Top 3 Cybersecurity Stocks Powering India's Digital Defense

Have you heard about "cybersecurity"? Of course, you have... and you might think it's just about installing antivirus software in your device or protecting your framework using strong passwords.

However, the term encompasses much more - it refers to the practice of protecting systems, networks, and data from cyber threats and attacks.

One of the main reasons cybersecurity is so crucial these days is because of the increasing volume of digital data. With businesses, governments, and individuals storing vast amounts of sensitive information online, the risks of cybercrime have grown exponentially.

Cybersecurity helps prevent unauthorized access, data breaches, and financial losses, ensuring that private information remains safe.

Another reason is the growing sophistication of cyberattacks. From ransomware and phishing to more complex forms of hacking, cybercriminals are becoming more inventive and dangerous.

Effective cybersecurity measures, such as firewalls, encryption, and continuous monitoring, are essential in defending against these evolving threats.

For businesses, maintaining strong cybersecurity can protect brand reputation, reduce downtime, and foster consumer trust.

While the landscape is challenging, companies that prioritize cybersecurity are better equipped to thrive in today's digital world.

As we delve deeper into the evolving landscape of cybersecurity, it's crucial to recognize the companies at the forefront of innovation and protection.

Keeping that in mind, we look at the top 3 cybersecurity stocks in India.

#1 Quick Heal Technologies

First on the list is Quick Heal Technologies, a company whose name is synonymous with anti-virus software.

Established in 1995, the company has evolved into a 360-degree cyber security solutions provider in India.

With its flagship products, such as Quick Heal and Seqrite, it has over 30% market share in India and a global presence in over 47 countries.

The company offers a range of services across data encryption, data loss prevention, endpoint security, network security, enterprise mobility management, and server protection.

The company is already well-positioned in the IT market with its anti-virus products. Banking upon its good reputation, it plans to expand its product offerings in cyber security further.

Coming to its financials, the company reported consolidated revenues of Rs 735 million (m) for the first quarter of FY25, reflecting a 37% YoY growth.

Its revenue split is 58% consumer and 42% enterprise, with a 12% QoQ decline due to seasonality and election-related deferments.

During the quarter, EBITDA improved to Rs 30 m from a negative Rs 150 m last year, while profit after tax stood at Rs 40 m.

The net income for the quarter stood at 40 m versus a loss in the same period in the previous year.

Here's a table showing the company's performance over the past 5 years -

Quick Heal Technologies Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-9%	16%	3%	-19%	5%
Gross Profit Margin (%)	96%	96%	96%	97%	98%
Operating Profit Margin (%)	32%	42%	31%	1%	6%
Net Profit Margin (%)	26%	32%	24%	2%	8%
Return on Capital Employed (%)	14%	21%	15%	NM	6%
Return on Equity (%)	11%	14%	13%	1%	5%

Data Source: Ace Equity

Despite traditionally weak performance in Q1 due to seasonality and market dynamics, Quick Heal remains focused on addressing evolving cyber threats while maintaining secure, error-proof systems in light of global cybersecurity incidents.

Looking ahead, the company is committed to profitable growth, driven by continuous investment in research and development (R&D) and innovation.

Quick Heal aims to expand its serviceable market from Rs 30 bn in FY25 to Rs 40 bn by FY27, bolstered by the introduction of new products and geographic expansion.

Additionally, the management is optimistic about scaling enterprise revenue and improving EBITDA margins as their products mature.

In conclusion, Quick Heal Technologies is strategically positioned to leverage its expertise, innovative product offerings, and regulatory changes to propel future growth in the cybersecurity space, despite facing certain market challenges.

To know more about Quick Heal, checkout its factsheet and latest quarterly results.

#2 SecureKloud Technologies

Second on the list is SecureKloud Technologies.

Formerly known as 8K Miles Software, the company offers software, managed, and platform services.

It also offers products and frameworks to solve problems around blockchain, cloud, and enterprise security.

The company has tech partnerships with Amazon Web Services, Microsoft Azure, IBM, Google Cloud Platform, and CA Technologies.

It serves reputed clients such as Novartis, GE Healthcare, Red Hat, Google, and Honda, spread across the healthcare, automotive, financial services, and entertainment industries.

Coming to its financials, SecureKloud Technologies reported revenue of Rs 474.5 m in Q1FY25, a sharp 52.1% decline YoY from Rs 990.2 m in Q1FY24.

Healthcare and Life Science vertical of the company contributed around 56.4% of the total revenue while information, communication & technology contributed around 43.6% of the total revenue.

