Apollo Micro Systems Limited — Q3 FY25 earnings call

Call held 8 Feb 2025

Management summary

Apollo Micro Systems delivered a strong Q3 and 9M FY25 performance, driven by robust order execution and strategic capacity expansions. The company reported significant growth in revenue and profitability, with Q3 FY25 being its highest-ever recorded quarterly performance. Strategic partnerships and ongoing R&D investments are set to further strengthen its position in indigenous defense programs and expand its market share.

Highlights

  • Q3 FY25 Revenue reached INR 1,483.9 million, marking a 62.5% YoY increase.

  • Q3 FY25 EBITDA grew by 58.1% YoY to INR 379.6 million, with an EBITDA margin of 25.6%.

  • Q3 FY25 PAT surged 83.1% YoY to INR 182.4 million, achieving a PAT margin of 12.3%.

  • For 9M FY25, revenue from operations increased 69.5% YoY to INR 4,003 million.

  • 9M FY25 PAT saw a significant 133.2% YoY increase, reaching INR 424 million.

  • Current order book stands at INR 500-550 crores, with a target to reach INR 2,500 crores by December 2025.

  • Unit 2 facility is now ready, and Unit 3 (3.5 lakh sq ft) is under construction, expected to be completed by Q2 FY26.

  • Entered into a consortium agreement with Redon Systems for Loitering Munition and an MoU with GRSE for underwater systems.

Key financials

2 periods

Q3 FY25

  • Revenue
    1,483.9 Mn
    YoY +62.5%
  • EBITDA Margin
    25.6%
  • PAT Margin
    12.3%

9M FY25

  • Revenue
    4,003 Mn
    YoY +69.5%
  • EBITDA
    932.2 Mn
    YoY +69.1%
  • PAT
    424 Mn
    YoY +133.2%

What they filed

Q1 FY27: revenue up 87.3%, net profit up 38.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue161 148 162 134 225 +40%252 +70%293 +81%251 +87%
EBITDA33 38 36 41 59 +79%50 +32%68 +89%54 +32%
Net profit16 18 14 18 30 +88%23 +28%37 +164%25 +39%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

medium confidence

Total value

₹5,250 Mn

as of 2024-12-31 range

Execution

Naval defense orders expected to dominate for the next 1-1.5 years.

Composition

Mix 2 contract types
  • Development Orders 75%
  • Production Orders 25%

Share of order book by contract type

Pipeline

deal pipeline tcv

Strong pipeline of orders from existing customers and a direct order expected shortly from the Indian Navy.

The company has a very robust order book, with significant pipeline orders from existing customers and an anticipated direct order from the Indian Navy, indicating strong future growth.

Source: Q&A

Capital allocation

medium confidence
  • Capex Capex disclosed
    • Investment in subsidiary for acquisitions and other purposes ₹66 Cr
    • General corporate purposes and R&D investment ₹135 Cr
    • Construction of Unit 3 (3.5 lakh sq ft facility) in Hardware Park II, Hyderabad
    Krishna Sai Kumar: 'INR66 crores we will be investing in our subsidiary for some acquisitions and other things like. And around INR130-INR140 odd crores for general corporate purpose and some of the -- the balance of the funds we will be investing in R&D.'; Krishna Sai Kumar: 'In case of the Unit 3, which is a 3,50,000 square feet facility, which is constructed in Hardware Park II, Hyderabad, very close to Hyderabad International Airport.'
  • M&A Redon Systems Private Limited Joint venture · Announced

    To collaborate on a manufacturing partnership for Loitering Munition.

    Krishna Sai Kumar: 'we have recently entered into a consortium agreement with Redon Systems Private Limited to collaborate on a manufacturing partnership for Loitering Munition.'
  • M&A Garden Reach Shipbuilders and Engineers Limited (GRSE) Joint venture · Announced

    To establish a business partnership focused on joint research and development, co-production, and export of underwater weapons and vehicles, underwater mines, underwater communication systems, and air defense systems.

    Krishna Sai Kumar: 'we have signed an MoU with Garden Reach Shipbuilders and Engineers Limited. It is a dockyard government of India. This MoU establishes a business partnership focused on joint research and development, co-production, and export of underwater weapons and vehicles, underwater mines, underwater communication systems, and air defense systems.'
  • Liquidity Liquidity disclosed Raised INR 800 crores, with INR 550 crores allocated for working capital to address market needs and ensure timely deliveries.
    Ankush Agrawal: 'INR800 crores that you have raised?'; Krishna Sai Kumar: 'INR550 odd crores will be going for the working capital'

Guidance & targets

Revenue

  • Revenue Growth Revenue · next financial year · High confidence 45-50%
    Krishna Sai Kumar: 'as a guidance point of view, 45% to 50% is something that, we will continue to increase our revenue by 45% to 50%. That's the only guidance that I can give you at this point of time.'

