 72x/52x/36x FY27/FY28/FY29 consensus’ earnings.
EMS contributes major share of revenue, caters mainly to exports for marquee global customers The EMS model represented 72% of Centum’s revenue in FY26 and 1QFY27. KTAs from out EMS plant visit in Devanahalli:
1) state-of-the-art SMT lines and cleanrooms featuring high-precision printing, 3D AOI inspection, and high-speed placement systems
2) lead and lead-free soldering capabilities
3) advanced polymer coating capabilities
4) advanced circuit and probe testing capabilities
5) various certifications enabling access to sectors like aerospace, defense, medtech, etc. The EMS model includes PCB-A and BTP box-builds with EBITDAM typically capped at ~10% and ~90-100 NWC days. Centum’s EMS business is ~80% exports-oriented, with customers including Thales, Rafael, and LAM Research, among others
BTS model key differentiator; mainly caters to domestic space and defense programs
The BTS model is the key differentiator for Centum, with the company taking complete ownership of product including design, development, manufacturing, system integration, and customer delivery. Per the management, EBITDAMs in this segment can be as high as ~20%, although WC days are also high, at >200. The company has 17 patents and has published 125 technical papers. Customers served via this segment include DRDO, ISRO, and other Defense PSUs as well as Space sector companies. BTS has a more ‘program’ like revenue model with prominent products including AESA radars, Satellite payloads, and various defense program electronics, among others. The order book can take 2-2.5 years to convert into revenue, unlike EMS, which needs 9-12 months to log revenue.
The International subsidiary drag now in rearview mirror; focused on growth ahead
The company has discontinued international operations and booked ~Rs2bn exceptional items in the form of impairments and provisions in its FY26 financials. The standalone entity is now the key operating entity. Management expects ~30% revenue growth in the near-to-mid term, with EBITDAM expansion to 13-15% over next couple of years driven by mix improvements, and ramp-up of key programs in both EMS and BTS, with improvement in BTS share of total revenue not taken as a base case but being a potential upside.
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