Gross profit for the quarter amounted to Rs 139.7 m, marking a decrease of 38.5% YoY.

The company reported a negative EBITDA of Rs 79.6 m, reflecting an improvement from Rs -112.8 m in the previous quarter but still a challenging figure. At the bottom-line level for the quarter, the company reported a loss of 140 m.

SecureKloud's overall performance highlights continued efforts in cost-cutting and margin stabilization, but significant challenges remain due to declining revenues and persisting losses across the board.

Going forward, SecureKloud is well-positioned to capitalize on the growth trends within the IT staffing industry.

With increasing demand for IT professionals across various sectors, the company is primed to deliver exceptional staffing solutions tailored to industry needs.

The rising demand for flexible IT staffing, especially in areas like infrastructure management, application support, and new product development, presents a significant growth opportunity.

Furthermore, the IT and IT-enabled services sector will continue to dominate the demand for staffing, while key sectors such as startups, e-commerce, BFSI, retail, IT, and manufacturing are expected to drive growth in the coming years.

With a strong foothold in these high-demand sectors and an adaptable staffing model, SecureKloud is well-positioned to maintain its competitive edge and expand its market presence.

To know more about SoundKloud, checkout its factsheet and latest quarterly results.

#3 Allied Digital Services

Third on the list is Allied Digital Services.

Allied Digital Services Ltd provides a wide range of information technology and consultancy services.

It's an IT consulting and services provider and systems integrator offering infrastructure solutions and services to clients across 70 countries.

It designs, develops, and deploys digital solutions and delivers end-to-end IT infrastructure services including, end user IT support, IT asset life cycle, enterprise applications and integrated solutions

Coming to its financials, Allied Digital Services reported revenue for Q1FY25 of Rs 1.8 bn, with a 17% YoY increase in its India business, despite a minor slowdown due to the general elections.

Globally, revenue growth was modest at 1% YoY. The solutions business grew by 52% YoY, constituting 23% of total revenues in Q1FY25, up from 21% in Q4FY24.

Revenues from government customers surged by 50% YoY, accounting for 23% of total revenues.

The company secured Rs 1,500 m in orders, including new contracts and multi-year renewals across sectors such as infrastructure management, IT consultancy, and manufacturing.

The company's EBITDA margin remained steady at 11% in Q1 with the EBITDA being at Rs 190 m, with a target of achieving mid-teen margins within the next 3-4 quarters and a long-term goal of 18-20%.

The net profit on the other hand stood at Rs 100 m, while the net profit margin for the quarter stood at Rs 6% versus 5.3%, in Q1FY24.

Here's a table showing the company's performance over the past 5 years -

Allied Digital Services Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	38%	8%	35%	36%	4%
Gross Profit Margin (%)	42%	42%	43%	39%	41%
Operating Profit Margin (%)	14%	12%	14%	13%	12%
Net Profit Margin (%)	6%	5%	13%	1%	7%
Return on Capital Employed (%)	6%	5%	9%	13%	10%
Return on Equity (%)	4%	4%	11%	1%	8%

Data Source: Ace Equity

With strong demand for services, particularly in India, and optimistic market outlooks, Allied Digital Services continues its strategic expansion with a new sales office in Dubai.

Meanwhile, the US economic environment remains cautious, impacting decision-making, but the company is preparing for growth by reskilling employees and potentially funding large projects through short-term loans.

The company aims to reach Rs 10 bn in revenue by FY27, targeting smart city projects and expanding its global footprint in regions like the US, UK, Europe, and Africa.

Overall, Allied Digital Services is well-positioned for growth, driven by strong market demand, strategic initiatives, and an expanding opportunity pipeline.

To know more about Allied Digital Services checkout its factsheet and latest quarterly results.

Snapshot of Cybersecurity Stocks on Equitymaster's Stock Screener

Here's a table comparing the top cybersecurity firms in India on various parameters -

Conclusion

While cybersecurity offers immense potential and is essential for safeguarding digital infrastructure, it is not without challenges.

Despite advances in technology, no system is entirely immune to breaches, and the constant evolution of cyber threats means that companies must remain vigilant and proactive.

Additionally, investing in cybersecurity solutions can be capital-intensive, and not all businesses may find an immediate return on these investments. There is also the risk of overreliance on technology, potentially leading to complacency in other areas of security.

As investors explore opportunities in the cybersecurity sector, it is crucial to stay aware of these limitations. Evaluating a company's resilience, adaptability, and commitment to ongoing innovation will be key to making informed decisions.

With this in mind, investors should remain conscious of the risks and assess any investment opportunity carefully and judiciously.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...