Apollo Micro Systems: Smallcap defence stock up 17% on DRDO, PSU orders

Shares of aerospace and defence company Apollo Micro Systems Ltd climbed 17 per cent in Friday's trade after the smallcap company informed stock exchanged about its order pipeline. Apollo Micro Systems told BSE that it has been declared the lowest bidder for orders worth Rs 25.12 crore from DRDO and defence PSU’s, in the ordinary course of its business. The stock rose 17.39 per cent to hit a high of Rs 240.60 on BSE.

Apollo Micro Systems in its recent earnings call expected revenue to grow at a CAGR of 45-50 per cent over FY26 and FY27, driven solely by the core business, excluding any contribution from the recent acquisition. This growth is underpinned by a healthy order book and multiple products entering the production phase, the company management suggested. 

"Operating margins are projected to improve in the first half of FY26 due to favorable operating leverage and product mix. However, ongoing capex is expected to moderate margin expansion in the later half of FY26 and into FY27," the Apollo Micro Systems management said. 

It added that there will definitely be a margin expansion once the systems get into core production phase. "And that is something that you will start partially seeing starting from this financial year and subsequently the next financial year and FY '28, I think it will be much better," it said.

Following Apollo Micro Systems' Q1 results, Choice Institutional Equities retained its 'Buy' rating on the stock, backed by its strategic shift from a component supplier to a full-fledged system integrator. 

"The company’s expanding role across key defence programs, robust order pipeline and visible margin trajectory reinforce our conviction in its long-term growth story. Based on our average FY27/28E EPS estimates, we arrive at a target price of Rs 240, valuing the stock at 45x forward earnings," it said.