Apollo Micro Systems LtdQ3 FY18Aerospace & Defense

Apollo Micro Systems Ltd

Q3 FY18 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 3

→Apollo Micro Systems expects positive growth and strong visibility in many ongoing and futuristic programs, aided by initiatives like Make in India promoting indigenous systems.
→The company aims to maintain the momentum of growth similar to the previous financial year on a quarter-on-quarter and escalated basis.
→Current project executions and repeat orders from customers indicate consistent order inflow, supporting sustained sales growth.
→Expansion into larger ticket, turnkey projects post-public issue is planned, potentially increasing revenue scale.
→The company views itself evolving into a prominent player with a strong role in ongoing programs, though not specifying exact revenue targets.
→Growth is expected with better working capital cycle management and strategic project acquisitions.
→No fixed yearly revenue guidance is provided, but Q2 figures and order book trends suggest revenue in the range of Rs. 450-500 crore manageable under current capital employed.

Category 3

→The company expects to maintain a similar momentum of growth quarter-on-quarter as observed in the previous financial year, with an overall positive outlook (Page 6, 12).
→EBITDA margins are expected to be better than the previous year though exact figures are not provided to avoid speculation (Page 8).
→Operating margins typically remain stable with minor fluctuations (+/- 1-2%) and have shown historically consistent gross profit margins (Page 8).
→The company foresees strong visibility of orders from strategic programs, aided by initiatives like Make in India promoting indigenous systems (Page 12).
→Consistent order flow is anticipated in technology-driven segments with no immediate requirement for additional capital infusion unless very large-ticket projects occur (Pages 12-13).
→Interim dividend has been declared, indicating confidence in generating profits (Page 13).
→Overall, the company aims to be a prominent key player in its domain with optimistic growth in revenue and profits over the coming years (Page 12).

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Yes

→Currently, Apollo Micro Systems does not foresee an immediate need for additional capital infusion.
→Krishna Sai Kumar mentioned that unless a very large-ticket project comes in, no new debt or equity funding will be required soon.
→The company is optimizing working capital and expects improvement going forward.
→Discussions are ongoing for possible acquisitions to grow in the SME sector, which may imply future capital needs, but no specific fundraising mentioned.
→IPO proceeds utilization has been announced, with remaining balance details to be shared soon.
→Overall, the company is confident of sustaining operations and growth with existing capital employed (~350-400 crore).

Yes

→Apollo Micro Systems maintains an order book with an average execution horizon of 9 to 12 months.
→The company expects to announce a significant repeat order from an existing customer shortly, post which a consolidated order book figure will be disclosed.
→Orders are picked strategically, often following platform manufacturer releases; repeat orders are key for business continuity.
→Current order inflows indicate strong visibility and positive momentum, aided by programs in defense and non-defense sectors.
→The company is working on a mix of projects including Make in India initiatives, with diversified clientele spanning DRDO, PSUs, private defense, and others.
→No specific quantified order book value was provided in the transcript, but management indicated ongoing robust inquiry trends and strategic orders awaiting announcement.

Yes

→The management is actively exploring strategic acquisitions in the SME sector to grow bigger in the defense electronics space.
→They are in discussions with a few companies and intend to clinch meaningful acquisitions.
→No specific details or timelines about the capital expenditure or exact investment amounts were disclosed during the call.
→Post-public issue, the company has started bidding for larger ticket projects which may impact working capital but no immediate additional capital infusion is expected unless very large projects materialize.
→The focus is on optimizing working capital, leveraging similar/raw materials across programs, and scaling up operations rather than heavy capex.
→No explicit mention of standalone capex plans; emphasis appears more on strategic growth via acquisitions and project execution.

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