Paras Defence stock zooms 8% to 52-week high after Q4 results

Paras Defence and Space Technologies' stock experienced a significant increase of over 8% on May 27. This surge followed the announcement of a 63.82% jump in the company's consolidated net profit for the fourth quarter of fiscal year 2024 (Q4FY24). The profit reached ₹96 crore, a substantial increase from the ₹58.6 crore reported in the previous quarter.

At 12:04 pm, Paras Defence's stock surged by almost 6% to ₹909.80 per share on NSE. During the trading day, a total of 64 lakh company shares were exchanged on BSE and NSE combined, significantly higher than the one-week and one-month average trading volumes of 26 lakh and 8 lakh equity shares, respectively.

Over the past year, the stock has achieved impressive returns of approximately 84%, significantly outperforming the benchmark Nifty 50, which rose by 24%. The company's revenue from operations grew by 24.17% sequentially to ₹79.69 crore during the period under review. On Monday, May 27th, the stock reached a 52-week high of ₹928 on the National Stock Exchange (NSE). 

Paras Defence's net profit declined on a year-over-year (YoY) basis. The company's net profit for the quarter decreased by 7.34% YoY to ₹9.97 crore. Net sales witnessed a surge of 22.41% YoY, reaching ₹79.69 crore. The FY24's financials painted a more subdued picture for Paras Defence, with net profit declining by 11.12% YoY to ₹32.06 crore, down from ₹36.07 crore in FY23.

Although Paras Defence's year-on-year sales growth fell short of expectations, investor confidence in the company's future remained strong. This optimism was reflected in a significant rise in share prices, despite the 13.97% increase in sales to ₹253.50 crore for FY24.

The operating profit margin for the quarter marked the lowest point in the previous five quarters, suggesting a decrease in the company's operational efficiency. The profit before tax (PBT) excluding other income also reached its lowest level in the last five quarters, indicating a negative trajectory for the near future. The company's non-operating income, constituting 45.25% of PBT, raised concerns about sustainability as it may not represent a viable business model. The recent increase in non-operating income may not be sustainable in the long term. 

Earlier, on 30 January, the company secured an order worth ₹53 crore from the Ministry of Defence to supply optronic periscopes that have to be completed during the current fiscal year.

The unexpected market response was attributed to several factors, including the company's strong sales growth and its potential for long-term expansion in the defense and space technology sectors, as analyzed by experts.

Paras Defence and Space Technologies specializes in providing high-precision products and comprehensive solutions to the defense and space industries. Their operations encompass three key areas: defense and space optics, defense electronics solutions, and heavy engineering. As of March 31, the Indian government holds a majority stake in the company, owning 58.94% of its shares.

Paras Defence and Space Technologies' performance in the quarter ending March 2024 was a mixed bag. Positive developments were balanced by areas needing improvement, requiring careful consideration from investors before making any investment decisions.