Stock of this private defence company has zoomed over 100% in one month

Shares of Apollo Micro Systems (AMS) hit a new high of Rs 133.90, and were locked at the 10 per cent upper circuit on the BSE on Wednesday at 11:15 AM; on strong earnings and healthy business outlook.

In the past one month, the stock price of private aerospace & defence company has more-than-doubled or zoomed 104 per cent. In comparison, the S&P BSE Sensex was down nearly 1 per cent during the period. AMS is a pioneer in Design, Development and assembly of Custom Built Electronics and Electro-mechanical solutions. The company’s products are used across multiple industries including Aerospace Systems, Ground Defence, Space, Avionics Systems, Homeland Security, and Transportation.

The company’s clientele consists of prominent government institutions such as the Defence Research and Development Organisation (DRDO), Indian Army, Indian Navy, DPSU’s, as well as private players like Adani, L&T and many more. In July to September quarter (Q2FY24), AMS’s consolidated profit after tax doubled to Rs 6.56 crore, aided by higher income. The company had clocked a net profit of Rs 3.28 crore during the year-ago period. Revenue from operations grew 54.9 per cent year-on-year (YoY) to Rs 87.16 crore from Rs 56.27 crore in Q2FY23. Earnings before interest, taxes, depreciation, and amortization (ebitda) margin improved 352 bp to 21.35 per cent from 17.83 per cent in a year ago quarter.

The management said defence programmes such as TAL, VARUNASTRA, EHWT, and others have received a favorable reception in the market, contributing significantly to the company’s revenue growth and profitability margins. Looking ahead, the management is confident in the company’s ability to maintain momentum and deliver strong results in the coming quarters. The Indian defence industry is rapidly growing and gaining importance due to modernization and indigenization programs. The government is actively promoting defense exports, reducing reliance on imports, and fostering innovation by developing indigenous defence technologies. Reforms like increased foreign direct investment and defense corridors aim to attract foreign investment and boost manufacturing and exports as part of the Make in India initiative, the management said.

Meanwhile, the company has established a subsidiary named Apollo Defence Industries Private Limited, signaling potential diversification or expansion into the defence industry, which investors should monitor for strategic implications and growth opportunities. AMS has entered into significant agreements with the Defence Research and Development Organisation (DRDO). The company is gradually scaling up to be a Weapon Design, Development and manufacturing company for which the Weapon Integration facilities are being commissioned. The government allocated Rs 5.95 lakh crore for the Ministry of Defence in the Budget 2023-24. During the year the government notified fourth Positive Indigenization List consisting of 101 items for which there would be an embargo on the imports.

This represents a great opportunity for the Indian defence industry to manufacture these items using indigenous design and development capabilities to meet the demand of the armed forces. The company is in discussion with various international companies who wish to manufacture their products under Make in India and this facility would be utilised to meet their manufacturing requirements as said by Baddam Karunakar Reddy, Managing Director of the company.