Overview

Headquartered in Mumbai, DC Infotech and Communications is a major player in India’s secure digitization, known for innovation. The company provides services including networking, data security, cybersecurity, network surveillance, unified communication, digital signage, wireless technology, and firewalls.

With a strong presence across India, especially in Western India, DC Infotech benefits from strategically located warehouses. It partners with over 12 leading businesses and serves more than 75 mid-sized and large enterprise customers nationwide. Recognized as the ‘Fastest Growing Company’ in Asia-Pacific by the Financial Times, DC Infotech is expanding rapidly.

Operating through over 1,600 partners and a team of 50+ professionals, DC Infotech maintains a strong sales presence in cities like Delhi, Kolkata, Bangalore, Chandigarh, Indore, Pune, Rajkot, Guwahati, Lucknow, Bhubaneswar, and Jaipur. Top customers include Tata Communications Limited (TCL) and Hitachi.

In networking, a Delhi partner leads, while significant UC projects include museums and Sansad Bhavan with LED installations. Samsung is the largest customer in Traditional Networking, contributing 15%-20%. In Unified Communication, Netgear holds a 45%-50% share, and Enterprise Security is led by NETSCOUT and Arbor with a 60% share.

DC Infotech delivers customized solutions across Information Security, Digital Signage, Unified Communication & Collaboration, and AV/IT Connectivity & Management, ensuring tailored, cutting-edge solutions.

Promoter Analysis

Mr. Chetankumar Hasmukhlal Timbadia (Age: 55 Years)

• He is the managing director of the company and owns 22.15% of the company

• Graduated with a degree of Bachelor of Engineering (Computer Engineering).

• Experience of around two decades in the Information technology (IT) sector.

• Has developed a network of vendors, channel partners, and customers through his adeptness in building long-term relationships across technologies, verticals, compliances, and geographies

Mr. Devendra Sayani (Age: 55 years)

• He is the whole-time director and owns 19.38% of the company

• Graduated with a degree of Bachelor of Engineering (Electronic Engineering

• Heads marketing and commercial relationship management departments of the Company

FY24 Financial Performance

• Total Revenue at INR 460.6 Cr. v/s INR 360 Cr. in FY23 (+27.9% YoY)

• EBITDA at INR 20 Cr. v/s INR 12.7 Cr. in FY23 (+57% YoY)

• EBITDA Margins at 4.36% v/s 3.54% in FY23 (+82 Bps YoY)

• PAT at INR 11.6 Cr. v/s INR 7 Cr. in FY23 (+65% YoY)

  
  

Industry Outlook

• The global cyber security market size, which was INR 17 Lakh Cr in 2022. It is projected to surpass INR 57 Lakh Cr. around by 2032.

• The global hardware security module market, valued at INR 1,079 Cr.  in 2022. It is expected to reach INR 4,316 Cr. by 2032.

• The India Cybersecurity Market size is estimated to be approximately INR 3,901 Cr in 2024 and is expected to reach approximately INR 9,047 Cr by 2029, growing at a CAGR of 18.33% during the forecast period.

• The hardware security modules market is projected to grow from approximately INR 996 Cr in 2023 to INR 1,909 Cr by 2028, with a Compound Annual Growth Rate (CAGR) of 13.5% during this period

Investment Thesis

1. Efficient Delivery and Promising Sales Funnel

The company’s delivery time is typically within a month. They focus on their sales funnel, which indicates a substantial number of quotes in progress. The current order book is relatively small compared to the funnel, which includes approximately ₹40-50 crores in quoted amounts expected to materialize into orders soon. Therefore, the size of the order book is less relevant, as the company ensures quick delivery once orders are confirmed.

2. Interactive Panel Growth and Outlook

The interactive panel segment is poised for growth. After a six-month investment pause, renewed government funding and increased corporate adoption are expected to drive this segment to contribute ₹30-50 crores this year, enhancing overall revenue and market position.

 3. Cash Flow Outlook and Current Challenges

The company anticipates improved cash flow from promoter warrant conversions and margin enhancements. However, it currently faces a negative cash flow from operations (CFO) of ₹10 crore. This deficit is largely due to increased working capital demands, including higher inventory and receivables, which are straining liquidity despite ongoing efforts to optimize financial management.

4.  Shift Towards Higher-Margin

Given the low margins in traditional networking (5%-7%), despite it being the primary revenue source, the company is shifting its focus towards unified communication (UC), which offers higher margins of 7%-9%. This move is aimed at boosting overall profitability by increasing the share of higher-margin UC in the business.

Valuation and Recommendation

We recommend a "BUY" rating on DC Infotech and Communications, based on the strength of their services and the growing demand for their products.

We value DC Infotech and Communications at 37x FY2027E Earnings Per Share (EPS) of INR 21.57, with a target price of INR 798, a projected upside of 97% over the next 12-18 months.

Disclaimer:

Mool Capital Limited is a SEBI Registered Research Analyst having registration no. INH000012449. This report has been prepared by Mool Capital Pvt. Ltd. and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with Mool Capital. Mool Capital and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.