Buy DCX Systems; target of Rs 519: KR Choksey

KR Choksey's research report on DCX Systems

The first quarter has always been a lackluster quarter for DCX systems, and it was no exception this time. However, Raneal Advanced Systems (PCBA Arm of DCX) delivered a revenue of INR 424 Mn. At the same time NIART Systems (Railway JV) has geared up and is ready for mass production with assets of INR 4,752 Mn. Operationally, DCX Systems saw a 19% YoY revenue decline to INR 1,381 million, due to a traditionally slow Q1. Rising material costs led to an operating loss of INR 48 million and net profit dropped 69% YoY to INR 29 million. However, we believe healthy recovery is expected from customers against the increase raw material prices under the BOM guarantee.

Outlook

We maintain our BUY rating due to a strong order book of INR 19,370 million, 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. We also maintain our target price of INR 519, based on a P/E multiple of 36x on FY26 EPS.

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