ICICI Securities Maintains Buy Rating for Aditya Infotech, Targets Price of Rs 1850

Aditya Infotech (AIL) Research Report

Company Overview

We recently visited Aditya Infotech's manufacturing facility at Kadapa, Andhra Pradesh, and observed several key takeaways. The company boasts the world's third-largest CCTV manufacturing capacity (ex-China) and largest in India, setting it apart from its competitors.

Capacity Expansion and Backward Integration

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Aditya Infotech is focused on expanding its manufacturing capacity, with plans to add two new Surface Mount Technology (SMT) lines with a complete ecosystem in the coming months. Additionally, the company's backward integration into housing and lenses is progressing on track and is expected to be margin-accretive over the medium to long term. This move will reduce supply-chain dependency and improve cost control.

Operational Efficiency and Differentiation

The company has demonstrated significant improvement in its Overall Operational Efficiency (OOE), increasing from 67% to 77%. We expect this trend to continue, further enhancing Aditya Infotech's competitiveness. Moreover, the company's in-house memory programming and PCBA design capability embeds proprietary firmware IP at the point of manufacture, creating a differentiation layer that import-led and unorganized players would find challenging to replicate.

Outlook and Valuation

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We maintain a BUY rating for Aditya Infotech with a DCF-based target price of INR 1,850, implying a P/E of 46x FY28E EPS. Our model predicts revenue and PAT Compound Annual Growth Rates (CAGRs) of 25.9% and 66.9%, respectively, over FY25-28E.