Apollo Micro Systems surges 9% on heavy volumes; stock zooms 26% in 5 days

Till 02:02 PM, a combined 20.06 million equity shares, representing 6.5 per cent of total equity of AMS, have changed hands on the NSE and BSE

Shares of Apollo Micro Systems (AMS) have moved higher by 9 per cent to Rs 117.50 on the BSE in Tuesday’s intra-day trade amid heavy volumes. In five days, the stock of this smallcap aerospace and defense company has zoomed 26 per cent. It is quoting at its highest level since August 2024. The stock had hit a 52-week high of Rs 147.50 on February 27, 2024.

 

At 02:02 PM, AMS was trading 8 per cent higher at Rs 116.40, as compared to the 0.10 per cent gain on the BSE Sensex. The average trading volumes on the counter had jumped over seven-fold. A combined 20.06 million equity shares, representing 6.5 per cent of total equity of AMS, have changed hands on the NSE and BSE.

 

 

On December 24, 2024, AMS announced that it has received an order worth Rs 6.14 crore from the Defence Research and Development Organisation (DRDO).

 

Further back, on December 3, the company had informed the stock exchanges that it had been declared the lowest bidder for orders worth Rs 21.42 crore from Bharat Electronics Limited (BEL) and a private company.

 

Last month, AMS had received orders from DRDO and the Adani Group, worth Rs 4.65 crore. The company also informed that it has been declared the lowest bidder for orders worth Rs 16.96 crore from DRDO, Public Sector Units, Indian Navy and Indian Army.

 

The company’s order book is strong, and reflects significant demand, positioning the company well for future growth and stability.

 

AMS specialises in electronic, electromechanical and engineering design, as well as manufacturing and supply. With a strong focus on providing comprehensive end-to-end services, the company offers design, assembly and testing solutions tailored to meet the diverse needs of its clients. Additionally, the company provides custom-built commercial off-the-shelf (COTS) solutions, crafted to meet the specific requirements of defence and space clients.

 

According to AMS, India is expected to have a defence market opportunity worth $90-100 billion over the next five to six years, with the defence industry likely to grow at 13 percent annually from FY24 to FY30.

 

Ranked as the fourth-largest defence spender worldwide, India has allocated a significant amount of $74.5 billion (Rs 6.21 trillion) for defence in the 2024-25 fiscal year. This makes up about 13.04 per cent share in the overall union budget, announced by Finance Minister Nirmala Sitharaman in the parliament on February 1, 2024. 

 

Military spending in India has more than doubled over the past decade, highlighting the government's readiness and commitment towards boosting the nation’s defence potential and moving toward Atmanirbhar Bharat.

 

The company’s new plant, unit-II is expected to be commissioned in the next two to three months, and the bigger unit-III plant is expected to start operation in 9-10 months.

 

Meanwhile, despite global uncertainty and supply chain instability AMS has delivered a decent set of numbers during Q2. Analysts at Choice Equity Broking expect the company will manage to achieve 40-50 per cent revenue growth in FY25 as well.

 

Moreover, with recent orders win under the Make-II category for Anti drone swarm system, the company has got the opportunity to participate in the program which is expected to complete in the next 15-18 months, where AMS will provide RADAR/ Electroptic System/RF detector with countermeasures (rocket), the brokerage firm said.

 

Analysts further have a bullish view on the company, led by the government's push for the 'Make in India' initiative. They expect the company to witness a high-growth cycle over the next five to six years. In missile technology, India has a very low dependency on foreign parts; hence, the brokerage firm expects companies like AMS to benefit from the government's local manufacturing initiatives. 

 

AMS, which largely provides solutions in the areas of weapons and EW, is poised to grow at a healthy rate in the coming years. “We recommend to buy AMS, supported by 1) its participation in most of the indigenous weapon programs; 2) commencement of production of these programs following successful trials; 3) capacity expansion to meet the rising demand from defence; 4) shift in the business model from a solutions provider to a development-level solution provider; and 5) diversification in defence product (Anti drone swarm system),” Choice Equity Broking said in the company's Q2FY25 results update. 

 

Analysts further expect AMS's Revenue/Ebitda/Pat to grow at a compound annual growth rate (CAGR) of 40 per cent/41 per cent/51 per cent over FY24-27E. It assigned a multiple of 45x on FY27E EPS to arrive at a target price of Rs 158, with a 'Outperform' rating.