Apollo Micro Systems Limited

Started in 1997, Apollo Micro Systems Limited is an electronic, electro-mechanical, engineering designs, manufacturing and supplies company. AMSL design, develop and sell high-performance, mission and time critical solutions to Defense, Space and Home Land Security for Ministry of Defense, government controlled public sector undertakings and private sectors. The huge repository of knowledge and technology base that the Company has developed since inception is a strong base to outperform the competition and be abreast in the market. This supports the Company to constantly upgrade the technologies to meet present and futuristic requirements of its customers. AMSL has its participation in several Indigenous Missile programmes, underwater electronic warfare, underwater missiles, surface to air missiles, nuclear missile programmes, surface to surface missile programmes, indigenous submarine programmes, UAV’s long and short endurance, ships, space programmes. The solutions offered by company were used by its customers during development and user trials on account of which these solutions are qualified to be a part of supply chain in production phase. Company's manufacturing facility is located at Hyderabad. They have a strong R&D team of 56 engineers with core competencies in development of Embedded Hardware and Software along with engineering designs team. As total solutions are offered under one roof, it allows the Company to stay ahead of competition and also enables to scale-up production activity. They sell their solutions predominantly through a combination of direct sales to system integrators and end users. Customers of the companies are  Ministry of Defence, government controlled public sector undertakings and private sectors. AMSL is certified company to carry out Airworthy designs by CEMILAC (Centre for Military Airworthiness), they are registered vendor of DRDO and Defence public sector undertakings and other public sector undertakings. They are collaborative R&D partner for Bharat Electronics Limited in Embedded Hardware Designs, Embedded Software Designs, IP Cores for FPGA & DSP (Radar, SONAR and image). They are an identified production service provider for Bharat Electronics Limited in the areas of Electronic Manufacturing Facilities and Mechanical Precision Machining Facilities. On performance front, AMSL has posted turnover/net profits of Rs. 37.46 cr. / Rs. 2.96 cr. (FY13), Rs. 72.88 cr. / Rs. 5.33 cr. (FY14), Rs. 108.77 cr. / Rs. 7.45 cr. (FY15), Rs. 159.53 cr. / Rs. 10.0 cr. (FY16) and Rs. 211.8 cr. / Rs. 18.57 cr. (FY17). For H1 of FY18, it has reported net profit of Rs. 7.11 cr. on a turnover of Rs. 109.47 cr. Thus company has posted healthy growth over last couple of years on consistent basis. AMSL has posted an average EPS of Rs. 10.10 and average RoNW of 25.65% for last three fiscals. Issue is priced at a P/BV of 5.05. Listed peers as per DRHP are trading in range of 18 to 28 P/E ratio. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 40, which looks aggressively priced when comparing with peers. As per financials, company's growth is very good, RoNW is 25.65% for last three fiscals and issue is priced at P/E of around 40 as per latest earnings. Company is working in electronics and defense sectors and Government's initiatives for Make in India for defense related solutions which will be very beneficial. So we give SUBSCRIBE rating to this IPO.

• 1 Mr. Karunakar Reddy Baddam.