    — Krishna Sai Kumar

Margin

  • EBITDA Margin Margin · ongoing · High confidence 25-30%
    Krishna Sai Kumar: 'anywhere between 25%-30% is a very decent EBITDA margin for our size of balance sheet.'

    — Krishna Sai Kumar

  • EBITDA Margin Margin · next 1-1.5 year · Medium confidence up to 30%
    Krishna Sai Kumar: 'And it will go up to 30% on a balance sheet basis for the next 1-1.5 year.'

    — Krishna Sai Kumar

Order Book

  • Minimum Order Book Order Book · by December 2025 · Medium confidence INR 2,500 crores
    Mayank Kapoor: 'by December 25, we want to take it up to INR2,500 crores minimum.'

    — Mayank Kapoor (referencing management)

Product Mix

  • Production vs Development Order Mix Product Mix · FY26 · High confidence 60%-40%

    From 70-75% development today

    Krishna Sai Kumar: '60%-40% for FY '26 as well, sir?'

    — Krishna Sai Kumar

Exports

  • Export Orders Exports · next financial year · Low confidence some orders
    Krishna Sai Kumar: 'we will be able to back some orders in the next financial year'

    — Krishna Sai Kumar

What to watch in Q4 FY25

Unit 3 Operationalization

Q1 FY26
Current Under construction
Target Active operations commence

Why it matters

Timely completion and operationalization of Unit 3 is crucial for expanding production capacity and meeting future order demands.

Krishna Sai Kumar: 'this operation will commence from Q1 FY '26 actively, although some composite productions already started here.'

Risks & concerns

  • Global Supply Chain Delays

    medium

    Export control approvals and global conflicts (semiconductor war, actual wars) are causing 3-4 month delays in raw material sourcing, impacting lead times.

    Management acknowledged

Q&A highlights

5 direct
Project lifecycle and company's role/services Direct
primarily, we are not a product company as such, although we will be rolling our own platform products in the years to come. Many of the technologies that we are developing are specific to a specific program of DRDO in many of the cases. We undertake development of different LRUs, which we call as the Line Replaceable Units...

Clarifies Apollo Micro Systems' core business model as a developer and supplier of subsystems (LRUs) for DRDO programs, rather than a pure product company.

Asked by Mayank Kapoor

Order book distribution and target areas for growth Partial
No, there is no breakup that we are giving at this point of time. We are restricted to share certain information, so I will not be able to give you a breakup at this point of time. But broadly, I can tell you that majority of the business comes from the missile defense as well as from the naval defense areas.

Provides insight into the key defense segments driving the current order book and future growth, despite not giving a precise numerical breakdown.

Asked by Mayank Kapoor

EBITDA margin scaling with increased production orders Partial
See, on a standalone basis, it depends on the product mix, where the revenue gets booked actually, different products that we supply will have different EBITDA margins. So, some of them can go as big as 40%-45%. Some of them can go lesser than 20% in some cases, where there is a product development, initial stage of the product development. But whatever figures that you are seeing, these are the complete revenue figures, averaging of that each product mix that is contributing to the revenues.

Explains the variability in margins based on product mix (development vs. production) and indicates that higher production orders will eventually lead to better margins, but it's not an immediate jump.

Asked by Ankush Agrawal

Utilization of the recently raised INR 800 crores Direct
INR550 odd crores will be going for the working capital and INR66 crores we will be investing in our subsidiary for some acquisitions and other things like. And around INR130-INR140 odd crores for general corporate purpose and some of the -- the balance of the funds we will be investing in R&D.

Provides a clear breakdown of how the significant fundraise will be deployed across working capital, strategic investments, and R&D, addressing investor concerns about capital allocation.

Asked by Ankush Agrawal

Specific components supplied for missile programs Direct
Except for the BrahMos missile, okay, there we have a very, very insignificant contribution... There is no indigenous missile program of DRDO where we do not have a participation... Right from the explosive area where we are not into explosives, but the detonation of the explosive, like safety arming mechanism, next comes the seeker section where the signal processing portion we are doing and various onboard computer instrumentation systems, navigation systems, telemetry systems, data link systems, actuation systems.

Highlights the company's deep integration and broad expertise across almost all indigenous missile programs, detailing the types of critical electronic and electromechanical systems they supply.

