Sell DCX Systems Ltd For Target Rs. 260 - Choice Broking Ltd
Cautious Near-Term Outlook; Execution Holds the Key
From a long-term perspective, we view DCXINDIA as structurally wellpositioned to benefit from rising defense exports and import substitution initiatives. Its strong order book (2.6x of FY25 revenue) & global partnerships support this outlook.
However, we expect near-term execution remains a key concern. The company has faced margin pressures and delivery delays over the past four quarters, raising questions about its operational efficiency and earnings visibility. Financial performance has been inconsistent, and its margin profile remains weaker than peers.
While the long-term growth opportunity remains compelling, we advise investors should remain cautious until the company demonstrates a consistent track record of execution and financial performance.
View & Valuation:
Given the company’s underwhelming near-term track record, we are building conservative assumptions into our model. Our investment case is contingent on improvement in execution and margin stability. Should execution improve or margin profiles normalize ahead of expectations, we would revisit our stance.
We remain bearish on our topline/bottom-line assumptions, but we are hopeful about margin improvement. Accordingly, we revise our FY26/FY27E Revenue estimates downwards by 21.2% and 15.9%, and EPS estimates downwards by 10.5% and 18.3%, respectively. However, given the inconsistent performance, we downgrade our rating to SELL (from REDUCE), while revising our TP downwards to INR 260 (from INR 317), while maintaining a valuation multiple of 30x FY27E EPS.
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SEBI Registration no.: INZ 000160131
