Compelling play on rising surveillance penetration
Aditya Infotech Ltd (AIL) has emerged as the pioneer in the rapidly growing video surveillance market in India. AIL, through its well-regarded brand “CP Plus”, has 1,000+ distributors and 2,500+ system integrators and operates as the third-largest Closed Circuit Television (CCTV) manufacturer in the world. AIL commands more than 44% market share in the video surveillance market.
AIL is well-positioned to benefit from a demand surge in the video surveillance market. The market is valued at INR106b as of FY25 and is expected to grow to 227b by FY30E, driven by the imminent need to enhance security. Further, the implementation of Standardization Testing and Quality Certificate (STQC) norms for CCTVs has unlocked a humongous growth opportunity. Hence, market share is projected to expand from 44% to over 58%+ by FY28, as its revenue is likely to post a 44% CAGR over FY26-28E. This represents a notable outperformance vs. the industry, which is likely to clock a 16-18% CAGR over the same period. This growth will be aided by robust volume growth and improvement in realization due to the imminent price hikes and evolution of the product mix towards higher-value products.
Multiple margin levers: 1) AIL is backward integrating the manufacturing process by increasing lens capacity from 0.3mpcs/month to 1mpcs/month by FY28E, forming a JV for cables, and setting up a plant for in-house plastic and metal components (30m pcs/annum capacity will come up in two phases); 2) shift towards higher-margin Internet Protocol (IP) cameras over analog; and 3) reduced reliance on Dahua (a China-based CCTV company) and increased in-house production (AIL is the exclusive distributor of Dahua in India, the share of which is likely contract meaningfully post STQC). Owing to this, we reckon its operating margin to structurally improve to ~15%/16.1% by FY27E/FY28E from 13.4% in FY26.
We expect AIL to deliver a stellar revenue/EBITDA/PAT growth of 44%/58%/64% over FY26-FY28, owing to strong industry tailwinds and expansion in market share. The company’s share is likely to grow due to its strong brand image and a slowdown in competitive intensity post-STQC norms. AIL’s EBITDA margin is also expected to improve.
We initiate coverage on the stock with a BUY rating and a TP of INR4,200.
