Background: The Defense and electronic sector is booming right now on the back of structural changes happening in the country. We have already seen multiple multibaggers from the sector and this shall continue to happen.
Company: Aplab has two major verticals: temporary power back-up, test and measurement. These verticals mainly serve the defense sector. India’s increasing Naval presence and increased spending in both Air and Sea defenses is translating into good orders for the company. Since the announcement of compulsory domestic tenders of sub-200cr, things appear to be turning around for smaller companies like APLAB. Its other vertical, Test and Measurement, which has the education and power sector as its primary customers was not doing business at all due to online education. But off late, after the resumption of the physical schools, this vertical is seeing surging demand and is now getting back to normal and moving forward it will start contributing to the overall growth. Defense is also a large procurer of test and measurement equipment. It also has a small Self-Service Kiosks vertical, which service mainly financial and banking institutions. The company was facing severe debt issue in the past but they have significantly pared their debt by selling some of the properties in the past year.
Valuations: The company is available at around 0.3 times sales and the last quarter EPS was more than 3rs. Although the results could continue to be volatile, but the structural turnaround appears to be effective on the back of significantly improving business opportunities and debt reduction. Promoters hold more than 59% stake and if we observe closely, then the promoters have significantly increased stake as the previous stake had close to 10% share of ZEE which is no more the promoters, hence, promoter consolidation has happened.The company operates on great margins and if the debt reduction continues as planned and the structural changes materialize, then this is a company to watch for.
Technicals: Stock is coming out of multi decade consolidation and has started making high highs and higher lows. Momentum on the monthly and quarterly charts is strong.
With the defense keeping the momentum high, and the issues plaguing the company, slowly getting addressed, the future appears to be bright. I would be watching this one closely.
God Bless !!!
Disclaimer: It is safe to assume that I have some vested interests in the stock. Also, the above stock story is my personal view in individual capacity and I am not a SEBI Registered Research Analyst. For rest, please look at the About page.
aceinvestortrader 