Target: ₹225
CMP: ₹165.40
We interacted with Nehal Shah, Executive Director & Gopal Tiwari, CFO of Allied Digital Services Ltd (ALDS).
Key takeaways are core focus remains on IT infrastructure & security services, with strong execution track record in government and enterprise project; Government projects around smart cities continue to be a major growth driver, with ALDS looking to expand its services into critical infrastructure projects such as metro/railways surveillance and airport security; US enterprise segment remains ALDS’s largest revenue contributor, though ongoing pricing pressures affects margin despite continued large deals wins; focus on acquisitions in cloud & AI services to strengthen strategic capabilities; and expand cybersecurity offerings across IT and OT layers, giving clients a one-stop solution unlike competitors who separate these services.
Given strong execution across smart cities, expanding solutions contribution, global enterprise deals and a healthy order book, we maintain our PE multiple of 15x despite short-term margin pressure and may consider an upward revision to PE multiple when there is a meaningful improvement in margin. We expect Revenue/EBITDA/PAT to expand at a CAGR of 19.5/46.3/48.2 per cent over FY25-FY28.
We maintain a BUY rating, with an unchanged TP of ₹225.
Key risks: Failure to win smart city project; delays in government-led smart city projects and depending on a few large clients