This smallcap defence electronics stocks has zoomed 111% from June low

Shares of Avantel hit a new high of Rs 223.80, up 9% in intra-day trade on Tuesday; the stock has surged 21% in past three trading days.

Shares of Avantel hit a new high of Rs 223.80, as they rallied 9 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes on expectations of strong earnings and a healthy business outlook.

The stock of smallcap defence electronics company was quoting higher for the third straight trading day, surging 21 per cent during the period. The stock has more-than-doubled or zoomed 11 per cent from its previous month low of Rs 106.05 on June 4.

At 01:16 pm; Avantel was trading 4 per cent higher at Rs 214.85, as compared to 0.47 per cent rise in the BSE Sensex. The average trading volumes at the counter jumped over two-fold. As many as 4.21 million shares changed hands on the BSE, as compared to an average sub-2 million shares traded in the past two weeks.

Avantel has been a prominent player in the defence electronics segment for over three decades. Avantel specialises in the design, development, manufacturing, system engineering, deployment, and after-market support of a diverse range of defence electronics products. The company’s core competencies include wireless and satellite systems, RF system design, embedded systems and signal processing, network management and software development, and engineering and IT services.

Key clientele includes Indian Navy (Material organisation, Indian Coast Guard, Cochin Shipyard Limited, and Directorate of Naval Signals among others), Bharat Electronics, Lockheed Martin, Satish Dhawan Space Centre (SDSC) SHAR, Indian railways (through L&T), and The Boeing Company, among others. These clients are majorly central government organisations which are of strategic importance in Aerospace and defence sectors.

Meanwhile, on May 29, 2024, Avantel had informed that the company received a supply order worth of Rs 109.76 crore from Ministry of Defence, Government of India for supply of satellite communication (SATCOM) equipment.

In FY24, Avantel’s revenue from operations stands moderate at Rs 223.92 crore, although the company witnessed around 44 per cent growth in revenue compared to FY23. This growth is primarily driven by enhanced order book of Mobile Satellite Services (MSS) network products, successful deployment of the recently introduced Real-time Train Information System (RTIS) for Indian railways and 1KW HF project for Indian Navy, said CARE Ratings.

The company has been consistently maintaining strong profitability margins marked by profit before interest, lease rentals, depreciation and tax (PBILDT) margin of 32 per cent for FY23 and 37 per cent in FY24. Strong profitability margins are underpinned by the company's portfolio of indigenously designed, developed, and manufactured proprietary products in the SATCOM segment. The company has a modest order book providing short-term revenue visibility, the rating agency said in its rationale.

Further, the government's Atmanirbhar Bharat initiative has also focused on India's defence sector, which aims to promote indigenous production and reduce the country's dependence on imports. The government is focusing on the defence industry as a key area to achieve self-reliance. The government has taken several policy initiatives in the past few years under 'Make in India' programme and brought in reforms to encourage indigenous design, development and manufacture of defence equipment in the country.

Avantel in its financial year 2024-25 (FY25) annual report said that the company is in the forefront of building self-reliance in defence technologies and has been consistently offering solutions as per requirements of the strategic customers.

During FY25, the company has impressive order book and is expected to introduce few new products viz. SCAcomplied HF Software Defined Radios and MSS Xponders for fishermen in addition to the present product lines.

Further, Avantel is also establishing a facility in E City, Shamshabad, Hyderabad with built up space of about 70,000 Sq. Feet in about 4 acres of land. The facility is scheduled to be operational by October 2024 and shall house state of the art facilities and infrastructure for space technologies.

In view of the recently released Indian new space policy, Avantel has embarked on new initiatives in line with the company's diversification plans and submitted proposals for establishment of Ground Station as a Service (GSAAS) facility & SATCOM as a Service through dedicated satellite to IN-SPACe, ISRO, GoI for consideration, the company said.