DCX Systems Limited
Please refer to important disclosures at the end of this report
1
Incorporated in 2011, DCX Systems Limited (DSL) is among the leading Indian
players in the manufacture of electronic sub-systems and cable harnesses. The
company has been a preferred Indian Offset Partner ("IOP") for foreign
original equipment manufacturers ("OEMs") and for executing aerospace and
defense manufacturing projects. DSL is primarily engaged in system
integration and manufacturing a comprehensive array of cables and wire
harness assemblies and are also involved in kitting. The company operates
through their manufacturing facility located at the Hi-Tech Defense and
Aerospace Park SEZ in Bengaluru, Karnataka.
Positives: (a) Among the preferred Indian Offset Partners for the defense and
aerospace industry with global accreditations (b) Strong order book providing
visibility of cashflows (c) Well-positioned to capitalize on industry tail winds
Investment concerns: (a) High customer concentration risk (b) Significant
competitive intensity (c) High dependence on offset defense contracts.
Outlook & Valuation: In terms of valuations, the post-issue P/E works out to 30.5x
FY22 EPS (at the upper end of the issue price band) which is low compared to its
peers like Paras Defense & Space Technologies Ltd, Data Patterns (India) ltd and
Sundram Fasteners Ltd. Further, DSL has better revenue/PAT growth (CAGR of
57%/159% respectively) over 2 years, healthy return on equity and company also
has a strong order book (of `2,564cr) which provides visibility for next 2 years.
Considering all the positive factors, we believe this valuation is at reasonable levels.
Thus, we recommend a SUBSCRIBE rating on the issue.
Key Financials
Y/E March (₹ cr)
FY’20
FY'21
FY'22
Net Sales
449
641
1,102
% chg
43%
72%
Net Profit
10
30
66
% chg
203%
122%
EBITDA (%)
1.4
1.6
6.1
EPS (Rs)
1.3
3.8
8.5
P/E (x)
205.5
67.7
30.5
P/BV (x)
116.6
42.8
17.0
ROE (%)
56.8
63.2
55.8
ROCE (%)
3.2
4.2
10.5
EV/Sales
3.8
2.5
1.5
Source: Company RHP, Angel Research
SUBSCRIBE
Issue Open: October 31, 2022
Issue Close: November 02, 2022
Offer for Sale: ` 100cr
QIBs 75% of issue
Non-Institutional 15% of issue
Retail 10% of issue
Promoters 73.6%
Public 26.4%
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: ` 19.3cr
Issue size (amount): ₹ 500cr
Price Band: ₹197- ₹207
Lot Size: 72shares and in multiple thereafter
Post-issue mkt. cap: * `1,925cr - ** `2,002cr
Promoters holding Pre-Issue: 98.19%
Promoters holding Post-Issue: 1.81%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: ` 400cr
Issue Details
Face Value: `2
Present Eq. Paid up Capital: ` 15.48cr
IPO NOTE
DCX Systems Limited
October 27, 2022
DCX Systems Ltd | IPO Note
October 27, 2022
2
Company background
Incorporated in 2011, DCX Systems Limited (DSL) is among the leading Indian
players in the manufacture of electronic sub-systems and cable harnesses. The
company has been a preferred Indian Offset Partner ("IOP") for foreign original
equipment manufacturers ("OEMs") and for executing aerospace and defense
manufacturing projects. DSL is primarily engaged in system integration and
manufacturing a comprehensive array of cables and wire harness assemblies and
are also involved in kitting. The company operates through their manufacturing
facility located at the Hi-Tech Defense and Aerospace Park SEZ in Bengaluru,
Karnataka.
Company operates its business activities across three verticals of System
Integration, Cables and wire harness assemblies and Knitting:
1) System Integration: DSL undertakes system integration in areas of radar
systems, sensors, electronic warfare, missiles, and communication systems.
It provides product assembly and system integration services of various
complexities to address customers’ requirements. System integration
services are part of a comprehensive array of electronics and electro-
mechanical assembly and enclosure assembly. DSL also provides product
repair support for the parts that we manufacture. This division contributed
~85% (FY22) to the top line.
2) Cable and Wire Harness Assemblies: DSL manufactures a comprehensive
array of cables and wire harnesses assemblies such as radio frequency
cables, co-axial, mixed signal, power, and data cables for a variety of uses
including communication systems, sensors, surveillance systems, missile
systems, military armored vehicles, and other electronic warfare systems
for the aerospace and defense industries as per its customers’
requirements.
3) Kitting: DSL supplies assembly ready kits of electronic and electro-
mechanical parts and undertake all aspects of procurement including
sourcing components from suppliers approved by its customer along with
a ‘Certificate of Compliance’ for traceability, controlled storage of moisture
sensitive devices to ensure that customers receive complete, assembly-
ready kits when required when they are needed for production. This
division contributed ~ 12% (FY22) to the top line.
DCX Systems Ltd | IPO Note
October 27, 2022
3
Issue details
The IPO is made up of Fresh issue of ₹400cr and offer for sale of ₹100cr making
the total Issue size of ₹500cr.
