Buyer to builder
Tag: Defense
DAC clearance : Who can benefit
India Opportunities for coming decade
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Sunrise : Engineering Solutions provider – Strategy and Opportunities for FY26 and FY27
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
Axiscades Technologies Limited
Key Investment thesis –> Company focus on Aerospace, Defense, Semiconductor, Electronic system verticals and gearing up for FY26, FY27
Business
AXISCADES is a leading, end to end technology and engineering solutions provider aiding creation of innovative, sustainable and safer products worldwide. AXISCADES is headquartered in Bangalore with subsidiaries in USA, UK, Canada, Germany, India and China; and offices in Germany, France, Denmark, USA and Canada.
AXISCADES has a diverse team of over 3,100 professionals working across 20 locations across North America, Europe, UK and Asia-Pacific, striving to reduce the program risk and time to market.
The company offers Product Engineering Solutions across Embedded Software and Hardware, Digitization and Automation, Mechanical Engineering, System Integration, Test Solutions, Manufacturing Engineering, Technical Publications, and Aftermarket Solutions.
The solutions comprehensive portfolio covers the complete product development lifecycle from concept evaluation to manufacturing support and certification for Fortune 500 Companies in the Aerospace, Defense, Heavy Engineering, Automotive, Energy and Semiconductor industries.
Company Portfolio
Current serving Major Industries
- Aerospace
- Heavy Engineering
- Products engineering
- Products and Solutions for Defense
- AIP and Energy
- Semiconductors
Awards
Received 3rd consecutive Diamond supplier award from Bombardier for 2022. This recognition is a testament to our unwavering commitment to excellence, innovation, and delivering with the highest standards of quality.
Opportunities :
- Unique positioning with deep domain capabilities ranging across competencies, with respect to – Electronics Products, Engineering Services and Defence
- Growth driven by leveraging Digital ER&D and Defence
- ER&D Services – A large and underpenetrated market with a Global TAM of ~$1 Tn
- Strong Defence-Tech Play with leadership in Radar, Sonar and Electronic Warfare systems
Revenue Breakup
FY24 revenue breakup
Q1Fy25 revenues breakup
Q2Fy25 revenues breakup
Fundamental Ratios, Cash, EBITDA, PAT, SHP
Stable OPM, Stable tax, Quarterly YOY growth in sales and PAT, Borrowing reducing
DE ~0.4 , Free cash flow is good , Pledge is Nil, ROCE < 15 and ROE<10%
Promoter has sufficient skin in game, Cash flows are good, Cash conversion cycle is elongated
Triggers
Macro Trends :
Recent Triggers in last 1 year or so
Appointment of Chairman Mr. Abidali
Appointed Mr. Abidali Neemuchwala as Chairman of the Board and Non-Executive Director at AXISCADES. With a distinguished career spanning over three decades in the technology industry, he has earned enviable reputation for his expertise in aligning organizations, driving business results, and consistently leading transformational initiatives.
Strategic partnerships and Opening Engineering design center
Signed a strategic partnership with with Cantier, a Singapore-based powerhouse in Manufacturing Execution Systems (MES), with a specialization in Industry 4.0 integration to create a synergy that promises to elevate precision, efficiency, and innovation in the manufacturing sector.
Inaugurated Engineering Design Centre in Saltney, UK to serve the long-term requirements of the Aerospace Industry and various promising opportunities in the region.
Signed a strategic partnership with KANZEN Institute Asia-Pacific Pvt Ltd (KIAP), for new age Industry IIoT, Digital Automation and MES 4.0 implementation for delivering enhanced value to our Global customers.
Mergers and Acquisitions and QIP
Completed the acquisition of add solution GmbH which will strengthen our service offerings and bring opportunities to deliver enhanced value to our combined global client base. . This will provide us with a strategic foothold in the automotive space, with significant offshoring opportunities and access to marquee global automotive OEMs.
