The shares of this defence company hit 5 percent upper circuit of Rs 322.10 per share after the company’s subsidiary bagged a significant work order for $45,199,440.
With a market capitalization of Rs 3,587.76 crore, DCX Systems Ltd’s shares were trading at Rs 322.10 per share, increasing around 5 percent from the previous closing price of Rs 306.80 apiece.
Reason for rise:-
The shares of the company have seen positive movement after DCX Systems Ltd’s subsidiary bagged a significant work order for $45,199,440 from M/s. Lockheed Martin Global Inc for Supply of Electronic Assemblies. The order should be executed within 12 months.
Financial Performance:-
Examine the company’s financial performance, revenue plummeted by 19 percent from Rs 170 crore in Q1FY24 to Rs 138 crore in Q1FY25, during the same time frame net profit also soared by 70 percent from Rs 10 crore to Rs 3 crore.
Recent developments:-
The company has secured a major order fo Rs 1,250 crore for L&T for electronic modules alongside Rs 32.21 crore for cable and wire harness assembly for both domestic and international clients. Additionally, an MoU with Israeli Aerospace India Services enhances their MRO service capabilities.
Raneal Advanced Systems, a fully operational subsidiary, is streamlining supply chain management, positively impacting cash flow. Their JV with IAI ELTA Systems (NIART Systems) focuses on an advanced obstacle detection system for railways, combining radar and optics for enhanced operational safety and efficiency.
Order Book:-
As of June 30, 2024, the company’s order book total approximately Rs 1,937 crore, with a strong pipeline of incoming orders expected to drive further growth. Management remains confident in expanding the order book, reflecting a positive outlook for sustained future growth.
Operational Insights:-
Raneal Advanced Systems generated Rs 42 crore in revenue, commnly for internal use, highlighting a move to in-house manufacturing. Gross margins were affected by higher material costs and the shift from external procurement to internal sourcing.
Challenges and Margin Guidance:-
Management noted challenges in reaching double-digit EBITDA margins, primarily due to the need for customer approvals on price adjustments and the complexities of long-term contracts.
Rising employee expenses, including salary hikes and additional staffing, may place short-term pressure on overall margins.
However, management remains optimistic about achieving double-digit margins over time. This outlook is bolstered by the expected performance of Raneal Advanced Systems, the NIART joint venture, and the growing cable business, which collectively support profitability through strategic initiatives and diversified revenue streams.
Management guidance:-
Management is optimistic about the future, highlighting a robust pipeline and effort to enhance operational efficiency and margins. Their focus on defence-related projects aligns with the “Make in India” initiative, positioning DCX Systems advantageously in a rapidly growing market with significant potential.
Company profile:-
DCX Systems Limited is an India-based company, which is primarily engaged in system integration and manufacturing of cables and wire harnesses assemblies. It is also involved in kitting and manufactures of electronic sub-systems and cable and wire harness.
Written by:- Abhishek Singh
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