Up 375% in 3 yr! Ventura initiates coverage on this SME defence multibagger; check details

Domestic brokerage firm Ventura Securities has initiated coverage on Anlon Technology Solutions, a SME player, listed in January 2023. The brokerage firm is mostly positive on its business model generates revenues from equipment sales, installation, spare parts, and multi-year AMCs, providing recurring cash flows and strong customer retention.

Anlon Technology Solutions operates a solutions-led business model, offering end-to-end services across design, localized manufacturing, assembly, installation, and lifecycle support for mission-critical safety and infrastructure systems in airports, municipalities, and now finding application in petrochemical industries and defense sector. 

Anlon Technology Solutions (ATSL) has been identified by Ventura Securities as a key player poised for substantial growth in the coming years. The company, known for its essential airport infrastructure services such as ARFFs and Runway Sweepers, is strategically diversifying beyond aviation to capture opportunities in various high-growth sectors, said the brokerage.

Operating in a highly regulated, mission-critical environment, Anlon benefits from high entry barriers including stringent compliance norms. These factors limit competition, strengthening its market positioning. With India's expansion plans for over 220 airports by 2035, ATSL is strategically positioned to seize these growth opportunities.

Anlon Technology Solutions had raised only Rs 15 crore via IPO by selling its shares of Rs 100 apeice. The stock has delivered multibagger returns to investors in less than 3 years, rising 375 per cent from the issue price. The market capitalization of the company has zoomed nearly 5 times to Rs 292 crore as of today. 

Ventura noted Anlon's efforts in expanding into municipal and state fire brigade markets, driven by initiatives like the Swachh Bharat Mission. The untapped potential in these markets, alongside opportunities in the petrochemical and defence sectors, aligns with India's push for increased safety regulations and infrastructure upgrades.

"ATSL is projected to deliver strong financial performance, with revenue growing from Rs 50.2 crore in FY25 to Rs145 crore by FY28E at a 42.5% CAGR," Ventura highlighted. They also forecast improvements in profitability, with EBITDA margins expected to rise from 19.2% to 22.8%, and net profit projected to grow from Rs 6.2 crore to Rs 22.3 crore at a 53% CAGR.

Part of Anlon's growth strategy includes a planned INR 10 Cr capital expenditure in FY26E for land acquisition to establish a new manufacturing unit. This expansion underpins its plans for sustained growth supported by a robust order pipeline and recurring maintenance contracts, as noted by Ventura.

The company's competitive advantage is further bolstered by OEM partnerships, which enhance its access to advanced solutions and cost efficiencies through domestic integration. This strategic approach not only optimises its operational capabilities but also strengthens its market position against competitors.

Anlon's diversification into various regulation-driven industries reduces its reliance on the aviation sector alone, ensuring diversified long-term growth visibility. Ventura's optimistic projection reflects confidence in Anlon's strategic initiatives and market expansion efforts.

"We initiate coverage on ATSL with a 'buy' for a price target of Rs 766 (21.5 times FY28E forward P/E) representing an upside of 65.2 per cent over the next 24 months," added Ventura. "Given the significant growth runway ahead of it and high return ratios there exists the upside risk of significant re-rating which we have not taken.