Pre & Post Shareholding
(Pre-Issue)
(Post-Issue)
Particulars
No of shares
%
No of shares
%
Promoter
7,60,00,000
98.19%
7,11,69,082
73.58%
Public
14,00,000
1.81%
2,55,54,589
26.42%
Total
7,74,00,000
100.00%
9,67,23,671
100.00%
Source: Company, Angel Research
Objectives of the Offer
◼ Rs 400cr proceeds from the fresh issue would be utilized as follows:
o Up to ₹160cr utilized for funding working capital requirements.
o Up to ₹45cr utilized for funding capital expenditure
requirements of subsidiary.
o ~₹110cr to be utilized for repayment / prepayment, in full or
part, of all or certain borrowings availed by the Company.
o Rest would be utilized for general corporate purposes
DCX Systems Ltd | IPO Note
October 27, 2022
4
Financial Summary
Income Statement (Consolidated)
Y/E March (₹ cr)
FY’20
FY’21
FY’22
Net Sales
449
641
1,102
% chg
43%
72%
Total Expenditure
443
631
1,035
Raw Material
408
618
1,001
Personnel
6
5
9
Other Expenses
30
7
26
EBITDA
6
10
67
% chg
62%
565%
(% of Net Sales)
1.4
1.6
6.1
Depreciation & Amortization
1
2
2
EBIT
5
8
65
% chg
58%
747%
(% of Net Sales)
1.1
1.2
5.9
Interest & other Charges
8
10
11
Other Income
16
42
22
(% of PBT)
124.1
105.7
29.2
PBT
13
40
76
% chg
209%
90%
Tax
3
10
10
(% of PBT)
24.3
25.7
13.2
PAT
10
30
66
(% of Net Sales)
2
4.6
6.0
Basic EPS (Rs)
1.3
3.8
8.5
Fully Diluted EPS (Rs)
1.0
3.1
6.8
Source: Company, Angel Research
DCX Systems Ltd | IPO Note
October 27, 2022
5
Balance Sheet (Consolidated)
Y/E March (₹ cr)
FY’20
FY’21
FY’22
SOURCES OF FUNDS
Equity Share Capital
4
4
15
Reserves& Surplus
14
43
102
Shareholders’ Funds
17
47
118
Minority Interest
-
-
-
Total Loans
134
136
503
Other Liabilities
1
1
1
Total Liabilities
152
184
621
APPLICATION OF FUNDS
Net Block
17
16
15
Goodwill
-
-
-
Capital Work-in-Progress
-
-
-
Investments
0.12
-
-
Current Assets
681
777
924
Inventories
77
202
27
Sundry Debtors
88
12
69
Cash
417
549
800
Loans & Advances
-
-
-
Other Assets
99
13
27
Current liabilities
547
609
321
Net Current Assets
134
167
602
Deferred Tax Assets (net)
0
1
4
Other Assets
1
0
0
Total Assets
152
184
621
Source: Company, Angel Research
DCX Systems Ltd | IPO Note
October 27, 2022
6
Cashflow Statement (Consolidated)
Y/E March (₹ cr)
FY’20
FY’21
FY’22
Profit before tax
13
40
76
Depreciation
1
2
2
Change in Working Capital
129
93
-184
Interest / Dividend (Net)
(9)
-18
-15
Direct taxes paid
(4)
-3
-13
Others
(0)
0
0
Cash Flow from Operations
130
114
(134)
(Inc.)/ Dec. in Fixed Assets
(6)
-1
-1
(Inc.)/ Dec. in Investments
0
0
0
Interest Received
15
22
22
Cash Flow from Investing
8
21
21
Proceeds from Issue of Share capital
0
0
5
Proceed / (Repayment) of long-term borrowings
(0)
0
0
Proceed / (Repayment) of short-term borrowings
25
2
366
Payment of lease liabilities
0
0
0
Interest / Dividend (Net)
(6)
(5)
(7)
Cash Flow from Financing
19
(2)
364
Inc./(Dec.) in Cash
157
133
251
Opening Cash balances
259
417
549
Closing Cash balances
417
549
800
Source: Company, Angel Research
Key Ratios
Y/E March (₹ cr)
FY’20
FY'21
FY'22
Valuation Ratio (x)
P/E (on FDEPS)
205.5
67.7
30.5
P/CEPS
180.1
62.6
29.5
P/BV
116.6
42.8
17.0
EV/Sales
3.8
2.5
1.5
Per Share Data (Rs)
EPS (fully diluted)
1.3
3.8
8.5
Cash EPS
1.1
3.3
7.0
Book Value
1.8
4.8
12.2
Returns (%)
ROE
56.8
63.2
55.8
ROCE
3.2
4.2
10.5
Source: Company, Angel Research;
DCX Systems Ltd | IPO Note
October 27, 2022
7
Research Team Tel: 022 - 40003600 E-mail: [email protected] Website: www.angelone.in
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