DCX SYSTEMS

Cutting-edge vendor for defence projects

DCX Systems is a leading Indian defence manufacturing player offering a full suite of electronic systems and subsystems, cable & wire harness assemblies, and printed circuit board assemblies for both international and domestic customers. The company commenced operations in 2011 and has been a preferred Indian offset partner (IOP) for foreign original equipment manufacturers (OEMs) for executing defence manufacturing projects. DCX is primarily engaged in system integration, printed circuit board assemblies and manufacturing a comprehensive array of cables and wire harness assemblies, and is also involved in kitting.

• The company operates through a manufacturing facility located at the Hi-Tech Defence and Aerospace Park SEZ in Bengaluru. This facility is spread over an area of 30,000 square feet and is set up for complete in-house environmental and electrical testing and wire processing. The location of the facility is in the same city as DCX’s key domestic customers like Bharat Electronics, Alpha Design Technologies Private Limited, Alpha Elsec Defence and Aerospace Systems Private Limited, and Centum Adeno India Private Limited, thus ensuring shorter delivery times. DCX is one of the largest IOPs for ELTA Systems Limited and Israel Aerospace Industries Limited, System Missiles and Space Division (together, the IAI Group), Israel, for the Indian defence market. Over the years, it has expanded its manufacturing capabilities and grown its order book.

SALES DOUBLE

• The company has made a rapid rise on the financial front. During the last five years, its sales turnover has more than doubled from Rs 641 crore in fiscal 2020 to Rs 1,424 crore in fiscal 2024, with operating profit shooting up eight times from Rs 10 crore to Rs 80 crore and the profit at net level inching up from Rs 30 crore to Rs 76 crore. What is more, prospects for the company going ahead are all the more promising. Consider:
• DCX’s customers include reputed global multinational corporations and start-ups in Israel, the United States, South Korea and India, across different sectors ranging from defence and aerospace to space ventures and railways.
• On December 31, 2023, the order book stood at Rs 1,095 crore. Order execution during the three quarters following December 2023 amounted to Rs 1,079.90 crore. As of December 31, 2024, the current order book exceeds Rs 3,000 crore. It received a major order from L&T worth Rs 1,250 crore in July 2024, with a 3-year execution period, to be executed linearly.

GIANT CUSTOMER

• In 2024, DCX added a major customer, Lockheed Martin Global of the US. It has received orders from Lockheed Martin across various verticals, including system integration and PCBs, totalling over Rs 850 crore. These orders include: Rs -460.30 crore for electronic assembly received on November 8, 2024; -Rs 380 crore for PCBs to RASPL received on October 8, 2024, and Rs -16.53 crore received on February 8, 2024. All orders have an execution period of 12 months.
• Due to the Indian government’s shift towards the ‘Make in India’ initiative, items previously imported are now being manufactured by Indian OEMs such as BEL, HAL and L&T. This shift will likely lead to an increase in orders from Indian defence PSUs and private companies.

CASH RICH

• It has strong financials as short-term borrowings stand at Rs 63 crore and cash equivalents stand at Rs 980 crore. Thus, it is in a position to further invest in new technology transfers and product development. In FY 2025, we expect the company to register an EPS of Rs 3.5, which is likely to rise to Rs 10.8 in FY 2026. In FY 2027, it can report an EPS of Rs 13.8. The scrip trades at Rs 370. P/E on the FY 2027 EPS works out to 26.9.

PERFORMANCE INDICATORS (Rs. in crore)

RENAISSANCE GLOBAL

Gem designer to marquee clients

Renaissance Global is a small cap company in the diamond and gold jewellery industry. Starting off as a retail supplier of private label fine jewellery to global retailers, the company has grown through both organic and inorganic initiatives to establish itself in the licensed brand jewellery space as well as the margin-accretive direct-to-consumer (D2C) space. For the last 25 years, the company has been creating incredible jewellery designs for its marquee clients across the globe. The licensed brand jewellery segment and the D2C space are growth verticals that show immense potential to transform its revenues and margin profile in the medium term, deploying lower capital for growth.

Renaissance is a highly differentiated luxury lifestyle products company. It is a licensee for two leading global brands, ‘Hallmark’ and ‘Disney’. The company employs more than 150 designers across the US, the UK, Hong Kong and Dubai. With its investment in the latest technologies and human talent, the company has the ability to craft over 1,000 unique designs per month.

Needless to say, the company has been doing very well on the financial front. During the last 12 years, its sales turnover has more than doubled from Rs 952 crore in fiscal 2013 to Rs 2,107 crore in fiscal 2024, with operating profit shooting up almost four times from Rs 44 crore to Rs 164 crore and net profit surging around five times from Rs 15 crore to Rs 74 crore. What is more, prospects for the company going ahead are all the more promising. Consider:

• The company’s mastery in both designing and manufacturing positions it strongly as a competitive player that can succeed in the marketplace constantly. The designs created by Renaissance remain its intellectual property.

TOP CLIENTS

• Little wonder, the company has an enviable list of well-known customers, including Fred Meyer, Helzberg Diamonds, Joyalukkas, Malabar, Signet Jewellers and department store chains like JC Penny, Macy’s and Walmart. It is also a trusted supplier to catalogue commerce and television retailers like Amazon, Argos and Jewellery Television. The company’s top ten customers have been associated with it for more than 10 years. It has maintained its relationship with over 50 customers across the US, the UK and the Middle East.
• Of late, the established private-label business is seeing a new wave of growth through OEM arrangements with global fashion brands looking to diversify their supply chains due to geo-political concerns. This augurs well for the sustained growth of Renaissance.
• The company’s experience and expertise in design, manufacturing, distribution, marketing and cash flow management provide it with a robust platform to chase these growth opportunities as global economies emerge out of uncertainty and inflationary headwinds.
• The company exited the plain gold business based in Dubai, resulting in an overall inventory reduction of Rs 75 crore from the peak of February 2024. This transaction closed on August 1 of the current year and will be reflected in the next quarter’s financial results.

LAB GEMS

• The growing interest in lab-grown diamonds is reshaping the fine jewellery industry, and its D2C brands are at the forefront of this transformation by seamlessly blending luxury with affordability, given its strong emphasis on lab-grown diamonds. It has recently introduced home preview and experience stores allowing customers to try before they buy, which it believes will strengthen its market position in the next two to three years. At present, lab-grown diamonds account for 55% of its D2C business, and prominently feature in its own brands and licensed brands. Rather than entering the increasingly competitive and price sensitive field of lab-grown diamond manufacturing, it has strategically focused on building brands that cater to this demand. In FY25, we expect the company to register an EPS of Rs 8.9, which is likely to rise to Rs 11.2 in FY26. In FY27, it could report an EPS of Rs 14.4. The scrip trades at Rs 173. P/E on FY 2027 EPS works out to 12.0.

PERFORMANCE INDICATORS (Rs. in crore)