Multibagger small-cap defence stock gains 46% in just 10 sessions. What’s behind the rally?

Multibagger defence stock: Shares of Apollo Micro Systems, a small-cap company with a market capitalisation of ₹4,000 crore, have made significant strides on Dalal Street in recent sessions, closing each passing day with stellar gains. Over the last 10 trading sessions, the shares have risen from ₹93.32 apiece to the current level of ₹135.65, resulting in a fabulous gain of nearly 46%.

The demand for this defence-related stock picked up pace on the back of steady order wins secured in recent months. In December, the company won multiple orders, including one worth ₹21.42 crore from Bharat Electronics.

Additionally, during the month, it received an order worth ₹6.14 crore from the Defence Research and Development Organisation (DRDO). The company concluded the second quarter of the current fiscal year, with fresh orders worth ₹130.96 crore (as per the company’s earnings filing), positioning it well for future growth and stability.

Apollo Micro Systems, based in Hyderabad, is engaged in the business of electronic, electro-mechanical, and engineering design, as well as manufacturing and supply. It designs, develops, and sells high-performance, mission- and time-critical solutions to the defence, space, and homeland security sectors, catering to the Ministry of Defence, government-controlled public sector undertakings, and private clients.

In Q2 FY25, the company achieved robust revenue growth of 84.38%, reaching ₹161 crore compared to ₹87 crore in Q2 FY24. For the half-year, it recorded a revenue increase of 73.91%, totalling ₹252 crore as compared to ₹148 crore in H1 FY24.

Its PAT for Q2 FY25 rose significantly to ₹15.7 crore, up from ₹7 crore in Q2 FY24. Notably, PAT saw a remarkable increase of 194.19%, reaching ₹24 crore in H1 FY25, up from ₹8.2 crore in H1 FY24.

On the back of steady order wins and steady growth in fundamentals, the shares have zoomed 1016% in the last four years. 

Strong momentum likely to continue

India is expected to have a defence market opportunity worth USD 90-100 billion over the next 5-6 years, with the defence industry likely to grow at 13 per cent annually from FY24 to FY30.

Historically, India has heavily relied on defence imports, resulting in increased costs, delays, and technological obsolescence. In the past twenty years, India’s military has modernised its system and included advanced weaponry & sophisticated weapon systems.

Ranked as the fourth-largest defence spender worldwide, India allocated a significant amount of US$ 74.5 billion (Rs. 6,21,540.85 crore) for defence in the 2024-2025 fiscal year, a 13.04% share of the overall Union Budget.

The positive indigenisation list makes it compulsory for the Indian Armed Forces, which include the Army, Navy, & Air Force, to procure listed items from either domestic private sector players or DPSUs.

These are exclusively for the defence industry. The MoD approved five such lists, encompassing 4,666 items, with 98 items valued at over US$ 16.8 billion ( ₹1,40,000 crore). This step not only decreases the import expense from the current account but also augments MSMEs in the defence area.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.