Shares of DCX Systems have gone up over 100% in the past year, and analysts at KRChoskey think the small-cap stock still has some steam left.
The DCX Systems Analyst: Unnati Jadhav for KRChoksey initiated coverage on the stock with a buy rating and a target price of ₹519. The target indicates a 57% upside from the stock’s current market price of around ₹330.
The DCX Systems Thesis: The analyst said that DCX Systems finds itself on the brink of a significant transformation within the ever-evolving Electronic Manufacturing Services (EMS) industry, driven by a burgeoning demand for indigenous manufacturing of electronic equipment for both defence and civilian applications.
The company’s strategic decision to backwards integrate its Printed Circuit Board Assembly (PCBA) operations for internal consumption is expected to improve the profitability of its system integration activities. The analysts also added that DCX is actively pursuing avenues to augment revenues from higher-margin segments, including cable & wire harnessing and EMS (PCBA).
As per the analysts, DCX is also recalibrating its revenue mix by aiming to elevate the proportion of Non-IOP (Indian Ordnance Factory) contracts from 15% to 40%. This strategic shift is anticipated to yield substantial improvements in profit margins.
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The brokerage pointed out that DCX Systems plans to expand its international footprint in the Aerospace and Defence (A&D) sector. With a shift in focus towards markets like the United States, Korea, and beyond, the company seeks strategic alliances with regional entities to tailor its offerings and broaden its clientele. The analysts also added that the company is likely to receive a new order from a defence player in the US.
Price Action: DCX Systems’ share price was down 4.05% to trade at ₹328.50 in early trade on Monday.
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