Shares of DCX Systems have had a quiet run at the bourses over the last six months. The small-cap stock has gone down close to 9% in the past six months. However, analysts at KRChoksey think this could change over the coming 12 months.

The DCX Systems Analyst: Unnati Jadhav for KRChoksey maintained the “buy” rating for the stock with a price target of ₹519. The target indicates an around 54% upside for the stock’s current market price of around ₹337.

The DCX Systems Thesis: The brokerage firm said that DCX Systems achieved Q4FY24 revenue from operations of ₹746.2 crore, surpassing the analyst’s expectations by 28% due to strong execution. The recovery of inflated material costs from customers is anticipated to normalize the gross margin impact seen in Q4FY24 in the coming quarters.

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However, the brokerage house pointed out that despite strong revenue growth during the quarter, net profit growth declined year-on-year due to higher material costs and an increased tax rate. The company is likely to recover ₹20-25 crore from customers under the “material guarantee” clause, the analysts added.

The analysts highlighted EBITDA margin was affected by higher raw material costs, standing at 5.08% in Q4FY24 compared to 8.98% in Q4FY23 and 7.37% in Q3FY24. Management has indicated that margins are expected to improve in FY25, driven by nearly 70% captive consumption of PCBAs.

The brokerage house said that as of March 31, 2024, DCX Systems’ order book stood at approximately ₹800 crores, with a robust order pipeline. Successful conversions of this underlying order pipeline could secure revenue for the next couple of years, the brokerage added in the research note.

Price Action: DCX Systems’ share price was down 0.16% to trade at ₹338.20 in the early hours of trading on Friday.

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