The board has also approved the acquisition of EPCOGEN., a niche service provider in Energy space, specializing in engineering design and solutions. This proposed acquisition will strengthen our presence in energy vertical, provide access to Middle East and North American Energy markets
QIP in Jan2024 at 657Rs/share — The Company successfully concluded the Equity Raise of INR 220 Crores in January 2024, with marquee Institutional Investors subscribing to the issue. This will strengthen the balance sheet and improve profitability, Reduction in Net Borrowings by 60% from INR 214 crores to INR 85 crores, which will significantly reduce Finance Cost
Deal Wins
- Deal win with Aerospace OEM with TCV of $ 18 Mn in the areas of in-service repair and manufacturing support
- Design and prototype wins in several defense programs, such as HISAR, next generation ERP for combat aircrafts, Intel based SBC, DEAL satellite terminal design, DF for Naval program, adding to the production order pipeline
- Digital Team ramped to 75+ FTEs with deep competencies in automation, AI/ML and robotics, with complete digital project execution capabilities
- Acquisition of add-solutions GmbH and EPCOGEN, opens new vistas in Automotive and Energy Space, adding strategic logos and competencies
Q4FY24 updates
- Revenue from new customer logos grows to Rs.69 crores, a growth of 5 Times over the previous year
- Deal win with Aerospace OEM with TCV of $ 18 Mn in the areas of in-service repair and manufacturing support
- Defense Production Revenues in Mistral triples from Rs.39 crores to Rs.112 crores, with Rs.272 crores in executable production orders
- Commencement of delayed delivery of Man Portable Counter Drone System (MPCDS) to the Indian Army, with significant addressable
- market in Indian Defense and Global Markets
- Design and prototype wins in several defense programs, such as HISAR, next generation ERP for combat aircrafts, Intel based SBC, DEAL satellite
terminal design, DF for Naval program, adding to the production order pipeline - Digital Team ramped to 75+ FTEs with deep competencies in automation, AI/ML and robotics, with complete digital project execution capabilities
- Advanced level discussions with leading helicopter manufacturer for engineering and design support
- New opportunities in counter drone system over next 5 years are highly promising with addressable market more than INR 3,000 Cr. 40 Nos of one of a kind Man Portable Counter Drone System (MPCDS) cleared for dispatch to the Indian Army. Balance 60 Nos under production.
- Onboarded world’s largest phone and consumer electronic manufacturer as a customer with clear glide path on engagements into FY25
Order book at 30th Ap24 — 749Cr
Q1FY25 updates
- Mistral Solutions received order of ₹90 crores from BEL for supplying Radar Processing Systems
- Ramp up in aerospace with European OEM focused on production and plant migration efforts
- Ramp up in high end cybersecurity solutioning with UK automotive manufacturer.
- Onboarded an EPC major from Middle East as our customer with long term contract
- Completed second tranche of delivery of Man Portable Counter Drone System (MPCDS) to the Indian Army
Expenses hit in past Q3/Q4 Fy24
Increase in finance cost due to debt funding for Mistral acquisition . In Q2 FY24, the material cost has increased due to increase in production orders in Mistral and increase in employee expenses on account of annual increments and investments in building competencies in Embedded and Digital for future growth
Q2FY25 Update
Defence revenues grew by a healthy 73% QoQ, with Defence production revenues surging by 84% QoQ, bolstered by a significant order backlog set for execution in fiscal years 2025 & 2026. With a healthy pipeline and focused approach, over the next 12-18 months, we aim the defence revenue to reach around 60% of the overall company’s revenue
Management commentary With latest focus areas
- Unmanned combat, we are having anti-drone, drones, and drone controllers
- Foreign OEMs, we have a three-pronged, that is, weapon package, submarine, and avionics. preferred offset partner for the weapon system, weapon package
- new programs, all our missile programs, one is the largest missile program in India, another is an upgrade of the existing missile program, another is ground system for key programs
- Product focus : particular product direct RF. Then there is, of course, our product X-band radar, which is primarily used in the submarine and marine systems.
- Airbus, we have major programs running in India. C295, MRTT, Multi Role Transportation Tanker, which is going to be 330 based, And AVEX, of course, 319 based.
