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* Q1FY25 Performance Update: Revenue for the quarter stood at Rs 1381mn, de-grew 18.8% YoY/81.5% QoQ) vs Rs.1701mn last year same period, led by weak exectuion. Gross profit fell by 73% YoY to Rs 37mn and gross margin contracted significantly by 526bps to 2.7% because of high raw material prices. EBITDA dropped by 163% YoY to Rs -48mn, and margin contracted by 795bps YoY to -3.5% vs our est. 3%, largely impacted by higher RM cost. PAT, stood at Rs 29mn vs our estimates stood Rs 139mn. due to higher other income and lower interest cost. During this quarter employee cost increased mainly because of new man power recruitment and salary hikes for existing employees. DCX Systems signed agreement with L&T India worth Rs. 1,250 crore for manufacture & supply of electronic modules and Rs. 32.21 crore from various domestic & overseas customers, for supply of cable & wire harness assemblies. As of June 30th , order book stands at appx. INR 1037cr. The management is confident about healthy pipeline and growing order book.

* Strategic Growth through Acquisitions and Partnerships: Companies driving growth through strategic acquisitions and joint ventures, including the establishment of RASPL, a wholly owned subsidiary focused on printed circuit board assemblies for defense and aerospace. RASPL will also target non-defense sectors such as railways and medical electronics. Foreign subsidiary, NIART, aims to enhance railway safety with radar and optics solutions, capitalizing on a USD 3bn Indian market and global opportunities. DCX exploring further strategic acquisitions and joint ventures in aerospace and defense, leveraging global partnerships and the Aatmanirbhar Bharat initiative to expand their capabilities and market reach. A dedicated team will evaluate these opportunities to ensure they align with growth strategies and integrate new technologies effectively.

* Rs 2bn Investment to unlock defence opportunity: The company will invest Rs 2bn in JV’s to acquire technology through ToT for Make in India programs in the area of Defence & Aerospace. The Make in India program requires companies mandates to manufacturing at least 60% Indian content must be indigenous content. The company has a state-of-the-art facility having rich experience, and is reserving around Rs 2bn for this defence program.

* Radar based railway obstacle system: Developing cutting edge obstacle collision with ELTA for Radar & Optical where it will procure PCB, Cables and Subsystems will help DCX to become major player in the category. Product, development and certification has done and company is ready to go for mass production, expect some tender post end of election protocol.

* View & 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-toprint (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 defense sector. We anticipate that DCX's Revenue/EBITDA/PAT will grow at compound annual growth rates (CAGR) of 19%/31%/32%, respectively, over FY23-26, driven by the ELTA JV, backward integration, and new orders in both export and domestic defense markets. We maintain our positive view on DCX Systems with an "Outperform" rating, setting a target price of Rs.470, based on a 30x multiple of FY26E EPS.

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