Recommendation

Angel One has started tracking Apollo Micro Systems Ltd with a BUY recommendation and a target price of Rs 463 per share, which represents roughly 16 % upside from the previous close of Rs 404.85. The brokerage cites a solid order book, defence‑sector tailwinds, capacity expansion, and increasing contribution from indigenous defence products as the primary catalysts.

Company Overview

Founded in 1985, Apollo Micro Systems Ltd is a Tier‑I Indian defence OEM that designs, builds, and tests custom electronics and mechanical systems for defence, space, and homeland security. The company boasts over 41 years of experience, more than 700 onboard technologies, and participation in 150+ indigenous defence programmes. Its customers include DRDO, defence PSUs, the Ministry of Defence, and private defence OEMs across missile, naval, air, and land platforms. The firm’s market capitalisation stands at Rs 14,840 crore.

Recent Stock Performance

On the trading day referenced, the share price reached a high of Rs 404.85, up 1.81 % from the prior close of Rs 397.65. Over the past twelve months the stock has delivered a 130 % total return.

FY26 Financial Results

Apollo reported a record FY26 with:

  • Revenue of Rs 904 crore, up 61 % YoY.
  • EBITDA of Rs 218 crore, up 69 % YoY.
  • PAT of Rs 113 crore, up 91 % YoY.

These figures underscore strong operating leverage and profitability growth.

FY27–FY29 Outlook

The brokerage projects FY27 profit of Rs 176 crore, representing 55.7 % YoY growth from FY26 PAT. For FY29, a PAT of Rs 421 crore is forecast, implying a CAGR of 55 % from FY27 to FY29.

Order Book and Strategic Contracts

Apollo’s order book totals Rs 1,432 crore, providing clear execution visibility. Notable contracts include the IAF Make‑II Prototype Sanction Order for a Smart Bomb, the Indian Navy’s SAVIOR‑ASW system, and additional orders valued at Rs 134.3 crore.

Manufacturing Expansion

The company is allocating Rs 300 crore to a greenfield manufacturing facility in Hyderabad, which will be 12 times larger than its existing plant, enhancing capacity for future demand.

Technology, R&D, and Product Development

R&D spending in FY26 reached up to 8 % of revenue. Apollo is focusing on AI‑driven technologies, RF seekers, inertial navigation systems, counter‑drone solutions, loitering munitions, and complete weapon platforms, supported by strategic acquisitions.

Vision 2036 and Strategic Growth Plan

Under its Vision 2036, Apollo aims to become a globally recognised defence OEM with diversified capabilities across ground, air, and water platforms. Growth will be pursued organically, through acquisitions, exports, and innovation. The company has secured a manufacturing licence for calibres above 12.7 mm, further broadening its product range.

Key Risks

The firm faces high working‑capital requirements due to the long cycles inherent in defence projects. Delays in government order approvals, contract awards, or project implementation could adversely affect revenue recognition, cash flows, and overall performance.

Valuation and Intrinsic Value

Angel One values the stock at Rs 463 per share, based on 41 × EPS for FY29E. The valuation reflects expectations of 45‑50 % organic growth in the medium term and a rising share of high‑margin indigenous defence products. Consequently, a BUY rating is assigned.

Sector Outlook

India’s defence sector is experiencing robust long‑term growth driven by increased government spending, the Atmanirbhar Bharat initiative, a push to reduce imports, and greater private‑sector participation. Export opportunities, investments in UAVs, electronics, aerospace systems, and modernisation programmes are expected to sustain the sector’s expansion.

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