DCX Systems shares hit upper circuit after order win; analysts see up to 55% upside potential

Shares of DCX Systems Ltd hit their upper circuit during the trading session on Monday after the company bagged orders worth over Rs 100 crore from domestic and international customers. Even the brokerage firms tracking the counter remain positive on it and see up 55 per cent upside in the stock.

"We wish to inform that DCX Systems has received contracts for Rs 107.09 crore from domestic and overseas customers," said the company in an exchange filing. The order is for supply of electronic kits and cable & wire harness assemblies, which is to be completed with in a span of 12 months.

DCX Systems' share performance

Shares of DCX Systems hit an upper circuit limit of 5 per cent to Rs 335.70 on Monday, commanding a total market capitalization of Rs 3,740 crore. The scrip had settled at Rs 319.75 in the previous trading session Friday. Shares of DCX Systems have jumped 43 per cent from its 52-week low at Rs 235 apiece.

Listed in November 2022, shares of DCX Systems have gained more than 62 per cent from its issue price of Rs 207, while the stock is up 130 per cent from its all time low around Rs 145 in March 2023. The stock has remained mostly flat in the last six months and in 2024 so far.

DCX Systems Q1 results

DCX Systems reported a steep 69 per cent year-on-year (YoY) decline in consolidated net profit, falling to Rs 2.94 crore. Revenue from operations saw a 19 per cent YoY drop, down to Rs 138.08 crore. Adding more to the challenges, the company posted an operating loss of Rs 4.8 crore for the June quarter, primarily driven by rising costs.

DCX Systems is a leading Indian player in the manufacture of electronic sub-systems and cable harnesses. It commenced operations in 2011 and has been a preferred Indian offset partner (IOP) for foreign original equipment manufacturers (OEMs) for executing aerospace and defence manufacturing projects.

Analysts' take

DCX established a joint venture to enhance its overall profitability, which focuses on railway products, with production slated to commence in FY25 under a product development category. The backward integration with Raneal Advanced Systems for PCB assembly is projected to boost margins. The company is also exploring opportunities for further expansion in the domestic defense sector, said Choice Broking.

"We anticipate that DCX's revenue, Ebitda and PAT to grow at compound annual growth rates (CAGR) of 19 per cent, 31 per cent and 32 per cent, respectively, over FY23-26, driven by the ELTA JV, backward integration, and new orders in both export and domestic defense markets," it added with a 'outperform' rating and a target price of Rs.470.

The first quarter has always been a lackluster quarter for DCX systems, and it was no exception this time. Rising material costs led to an operating loss of Rs 4.8 crore, said KR Choksey. However, healthy recovery is expected from customers against the increased raw material prices under the BOM guarantee, it said.

"We maintain our 'buy' rating due to a strong order book, a healthy order pipeline in cable and wire harnessing and system integration, and a positively evolving mix of system integration and non-system integration businesses, supported by the strong potential lying with NIART Systems," KR Choksey said with a target price of Rs 519, on a P/E multiple of 36 times on FY26 EPS.

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