- Tying with AgniKul, having an MOU with them, and approaching the ISRO, ISRO and other space agencies for two major things, NGLV, New Generation Launch Vehicle, and Bharatiya Space Station. So we want to add value to them significantly, and there could be opportunities in 3D additive manufacturing, and designing of certain subsystem blocks, etcetera. Then there is also chances for electronics-based algorithms and advanced systems, and for the guidance and navigation, that product we’ll be able to make. The third one is AI-based anomaly detection in the launching
Capturing some discussions from Dec24 confcall
C2P strategy, that is, chip to product. That is Mistral’s non-defense activity, or our group’s non-defense activity., we are shifting the center of gravity of C2P to US. Basically it will be driven out of US. We’ll have a small team there and driving the offshore team here. That’s the strategy
We are a very, very good RF in RF. We consider we are among the best in India for RF. RF and RF activities. Second is probably we are one of the best in handling mixed signals. We can handle analog, digital, RF, everything together. That is one of our forte.
Third is sensor fusion. We can handle multiple sensor. Sensor fusion comes very, very handy when you deal with multiple sensor in a new AI environment, in new robotics or auto-driven and those kinds of things. We are extremely good in both. Then we are very good in ruggedization. We are especially because we are very defense focused. We can ruggedize any product and do that.
And finally that we are very good in the chip, chip level, post-silicon, whatever it is, validation, verification, and take the chip to the product and then product to the customers
Continuous Hiring of Talent
Orders winning, Expansion in Middle east and Outlook for different segments by Management
Added this latest development on 17Jun25
INDRA SIGNS AGREEMENT WITH AXISCADES TO BOOST PRODUCTION OF CUTTING-EDGE SYSTEMS IN INDIA
- Indra, a European-based global leader in defense, aerospace, and strategic systems, and
AXISCADES a prominent technology solutions provider in defense, aerospace and strategic
electronics, are proud to announce a strategic alliance. - Indra is keen to acquire defense-related products and services from AXISCADES, which will be
delivered through AXISCADES’ comprehensive design, development, production, and supply
chain center. - Both companies are actively exploring joint product development for the Indian and global
markets, potentially adapting existing Indra products or creating new ones specifically tailored to
meet customer needs.
Technical Chart
Technical chart on 15-dec24
Technical chart on 29-dec24
Risks
Highly competitive industry
Acquisitions dont play out as anticipated
Customer concentration risk – On a consolidated basis, ~26% of ACTL’s revenues in FY23 were from its top two clients (35% in FY22).
Slowdown in Europe impacting automotive revenues
Heavy Engineering vertical remains a drag for few more qtrs although optimization work going on
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
In case you have any questions/ queries, please feel free to reach me through Contact Form
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Open AI in Drones and Defense
Tactital Training importance
Agneepath
Cryosceintific
Also Read : INOX INDIA
3D printed Engine
DAC : Defense Aatmnirbhar version
Railways and Defense : Game is Still on
PSU Capex Status in FY24
Military expenditure
We have 96 MASTERS
Acquisition and Targeting
Military spending
HBL : Powering ahead
Global Drone market
Navy Indigenous content trend
TASL focus
DAP 2020 IC content
Defense : Mega trend
Its about iDEX and IDDM
Mega trend : Indigenisation of Defence manufacturing
Eyes and Brain
Space and Defense
Defense Exports
Defense Exports
An insight into Defense company : Data Patterns
Disclaimer – Below Analysis is NOT a BUY/SELL/HOLD Recommendation. It is for educational purpose and it can be used for educational purposes further. There could be lot of things which might have been missed in my analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
Data Patterns
Business —
Data Patterns is a leading player in India’s Defence and Aerospace industry. The Company is respected for its proprietary capabilities: design to manufacture, testing to validation and support for products throughout the life cycle. Data Patterns is the only Indian company in the Defence and Aerospace sectors to offer complete systems.
Data Patterns’ core competence covers the entire spectrum of electronics including Processors, Power, RF and Microwave, Embedded Software & Firmware. This unique capability allows Company to offer complete solutions, an area addressed only by international OEMs.
Data Patterns has succeeded in building products in high technology domains such as Radars, Electronic Warfare (EW), Communications, Satellite Systems, Video, Control Systems and Navigation, besides others. It is one of the few Indian companies offering indigenously developed products catering to the entire spectrum of Defence platforms – space, air, land, and sea. The Company established its quality management system in line with the demanding standards of AS9100 Rev. D by TUV-SUD, an internationally acclaimed certification
Product offerings and Clients
Can they do 3x in next 6yrs for revenue? Chances are bright with emerging tailwinds
Moats —
Biggest moat is long term relationship with Indian Defense companies built over years. A new company will take years to develop, manufacture, provide and test the integrated systems and then won new orders
Data Patterns is the only Indian company in the Defence and Aerospace sectors to offer complete systems.
