AXISCADES - AXISCADES TECHNOLOGIES LIMITED Share Price

In the earnings call for Q4 FY '25, AXISCADES Technologies Management provided an optimistic outlook, emphasizing a transformative strategy aimed at achieving significant revenue growth and margin expansion. The key forward-looking points highlighted by management include:

1. Revenue Growth Target: Management is targeting a revenue of $1 billion by 2030, reflecting an ambitious growth pathway given the current revenue stands at Rs. 1,031 crores for FY '25. They aim for non-linear product-led growth, transitioning from service-based to a product-based revenue model.

2. Growth Estimates:

   • Aerospace revenue is projected to grow by at least 35% in FY '26, driven by existing contracts and new opportunities, with a significant foundation from current customers.
   • Defense revenue is expected to soar with a 75% growth trajectory, propelled by increased production and new contracts.
   • The ESAI segment anticipates 60% growth, focusing on delivering innovative products and expanding the customer base.

3. EBITDA Growth Targets: Management set an ambitious goal of achieving a 50% growth in EBITDA for FY '26, targeting an improvement of 300 bps in EBITDA margins annually. The aim is to reach an average EBITDA margin of 24% by FY '28.

4. Investment in Facilities: The company plans to invest Rs. 250 crores in its Devanahalli Atmanirbhar Complex for developing radar and electronic warfare solutions, with Phase-1A ready by January 2026.

5. Financial Health: The company has reduced finance costs significantly and maintains a robust cash position with net debt of about Rs. 15 crores. They report a 2.25x increase in PAT in FY '25, totaling Rs. 75.26 crores.

6. Focus on Core Domains: The company continues recalibrating its non-core verticals like heavy engineering and automotive to ensure focus remains on high-margin sectors, with core verticals yielding healthy EBITDA margins averaging 19.1%.

Through these initiatives, AXISCADES aims to unlock substantial value for stakeholders while effectively positioning itself for sustained long-term growth.

1. Question: "Can I just understand this one-time cost on the P&L that we have it on more clarity basis?"
   Answer: The one-time cost of Rs. 14 crores pertains to our transformation initiative, which included a major overhaul of our leadership team. This involved voluntary separations for leadership salaries globally, legal costs from exits, and consulting fees related to our automotive business in Germany. These costs are non-recurring and will not repeat next year.

2. Question: "What are the key levers which will play out in this specific margin increase?"
   Answer: Our blended EBITDA is at 13.8%, but our core businesses are already at around 19% EBITDA. The plan focuses on enhancing margins through the product-led approach, increasing our share of core businesses like aerospace and defense, with products expected to drive higher margins. We aim to shift towards a revenue mix of 80% products for improved profitability.

3. Question: "Can you again briefly explain me the Phase-1, Phase-2, and Phase-3 in brief?"
   Answer: Phase-1 focuses on electronics, including radar and electronic warfare. Phase-2 is dedicated to missile MRO and manufacturing, primarily aiming to produce smaller missiles and associated components. Phase-3 will cater to aerospace and defense dual-use MRO, including manufacturing parts for various aircraft. We expect Phase-1A to complete by December this year.

4. Question: "Can you break down the visibility for the revenue growth guidance of 35% for aerospace, 60% for Defense, and 75% for ESAI?"
   Answer: For aerospace, we have secure revenues and a strong pipeline, aiming for 90% visibility. Defense revenue is driven by production from existing programs and new procurement, while ESAI will benefit from expanding customer relationships and new product introductions. The visibility for our growth projections in these segments is robust, supported by existing contracts and new opportunities.

5. Question: "Can you give more clarity on emergency procurement and its expected contribution?"
   Answer: Emergency procurement involves rapid acquisitions by the MOD, and we are positioned to win a share due to our successful trials in counter-drone systems. While we can't disclose specific values, we feel confident about receiving orders from this initiative in the upcoming years, contributing positively to our production revenue.

6. Question: "What is the revenue expectation for the ESAI segment moving forward?"
   Answer: We're targeting 60% growth driven primarily by new revenue streams from products we're introducing, including complete system products. The order book reflects a more diverse client base and product offerings. We plan to generate substantial revenue growth through these new additions by leveraging secures contracts alongside existing relationships.

7. Question: "What is the CAPEX plan for Phase-2 and Phase-3?"
   Answer: We are focusing on strategic partnerships to fund later phases of our development, with Phase-1A costing around Rs. 120 crores, mostly covered by internal funds. Phases 2 and 3 will follow relying on negotiations for partnerships. Most future CAPEX will also be largely supported by our cash reserves and future EBITDA growth.

8. Question: "Regarding the contraband system, could you elaborate on our position and future plans?"
   Answer: We are expanding our counter-drone offerings, introducing new systems, including hand-held and vehicle-mounted versions. We've seen interest from international partners, and expect our comprehensive suite of counter-drone solutions, backed by product development, to significantly boost our revenues moving forward. We believe this focus will provide a competitive edge in both domestic and international markets.