Asked by Rupesh Tatiya

Promoter pledge percentage and plans for reduction Direct
Promoter has pledged his shares because he was sourcing funds to subscribe to the warrants. We have gone for the preferential around a year and a half back. Then once again now we are going for preferential in order to subscribe it he has gone for nothing for any personal reasons. ... In next 1 year, on a phase by phase basis. That's what we are working towards.

Addresses investor concerns about high promoter pledging, explaining its purpose (warrant subscription) and outlining a commitment to reduce it over the next year.

Asked by Garvit Goel

Timeline for underwater mine order and potential delays Partial
I am not sure if I can comment on that. It's a process going on inside the Indian Navy. I have to restrict the timing to tell you the timing of it as of now, but we were expecting it before March itself. But as the weeks envelope, we will get to know more information on that.

Indicates a significant order is in advanced stages with the Indian Navy, but its finalization timeline is uncertain, suggesting potential for slight delays beyond initial expectations.

Asked by Alisha Mahavala

Order completion time and lead cycle Direct
Average, you can take anywhere between 6 months to, 12 months to 14 months. ... Not necessarily, not in all cases. Certain cases where it's a fresh order and we need to source material and all, the timing of sourcing of the metal and all may take some time. But there's some orders, short term where we have some stocks, we have a huge inventory available with us.

Provides clarity on the typical project execution timelines, ranging from 6 to 14 months, and explains how material sourcing and existing inventory can influence these cycles.

Asked by Prateek Bagadia

3 min read 8 chapters

Detailed narrative

Strong Q3 & 9M FY25 Financial Performance

Apollo Micro Systems reported its highest-ever Q3 performance, with revenue growing 62.5% YoY to INR 1,483.9 million. EBITDA increased 58.1% YoY to INR 379.6 million, maintaining a strong margin of 25.6%, while PAT surged 83.1% YoY to INR 182.4 million. For the nine months ended December 31, 2024, revenue from operations grew 69.5% YoY to INR 4,003 million, and PAT increased 133.2% YoY to INR 424 million, demonstrating consistent operational efficiency.

Capacity Expansion & Infrastructure Development

The company has successfully completed its Unit 2 facility, which is now ready for operations. Construction of Unit 3, a 3.5 lakh square feet facility located in Hardware Park II, Hyderabad, is progressing and is expected to be completed by Q2 FY26. This expansion is crucial for enhancing production capabilities and supporting future growth, particularly for composite productions already initiated at Unit 2.

Strategic Partnerships & Collaborations

Apollo Micro Systems has entered into a consortium agreement with Redon Systems Private Limited to collaborate on manufacturing Loitering Munition, aiming for joint bidding on upcoming programs. Additionally, an MoU has been signed with Garden Reach Shipbuilders and Engineers Limited (GRSE) for joint research, development, co-production, and export of underwater weapons, vehicles, and air defense systems, leveraging each other's strengths in the defense ecosystem.

R&D Investment & Technology Development

The company consistently invests 7-8% of its revenues in R&D annually to develop new technologies and augment existing ones. Plans are in place to increase R&D investments further, particularly for new platform development and product qualification. Approximately INR 130-140 crores from the recent fundraise are earmarked for general corporate purposes and R&D.

Order Book & Future Revenue Visibility

The current order book stands at INR 500-550 crores, with management aiming to increase it to a minimum of INR 2,500 crores by December 2025. A strong pipeline of orders from existing customers and an anticipated direct order from the Indian Navy are expected to drive future growth. Naval defense and missile defense areas are projected to be the primary contributors to the increased order book over the next 1-1.5 years.

Fund Utilization & Working Capital Management

The company recently raised INR 800 crores, with a detailed allocation plan. Approximately INR 550 crores will be utilized for working capital, INR 66 crores for subsidiary acquisitions and other strategic initiatives, and INR 130-140 crores for general corporate purposes and R&D. This capital infusion is intended to address the addressable market on time and ensure timely deliveries, especially given long lead times for certain raw materials.

Product Mix & Margin Outlook

Currently, the product mix is skewed towards development orders (70-75%) versus production orders (25-30%). Management expects this mix to shift to 60% production and 40% development by FY26. While EBITDA margins vary significantly based on product mix (some products yielding 40-45% and others less than 20%), the overall EBITDA margin is expected to remain stable at 25-30% and potentially grow to 30% over the next 1-1.5 years as production orders increase.

Contribution to Indigenous Defense Programs

Apollo Micro Systems plays a crucial role in indigenous defense, participating in almost all DRDO missile programs (with minor exceptions like BrahMos). The company supplies a wide range of electronic and electromechanical systems, including seeker sections, navigation, telemetry, and actuation systems. It is also the sole Indian company to have developed all varieties of underwater mines and contributes to indigenous torpedo programs and nuclear submarine programs.

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