Sell Centum Electronics Ltd For Target Rs. 2,050 - Choice Broking Ltd
Strong order book supports growth visibility; space segment set for significant contribution
CTE’s consolidated order book currently stands at INR 27.36 Bn, representing 2.4x of our FY25 revenue estimates and is executable over the next two years. On a standalone basis, the order book is INR 23.30 Bn. In addition, we foresee significant order inflows driven by the MoD’s INR 400–500 Bn emergency procurement program. This presents a strong near-term growth catalyst and is expected to accelerate revenue realization.
Additionally, we believe the company is strategically positioned to benefit from India’s increased focus on satellite-based intelligence, particularly in response to recent cross-border infiltration threats. The Cabinet Committee on Security’s approval of a INR 225 Bn space-based surveillance initiative is expected to unlock a sizeable addressable market. With its deep-rooted association with ISRO and space-focused OEMs, CTE is well-placed to secure a meaningful share of this emerging demand.
Operational restructuring driving margin expansion; CTE is seeing benefits from strategic restructuring across international subsidiaries. The French subsidiary has shifted key test bench activities to India, leveraging skilled talent and cost efficiencies. Similarly, production from the Canadian unit has been relocated to India, further improving margins. These moves are expected to support EBITDA margin expansion from 8.6% in FY25 to 11.9% by FY27E.
Beats expectations with margin expansion.
* Revenue for Q4FY25 up by 28.8% YoY & up by 32.8% QoQ at INR 3,687 Mn (vs CEBPL est. INR 3,296 Mn).
* EBIDTA for Q4FY25 up by 129% YoY and up 115% QoQ at INR 416 Mn (vs CEBPL est. INR 198 Mn). The EBITDA Margin stood at 11.4%, improved by 497bps YoY (vs CEBPL est. of 6.0%).
* PAT for Q4FY25 jumped significantly, stands at INR 215 Mn (vs CEBPL est. INR 63 Mn). PAT Margin improved by 832bps YoY, reaching 5.9% (vs CEBPL est. 1.9%).
View & Valuation:
In light of the recent development, we are optimistic about topline and margin improvement. Accordingly, we revise our FY26/FY27E topline and EPS estimates upward by 13.8%/22.1% and 156%/116%, respectively and now project CTE’s Revenue/EBITDA, to grow at a CAGR of 12%/25%, over FY25-27E. However, the recent sharp rally in the stock limits near-term upside. we maintain our SELL rating, while revising our TP upwards to INR 2,050, maintaining a valuation multiple of 30x FY27E EPS. Any significant acceleration / deacceleration in execution momentum may warrant us to reassess our stance.
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