Broker’s call: Apollo Micro (Buy)

Our team has started covering Apollo Micro Systems with a favorable Buy rating and a target price of ₹570, calculated based on an average of 55 times the earnings per share for the fiscal years 2028 and 2029. We perceive a significant chance for Apollo to transition from being a mere subsystem and electronics supplier to becoming a fully integrated manufacturer of weapon systems.

The Indian government's enthusiasm to facilitate complete transfer of technology (ToTs) from the Defence Research and Development Organisation (DRDO) to private enterprises could open up vast, platform-level opportunities for Apollo, similar to Solar Industries' transformation into manufacturing complete Pinaka systems. Furthermore, the Department of Atomic Energy (DAE) 2026 aims to raise the indigenisation content requirement for domestic projects, ensuring long-term order visibility, increased budgetary allocation for research and development, and enhanced access to the private sector.

Beyond its role as a major production partner in missile systems across land, air, and water, Apollo is the leading player in underwater homing systems for torpedoes and mines. The company is also developing UAVs, anti-tank mines, and is currently expanding its physical infrastructure to accommodate the execution and testing of larger platforms.

Apollo eagerly anticipates securing ₹12,000 crore worth of orders within the next 24 months from mines, torpedoes, and missiles. The integration of Integrated Defence Laboratory (IDL) and Precision Engineering Laboratory (PEL) should equip Apollo Micro Systems with comprehensive platform capabilities in missiles, aligning with the government's objective of developing missile integration capabilities among private companies.

Apollo's substantial involvement in key programs such as MIGM mines, Pinaka, and QRSAM, EHWT & LWT torpedoes ensures a considerable near-term influx of orders.