DCX Systems IPO kicks off for subscription: Here's what brokerages say

As the primary market gathers pace, DCX Systems' public issue kicks off for subscription on Monday.

The Rs 500-crore primary issue of the sub-systems and cable harnesses manufacturer comprises a fresh issue of Rs 400 crore as well as an offer for sale (OFS) of Rs 100 crore by the company promoters.

The share price band for the IPO has been fixed at Rs 197-207 per share.


The company proposes to utilise the net proceeds from the fresh issue towards debt payment, funding working capital requirements, and investment in its wholly-owned subsidiary Raneal Advanced Systems to fund its capital expenditure and general corporate purposes.

Here’s what brokerages suggest on the DCX public issue:

• BP Equities

The brokerage said the Indian government aims to be the $5 billion export nation by 2025 in the aerospace and defence space and this offers immense opportunities for companies like DCX to achieve the target. BP Equities has assigned a ‘subscribe’ rating to the issue for probable listing gains.

“The shift from passive to active radar solutions will also provide numerous opportunities to the company. DCX maintains a healthy order book which has increased from Rs 1,941.3 crore as of FY2020 to Rs 2,369 crore as of FY2022. As of June 30, 2022, the order book stood at Rs 2,563.63 crore to be executed in FY2023 to 2025. However, any changes in the offset defence policies remain a key risk. On the valuation front, we value the company at a P/E of 22.5x based on FY22 earnings,” said the brokerage.

• Angel One

Angel One is also positive on the issue and has accorded the issue of DCX Systems a ‘subscribe’ rating. The brokerage is of the view that the company is among the preferred Indian Offset Partners for the defence and aerospace industry with global accreditations. Also, there is good visibility of cashflows given the strong order book.

“In terms of valuations, the post-issue P/E works out to 30.5x FY22 EPS (at the upper end of the issue price band) which is low compared to its peers like Paras Defense & Space Technologies, Data Patterns (India) and Sundram Fasteners. Further, DSL has better revenue/PAT growth (CAGR of 57%/159% respectively) over 2 years, a healthy return on equity and also a strong order book (of Rs 2,564 crore) which provides visibility for the next two years. Considering all the positive factors, we believe this valuation is at reasonable levels," it said.

• Choice Broking

At a higher price band, DCX is demanding an EV/Sales multiple of 1.2x, which is lower than the peer average. Considering the favourable macros for the defence manufacturing sector and for the company, we feel the IPO is attractively priced, the brokerage said. Thus we assign a “SUBSCRIBE” rating for the issue, noted the brokerage.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)