📌 At a Glance
Apollo Micro Systems has grown from a ₹200 crore electronics supplier into a ₹5,800 crore market cap defence-electronics player. But with a P/E of 103, ROE under 11%, and promoter pledging at 48%, this stock is a case study in “growth hai, par risk bhi full hai.”
It’s up 146% in 3 years. But should it have been?
🧰 About the Company
- Industry: Defence electronics, aerospace, embedded systems
- Core Biz: Design, development, and integration of mission-critical systems for Indian defence and aerospace
- Founded: Hyderabad-based, with over 700 onboard techs, 150 indigenous programs, and key partnerships with DRDO/ISRO/HAL
- New Focus Areas: Missile electronics, rugged systems, electro-mechanical components, and — surprise — recently acquired IDL Explosives
🛠️ Products & Services
- PCB Fabrication & Assembly
- Embedded System Design
- Electro-mechanical Integration
- Host Interface Solutions
- Custom-built Defence Electronics
Basically, they make the “brains” and “wiring” for India’s defence tech — but aren’t making brainy profits yet.
📊 Financial Performance (FY21–FY25)
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 203 | 243 | 298 | 372 | 562 |
| Net Profit (₹ Cr) | 10 | 15 | 19 | 32 | 57 |
| EPS (₹) | 0.49 | 0.70 | 0.92 | 1.12 | 1.87 |
| EBITDA Margin % | 19% | 19% | 22% | 23% | 23% |
| ROE % | 8% | 9% | 11% | 12% | 10% |
| P/E Ratio | 103 😬 |
⚠️ EduNote: Revenue CAGR is solid, but EPS is crawling. Defence contracts may take years to convert to profits — unless they start delivering on margin improvement.
📈 Growth Snapshot
| Metric | CAGR (3Y) | CAGR (5Y) |
|---|---|---|
| Revenue | 32% | 18% |
| Net Profit | 57% | 33% |
| Stock Price | 146% | 82% |
Yes, price ran faster than profits. Welcome to smallcap defence euphoria. 🛡️💥
🧾 Shareholding Trends
| Shareholder | FY21 | FY25 |
|---|---|---|
| Promoters | 59.10% | 55.12% |
| FII Holding | 1.78% | 0.93% |
| DII Holding | 0.00% | 0.37% |
| Public Holding | 39.11% | 43.60% |
🚨 Promoters have pledged 48% of their holdings.
And promoter stake has fallen by nearly 4%. Not ideal when you’re raising ₹416 Cr in preferential allotment.
🧮 Balance Sheet Evolution
| Year | Net Worth (₹ Cr) | Borrowings (₹ Cr) | Fixed Assets (₹ Cr) | CWIP (₹ Cr) |
|---|---|---|---|---|
| FY21 | 305 | 116 | 49 | 50 |
| FY25 | 609 | 295 | 181 | 59 |
- 📈 Borrowings doubled in 4 years
- 🏗️ Capex continues — probably linked to ramp-up for larger defence orders
- 💸 Working capital cycle = 423 days 😵
- Debtor days: 155 ➝ Still a concern for defence PSUs
💰 Cash Flow
| Year | CFO (₹ Cr) | FCF | Observations |
|---|---|---|---|
| FY24 | -₹80 Cr | 🚨 | Working capital pressure |
| FY25 | ₹12 Cr | ✅ | Slight relief, but too small relative to PAT |
🧨 Recent Updates
- ✅ Raised ₹416.77 Cr via preferential issue at ₹114 — to fund growth
- ✅ Acquired IDL Explosives — vertical integration or mission creep?
- ✅ Order book expected to triple by FY26, per investor call
- ⚙️ Capex of ₹250 Cr planned — facility expansion + tech upgrades
🥊 Peer Comparison (June 2025)
| Company | P/E | Market Cap (₹ Cr) | ROE (%) |
|---|---|---|---|
| HAL | 40 | 3,37,112 | 33.9 |
| BEL | 54 | 2,87,273 | 38.9 |
| Zen Tech | 63 | 17,639 | 36.7 |
| Data Patterns | 76 | 16,949 | 21.6 |
| Apollo Micro | 103 | 5,889 | 10.2 |
🤔 EduRoast: Apollo is trading at the highest P/E and lowest ROE in the defence club. Something’s not adding up. Unless future is already priced in?
🧮 Forward Fair Value Estimate
- Assumed FY26 EPS: ₹2.5–3.0 (30% YoY growth)
- Fair P/E Range: 40–50 (even HAL & BEL don’t trade beyond 45)
- Fair Value Range: ₹100–₹150
- CMP: ₹192
- Verdict: Expensive, unless the IDL + order book strategy explodes in a good way.
🧠 EduInvesting Take
“Apollo’s stock is reaching orbit. Now the business needs to catch up.”
Yes, this is a Make-in-India, Atmanirbhar Bharat favourite. But fundamentals still trail euphoria. Until profit growth catches up with price and pledging reduces, Apollo might remain more “hope” than “hero.”
That said — if the ₹250 Cr capex + IDL + tripling order book pays off, this could be the next Data Patterns. But that’s a big IF.
Author: Prashant Marathe
Date: 12 June 2025
Tags: Apollo Micro Systems, Defence Stocks India, IDL Explosives, Atmanirbhar Bharat, Pledged Shares, Defence Electronics, EduInvesting Recap