Data Patterns’ core competence covers the entire spectrum of electronics including Processors, Power, RF and Microwave, Embedded Software & Firmware. This unique capability allows Company to offer complete solutions, an area addressed only by international OEMs
Strengths
- Data Patterns’ modern manufacturing facility consists of 2,00,000 square feet factory built on 5.75 acres of land in SIPCOT IT Park, Chennai. It has facilities for design, manufacturing, qualification and life cycle support of high reliability electronic systems used in Aerospace and Defence applications. The facility includes an EMS line, clean rooms, board, box and rack level integration capability and environmental testing to cater to the requirements of quality and complex production
- Vertically integrated defence and aerospace electronics solutions providers catering to the indigenously developed defence products industry
- Diversified order book with marquee customers along with state of the art manufacturing facilities
- Experienced management team and skilled workforce
- Highest Revenue growth, EBIDTA margin, ROCE and ROE (for FY20 &FY21) amongst key Indian defence and aerospace companies
- Strong Balance Sheet; Net Debt Free Company
Capabilities and Opportunity
Some triggers and updates ( Market size, order wins etc)
Opportunity Size
TAM (total addressable market) of USD 4.65 bn by 2030 growing at CAGR – 9% from 2020*
Make in India, Indigenous manufacturing defense Theme
Beneficiary of shifting procurement trends in Defence – Aatma Nirbhar Bharat , Make in India, new defence acquisition policies among
others
Increasing indigenization, Domestic defence procurement, Higher share of electronics in warfare
Defense modernization program
Expansion of facilities
Data Patterns is in the process of upgrading and expanding the current facility, with a proposed doubling of available floor area and manufacturing capacity, as well as addition of capability of handling large and heavy equipment, integration of large radars and mobile electronic warfare systems, satellite integration facility. The new infrastructure is slated to be ready by September 2022.
Data Patterns is also in the process of acquiring an additional 2.81 acres of adjacent land for further expansion
Promoter holding
Promoters have sufficient skin in game, along with FII and DII holdings and big players leading to only 21% approx for retail investors
Risks (tried to see major risks, please do due diligence to understand more on this part)
Fast rampup in orders is key along with execution. Will fast orders and execution can lead to profitability, we need to see in coming quarters and years
The business has long gestation period and inherited execution delays, consequently causes volatility in revenue recognition
Company face challenges to meet the requisite financial criteria of tender based business, for which it needs to rely on bigger entities
Cash conversion cycle and working capital cycle has been really a big risk. Need to be watchful on these two parameters consistently. Major trigger is inventory levels, which should come down with normalized operations and betterment of chip availability
Seasonality Improving but Q4 still Significant
Valuations —
Valuations for such company is difficult to judge as growth can happen exponentially and company one good year can turn the tables on valuations and vice -versa. As per experience start with specific risk reward and then performance observed over a period of time and as and when orders emerge.
Looking at past, such companies look overvalued, Looking at future opportunities, Company seem undervalued
We entered around 700 even when valuations look high and markets took it to 1540+ –so Premium companies might be rerated faster than one can imagine –hence our focus is to ride as long as growth happens in company but 1-2 quarters should not deter us to stop holding long enough and give chance to company to perform
Only thing here is if valuation blow up faster than business –we need to book some partial profits
Your strategy can be different than mine. Your selection of company might be different than mine. So let’s not be a BLIND FOLLOWER
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It is for educational purpose and it can be used for educational purposes further. There could be lot of things which might have been missed in my analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
In case you have any questions/ queries, please feel free to reach me through Contact Form
Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.
Enjoy the day and your life. Don’t forget, we are alone in this grand universe and may not get a chance to live again.
ASADS
Anticipated Positioning of defense players
Aatmnirbhar Version : Defence
Army looking for Indigenous equipment
Defense players order book comparison
Aatmnirbhar version II : Defense
Our Defense : Shortage of components and ..and .. and..
India : Parts Sourcing Hub
AATMNIRBHAR to DEFENSE : Theme Usage prevalent
ALPHA AFFAIRS 