Why Avantel Share Price is Rising

Avantel's share price has been on a significant upward trend, stirring interest among investors and market watchers alike. The rise aligns with a broader rally in defence stocks, a sector that has been drawing increasing attention as India ramps up its defence capabilities.

With the government's push towards self-reliance and modernization of military infrastructure, companies operating in this domain are seeing a surge in demand for their products and services.

This environment has created a ripe opportunity for businesses, large and small, to benefit from new contracts and strategic collaborations. Avantel, a technology-driven company with a strong foothold in defence communications and solutions, seems to be riding this wave.

The company's shares have seen a sudden jump in the last five days.

What has led to this sudden surge in its stock price?

Let's find out.

Q2 Result Boosts Stock

Shares of Avantel rose 6% today following strong financial results for the September 2024 quarter.

The company's revenue rose 44.3% YoY to Rs 779 m for the quarter up from Rs 540 m in the same period last year. The net profit also rose 43.75% YoY to Rs 230 m from Rs 160 m.

The revenue from the Communications and Signal Processing Products segment, which comprises the company's entire revenue stream, surged to Rs 777 m compared to Rs 540 m on the back of multiple order wins.

In September 2024, the company secured several significant orders, including a Rs 445 m contract from Larsen & Toubro Limited and a Rs 34.5 m order from Bharat Electronics for the supply of Satcom systems.

Additionally, the company received an order from NewSpace India Limited for the supply, installation, and commissioning of a ground segment hub, valued at Rs 93.9 m.

This marked the second order from NewSpace India within a month, as the company had previously received a similar work order in August, which was valued at Rs 679.2 m

Strong Financials Support Growth

In recent years, Avantel's shares have delivered stellar returns to their shareholders, driven by steady order wins and consistent improvement in performance.

This is primarily because the company's revenue has increased by almost four times in the last five years. It has grown at a CAGR of 30.7% on account of the growing order book.

Being an established player in the electronics and telecom equipment business, the company has a unique offering of embedded systems and related software used in the defence and telecom segment.

This helped the company secure orders from all major defence and telecom players.

Moreover, its in-house production of proprietary products has helped the company maintain a healthy profitability.

In the last five years, the gross and net profit has grown by a CAGR of 39.7% and 37.3% respectively.

This helped the company improve its cash flows from operations, aiding in debt repayment.

The company has reduced its total debt by 59%, from Rs 279 m to Rs 115 m in FY24.

The Road Ahead for Avantel

The government is focusing on the defence industry as a key area to achieve self-reliance.

It has taken several policy initiatives in the past few years under the 'Make in India' programme and brought in reforms to encourage indigenous design, development and manufacture of defence equipment in the country.

During the last three financial years (2020-21 to 2022-23), 122 contracts have been signed for capital procurement of defence equipment by the Ministry of Defence (MoD).

Out of these, 100 contracts, accounting for 87% of the total contract value, have been signed with Indian vendors for capital procurement of defence equipment.

Avantel is at the forefront of building self-reliance in defence technologies and has been consistently offering solutions as per the requirements of strategic customers.

For the FY24-25 period, the company has an impressive order book and is expected to introduce a few new products i.e. SCA (Software Composition Analysis) compiled HF software defined radios and MSS Xponders for fishermen in addition to the present product lines.

Further, the company is also establishing a facility in E City, Shamshabad, Hyderabad, with a built-up space of about 70,000 sq. ft. in about 4 acres of land. The facility is scheduled to be operational by October 2024 and shall house state-of-the-art facilities and infrastructure for space technologies.

Given the recently released Indian new space policy, the company has embarked on new initiatives and submitted proposals for the establishment of Ground Station as a Service (GSAAS) facility & SATCOM as a service through dedicated satellite to IN-SPACe, ISRO .

The company is also establishing a state-of-the-art R&D and production centre for Imeds on about 2 acres of land with built space of approximately 30,000 sq. ft. and is expected to go operational by Q3 FY25.

How Avantel Share Price has Performed Recently

In the past month, shares of the company have risen by 14%.

The stock is also up more than 110% in the year gone by.

The stock touched its 52-week high of Rs 223.8 on 9 July 2024 and a 52-week low of Rs 83.98 on 6 October 2023.

At the current price, the company trades at a price to earnings multiple of 70.3x.

About Avantel

Avantel is engaged in the business of designing, developing, and maintaining wireless and satellite communication products, defence electronics, radar systems, and the development of network management software applications for its customers, mainly from the aerospace and defence sectors.

The company develops customized solutions for INSAT based Mobile satellite services with advanced technologies for Military applications.

It has developed a unique, real time and cost effective solution for position determination and location transmission of the rolling stock for Indian railways.

It also develops radar subsystems for voice and data communication for military applications, and building blocks of the radios which includes RF Front-end units, synthesizers etc

To know more, check out Avantel's financial factsheet and latest quarterly results.

You can also compare Avantel with its peers on our website:

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To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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