JM Financial Initiates Coverage On ideaForge With ‘Buy’ Rating, Sees 21% Upside

SUMMARY

Despite the recent decline in its share price and weak earnings reports, JM Financials has set a price target of INR 845, which implies an upside of 21% to its previous close

The brokerage also believes ideaForge will face a slowdown in the near term, primarily due to delays in order booking. However, it sees ideaForge’s order inflows to start picking up from H2 FY25, which will lead to revenue pickup from FY26

Shares of ideaForge jumped 2.1% to INR 711.25 on the BSE during the intraday trading session on Monday

JM Financial has initiated coverage on listed drone manufacturer IdeaForge with a ‘buy’ rating, saying the startup is set to benefit from the government’s “positive” policy push and increase in drone adoption across sectors in the country.

Despite the recent decline in its share price and weak earnings reports, the brokerage has set a price target of INR 845, which implies a 21% upside to its last close of INR 696.55 on the BSE.

Shares of ideaForge jumped 2.1% to INR 711.25 on the BSE during the intraday trading session today (September 16).

JM Financial analysts in their research report pointed out that ideaForge is one of the early entrants into the drone industry in India and the first one to locally develop vertical take-off and landing (VTOL) drones. Besides, its core strength is in new technology and product development and one of the few OEMs globally to have its proprietary autopilot sub-system and ground control software like BlueFire Touch, ground control station software, enabling safe and autonomous surveillance and mapping operations.

“ideaForge’s core strength of technical know-how and new technology and product development capability is supplemented by increasing adoption of drone usage by defence and non-defence space. Strong long-term client relationships and focus on exports augur well for the company to capitalise on upcoming opportunities,” said the analysts.

However, JM Financial believes there will be a slowdown in the near term, primarily due to delays in order booking. It sees ideaForge’s order inflows to start picking up from H2 of the current fiscal (FY25), which will lead to revenue pickup from FY26.

It is worth noting that the startup posted a 94% decline in its profit after tax (PAT) to INR 1.2 Cr in Q1 FY25 from INR 18.9 Cr in the previous year’s quarter. This was also an 87% decline from INR 10.3 Cr posted in PAT in Q4 FY24.

Meanwhile, ideaForge’s operating revenue fell 11.2% year-on-year and 15.7% quarter-on-quarter to INR 86.2 Cr in Q1 FY25.

ideaForge’s CEO Ankit Mehta said during the last quarterly earnings announcement that the company was able to successfully complete the Early Adopter Program (EAP) with customers in the US and received positive feedback, which indicated confirmed orders from that geography in the coming days.

JM Financial has noted the company’s success in the US market will also open up opportunities in other geographies like Africa.

Shares of ideaForge are trading around 16% lower year to date.