Axiscades Mistral Technologies Limited – Hidden Defence Story

AGM held on 18th Sep is summarized below:

• Aerospace and defence are going to be growth drivers for the company (currently contributing c. 57% of topline) – hence rebranding the company name to Axiscades Mistral.
• Earlier guidance 1600 crs / 160 crs PAT – includes inorganic, and assumes no major macro issues. Regarding division wise, broadly
  • Automotive currently facing headwinds
    • Germany has have been impacted due to Russia gas unavailability and competition from Chinese EV manufacturers – Volkswagen has been impacted, shutting down 2 plants in Germany (Osnabruck and Dresden)– never in history of last 100 years
    • Of total ER&D industry c. $1.5 trillion – auto is $400mn – from a 2–5-year perspective, the segment is strong – company has acquired marquee logos
  • Aerospace medium term tailwinds – OEMs have a big backlog – 3000 order backlog – have to supply by 2030 – at moment 775 aircraft a year will go upto 1000 a year – currently facing short term headwinds due to component shortage, and issues with Prat Whitney engines – has to be sorted out – looking good from a medium-term perspective.
    • This space has 5 subsets – OEM, MRO, engine mfg., landing gear mfg. and avionics – currently present largely in OEM. Interested in avionics (already present in defence) and take it to aerospace – Also see MRO as opportunity.
  • Energy – Seeing good growth in oil and gas, plus tailwinds in renewable, Middle East is a focus area
  • PES – Mm wave radar modules – increasingly being used for autonomous driving – take it from PES to automotive
  • Heavy engineering – Legacy business 35 years
    • Have had margin issues – legacy
    • Take capabilities in embedded to these customers to improve margins – cross sell
  • Defence – This is at inflection point where defence spends are expected to continue growing due to geopolitical tensions, transition from traditional warfare to electronic warfare (where Mistral is present), and tailwinds from Make in India
    • Focus on increasing production revenues – Defence production orders were c. 30 crs in Fy 23 / c. 100 crs in FY 24. Looking to execute c. Rs 165-170 crs in FY 25 and c. 225-250 crs in FY 26.
    • Man portable counter drone system – anti drone solutions – this itself is a 3000 crs opportunity including exports – some of their anti-drones have been deployed in borders, Manipur – they have a first mover advantage – while most others have POC in place, company already has 40 systems installed and 60 more getting installed in next couple of months.
      • Company has 100 crs order on counter drone. Looking at 2 orders in this space, larger than existing order – with Army – should happen in next 2-3 months
    • Big interest in drones for military applications –trials are currently on for high payload drone applications (carry upto 25 kgs at high altitude) in Ladakh – confident of passing – see as big opportunity – govt spends 600 crs every year on logistics with long lead times for transport
    • Top defence programs – Tejas, Sukhoi, Ashwini radar, Arudhra radar, QRSAM, Aakash.
    • Next 10 years healthy order book in defence, strong outlook, significant growth from Fy 26 onwards
• LCA
  • First 40 aircraft come with Israeli radar technology
  • From 41st aircraft (as of now total order is of 190 aircraft) – revenues will scale up significantly (timelines depend upon HAL for scale up)
• BEL received order from Cochin shipyard recently for X band radar- Mistral is working with LRDE etc – will supply some subsystems in this (https://www.bseindia.com/xml-data/corpfiling/AttachHis/0539bf8d-1b29-4088-9ede-7d5093316e60.pdf)
• Dornier upgrade – Mistral has supplied display systems, display cards for LCA and HAL wants to use these across helicopters and Dornier upgrade program.
• UAV / Direction finding system – Field trials done, certification pending – 2 sub-systems of Mistral go into this.
• Homeland security – developed emergency vehicles for police, airports, border security – Have delivered to Gujarat govt, Bangalore airport and talking to Bangalore police. Demand in this space can mushroom – from border forces and for civilian protection agencies.
• Orders book Mar’24 end c. $90m – of this engineering business $36m (c. 3-month cycle) and defence c. $55-60m