ICICI Securities Recommends Buying Aditya Infotech with a Target Price of Rs 3100
Aditya Infotech Exits FY26 with Strong Operational Momentum
Aditya Infotech (AIL) has concluded its financial year FY26 on a high note, significantly outperforming earlier expectations in terms of growth, market share, and profitability. The company's market share has expanded sharply to approximately 45.4%, exceeding its initial projections. This growth can be attributed to several factors, including its STQC (Software Technology Parks of India) certification, deep localisation, and increased manufacturing scale.
AIL is further strengthening its competitive edge through strategic initiatives. The company is adopting multi-SoC (System-on-Chip) sourcing, investing in backward integration, and expanding its capacity. Its manufacturing facility in Kadapa has been upgraded to produce 2.5 million units per month, with plans to double this capacity by FY28. However, AIL has largely exhausted its low-cost inventory benefits, and replacement inventory is now being procured at significantly higher costs.
To mitigate the impact of inflation, the company has implemented price hikes of 6-8%. Given the persistent price increases in semiconductors and memory chips, further price hikes are likely in the coming quarters. This inflationary environment is expected to continue affecting the company's operations.
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Modelled Growth Projections
We forecast AIL to report revenue and PAT (Profit After Tax) compound annual growth rates (CAGRs) of 36.2% and 42.9% respectively over the period of FY26-FY28E. Based on this analysis, we maintain our BUY recommendation for AIL, with a DCF-based revised target price of INR 3,100, up from the earlier target price of INR 1,850. This implies a price-to-earnings ratio of 48x for FY28E EPS.
| Recommendation | Target Price | Price-to-Earnings Ratio |
|---|---|---|
| BUY | INR 3,100 | 48x FY28E EPS |
| (earlier INR 1,850) |
Note: The above table provides a comparison of the current and previous target prices, along with the corresponding price-to-earnings ratio.
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Investor Takeaway
Investors should consider buying Aditya Infotech with a target price of Rs 3100.
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