800% Returns; 1:10 Stock Split: Multibagger Smallcap Defence Stock Hits Upper Circuit On Positive Brokerages

Hyderabad-based Apollo Micro Systems (AMS) has demonstrated significant growth and market performance. On Thursday, AMS shares opened 1% higher at Rs 103.15 compared to the previous close of Rs 102. This promising start set the stage for the stock to hit the day's upper price band at Rs 107.10, marking a 5% increase. The surge was strong enough to briefly halt trading. By around 12:30 PM, the stock was trading 3.50% higher at Rs 105.60, with approximately 6.91 lakh shares changing hands.

Despite this uptick, AMS shares are currently trading higher than their 200-day moving average but remain below their 20-day, 50-day, and 100-day moving averages. This discrepancy offers an intriguing snapshot of the stock's volatility and investor sentiment.

Bonanza Wealth Management Research, a stock broking firm, has issued a 'BUY' rating for AMS, setting a target price of Rs 129 per share. The firm highlighted AMS's experience-spanning over 38 years-in designing, developing, and assembling custom-built electronic and electromechanical solutions. The company's product portfolio includes electronic manufacturing services, PCB fabrication, embedded software design and development, and high-performance mission-critical solutions for defence, space, and homeland security sectors.

AMS currently operates a 55,000 square foot manufacturing facility in Hyderabad and is in the process of expanding significantly. The company plans to add two new facilities-one 40,000 square feet and another a massive 350,000 square feet-requiring a capital expenditure of Rs 1,500 million. These expansions are slated to be operational within the next 12 months.

According to Bonanza Portfolio, this capacity addition will substantially enhance AMS's manufacturing capabilities, enabling increased production to meet growing demand. "The capacity addition will position Apollo Micro Systems to capitalize on emerging opportunities in the defence and electronic manufacturing sectors, driving long-term growth," noted the brokerage in its report.

AMS has demonstrated strong market performance over the past year. According to BSE analytics, the stock has delivered multibagger returns of 200% in the last year alone. Over two and three years, the returns have skyrocketed to an astonishing 686% and 806%, respectively.

The company's shareholding pattern as of May 31, 2024, reveals that promoters own a 55.80% stake, followed by non-institutional investors with 34.14%, and FIIs holding more than 10%. Notably, these shares are locked in until December 19, 2025, following approval by the National Stock Exchange for warrant conversion at Rs 18.60 per share.

Despite a 4.26% decline on Wednesday during a bullish market session, AMS shares rebounded quickly. With a current market cap of Rs 2,960 crore, the stock's 52-week high stands at Rs 162, while the 52-week low is Rs 34. In the past year, from a low of Rs 34.70, AMS shares have surged by 186%. From Rs 12.29 on June 7, 2019, the stock has climbed 706%.

AMS's financial results for the quarter ending in March 2024 showcase substantial growth. Net sales grew by 26.76% to Rs 135.44 crore compared to Q4FY23. EBITDA increased by 25.61% to Rs 28.74 crore, and profit after tax (PAT) soared by 79.23% to Rs 12.93 crore. Annually, net sales grew by 24.91% to Rs 371.63 crore, EBITDA by 30.85% to Rs 83.87 crore, and PAT by 66.01% to Rs 31.11 crore.

For the fiscal year ending March 2024, AMS declared an equity dividend of 5%, translating to Rs 0.05 per share. Despite the modest yield, the company's consistent dividend payments over the past five years reflect stability and reliability in shareholder returns. Additionally, AMS executed a share split in May 2023, reducing the face value from Rs 10 to Rs 1, making the stock more accessible to a broader range of investors.

AMS's strategic initiatives have significantly boosted its order book and revenue streams. The company is actively developing defensive solutions with export potential, as seen in its participation in the Make-II defence project. The ceremony for their Integrated Plant for Ingenious Defense Systems (IPiDS) reflects their focus on enhancing capabilities in the defence and space sectors.

Founded in 1985, Apollo Micro Systems has carved a niche in creating, constructing, and validating crucial electronics and electro-mechanical solutions for the aerospace, defence, and space sectors. The company's commitment to research and development has yielded notable projects, including torpedo-homing systems and underwater mines, solidifying its reputation as a leader in defence technology.

Apollo Micro Systems is well-poised for continued growth, supported by expansions, robust financial performance, and a legacy of innovation. As the company enters its 40th year, its trajectory in the defence sector appears more promising than ever, offering substantial opportunities for investors and stakeholders alike.