Dynacons Systems & Solutions Ltd - A growing IT company

Stock Opportunities Untested - but worth a good look
86

Yes, same here this stock along with one more is the best performer in my portfolio, considering the time it has given these returns.
Company said 30th May results will come.
I will be on the lookout to see if margins have expanded as management guided double digit numbers for FY26 (NDTV Profits Youtube video). Also if the revenue from cyber security and cloud infrastructure segment has contribuited more to the overall topline.
Strong order book - 3000 Crores including RBI 750Cr order. So that gives good revenue guidance over 5-6 years as well.
I have high expectations from this stock i think its a strong pick in the coming AI transition play.

note: invested at 1000 levels, aprox 9% of portfolio
not investment advice.

87

From DSSL key watchout for tomorrow:

  • Revenue ≥ ₹1,600 Cr (FY25 was ₹1,267 Cr; would represent +26% growth)

  • OPM ≥ 9% (margin holding through scaling)

  • DSO ≤ 130 days (Q3 was 126d)

  • RBI order ramp visible in commentary

2 Likes
88
# Threshold Actual Δ
1 FY26 Revenue ≥ ₹1,600 Cr ₹1,424.28 Cr −11%, ₹176 Cr short
2 OPM (EBITDA/Rev) ≥ 9% 10.65% FY (Q4 9.55%) Good but Q4 trajectory weak
3 DSO ≤ 130 days 154 days Not Good
4 RBI ₹751 Cr ramp Visible in commentary Only ₹249.15 Cr RBI EAP disclosed 33% of expected
Metric (Consolidated, ₹ Cr) FY25 FY26 Δ
Revenue 1,267.22 1,424.28 +12%
Trade Receivables 436.58 602.19 +38%
DSO 126 days 154 days +28 days
Net Profit 72.49 84.81 +17%
Operating Cash Flow 66.04 46.13 −30%
OCF / PAT conversion 91% 54% −37%

Seems like the some change in the business model, P&L looks fine but DSO and OCF is working….

Is it a good results, honest answer I dont know. need to revalidate my thesis from an Asset Light to Asset Heavy Business Model..

Press release is also screwed up.

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Disc: 15% allocation of my portfolio.

5 Likes
89

Small caps can always surprise us on both sides once results are out. So we need to manage risk appropriately. Even if I feel.very bullish, usually I keep my allocation down to 4-5% of my PF as we don’t know where are the mines which will surprise you. Also dealings with Public sector enterprises can delay payments or unexpected turns in projects as proper project plans are weak in Govt run entities apart from possibility of corruption like delaying clearance of payment for want of money etc. We may not know all such inside stories and we can’t know too..

Stock may correct to 50 DMA or even further down as such wild swings were there in DSSL earlier as well.

Disc: I brought down my allocation to 1.9-2% of my PF in recent run up and used that money to add more of HBL while watching for the results. Will go through the results in depth after concalls are done. Sitting at 80% profit and watching the price action

2 Likes
90

Appreciate the candor on allocation, though I run my book differently.

Here’s the math for you: 80% gain on a 2% position adds ~1.6% to overall portfolio return. To make stock-picking meaningful over an index, that style requires 20-40 ideas, each generating 15%+ IRR, just to outpace Indian inflation + rupee devaluation (~4% 10-year avg).

Honest reflection: can one really source and track 20-40 high conviction ideas at any given time? If yes, wow, amazing, good for you. If not, you are in a constant loop of underperformance. Good luck.

Setting allocation philosophy aside, the facts of the company are what matter. The DSSL thesis rests on structural tailwinds as the sovereign data centre cycle takes shape in India. RBI and PSU orders are just a vote of confidence in DSSL’s execution the real story is the 25,000+ cr of data centre capex projected over the next few years, which means demand for DSSL’s expertise only grows from here.

The key question I am actually trying to answer: does DSSL have the right balance sheet shape to capture this opportunity?

Asymmetry doesn’t come from holding diversified large-caps names. It comes from finding a pure-play inside a huge tailwind sector and sizing it big enough to actually move your return profile.

https://www.reuters.com/business/energy/hitachi-energy-india-eyes-bigger-slice-data-centre-boom-with-grid-to-rack-push-2026-05-29/

Disc: Not arguing against risk management on PSU exposure or governance risk, those are real. Just pushing back on whether trimming winners to 2% solves the right problem.

91

We as a group need to address few foundational questions on this company, can you guys help @james_kerala @vtrrr you guys have done your research on this company, can you help build up this thesis ?

I believe this is one of the more compelling stories in Indian market, while commodity cable names are flotting around +40 earnings multiple, overall market is under estimating pure-play operators like DSSL.

Question

  1. Tender mechanics (L1 bidding, empanelment cycles, repeat-customer %)
  2. Execution depth (engineering bench vs Tier-1, CMMI 5 verification, incident track record)
  3. Competitive comparison vs TCS / Wipro Infotech / HCL Infra / mid-caps
  4. SI-specific TAM sizing
  5. Named 12-48 month pipeline (SBI, LIC, AIIMS, DPDP buildouts)
2 Likes
92

FY26 Vs FY25:
Revenue +12.4%, Operating Profit +41.4%, OPM +25%, EPS +16.9%, PAT Margin +4%.
Anually the company posted good results. Increase in EBIDTA, PAT and PAT margin are important. It’s whats driving the stock to be a growth pick, EPS growth has been steady so this share is providing value to its shareholders. OPM has increased to 10%, considering FY18 - FY25 Average is 6%, its good. Management had guided double digits OPM margins and they delivered, though i expected it to be more than this. What i am really liking about this years results is that despite 100% increase in finance costs and 780% increase in deprecition, PAT margin has increased to almost 6% ( 4 Year average: 4,4%). This is because Dynacons is now shifting from simply selling IT hardware to a reccurring revenue models like Device-as-a-Service (DaaS) and Managed Services.

Metric FY25 FY26 Change Change %
CFO 64.00 46.13 -17.87 -27.91%
CFI -26.00 -43.55 -17.55 67.48%
CFF -6 -24.40 -18.40 306.60%
Net Cash Flow 31.83 -21.81 -53.63 -168.52%
FCF 58.64 -18.87 -77.51 -132.18%
Capex -5.3551 -65.0043 -59.6492 1113.88%
Inventories 58.2374 16.1631 -42.0743 -72.25%
Trade Receivables 436.579 602.19 165.611 37.93%

Capex has increased massively from 5.3 crores to 65 crores, probably for the revenue model shift to recurring revenue. What i am not liking here is that CFO has decreased lowering the CFO/OP.
Q3 Vs Q4
This is where i am dissapointed. Topline shows steady growth, 21% YoY and 18% QoQ, so topline growth is steady. There is a decrease in Operating Profit and OPM -10% and -25% respectively. YoY Q4 Bottom line has been flat, with very little change in PAT, PAT Margin is down -13%. QoQ bottom line has done worse -18% in PAT and -31% in PAT margin. EBITDA also flat YoY and -18.8% QoQ.

Particulars Q4FY25 Q3FY26 Q4FY26 YoY Change YoY % Change QoQ Change QoQ % Change
Profit before tax 24.74 31.39 25.49 0.75 3.03% -5.9 -18.80%
Net Profit 18.17 23.45 19.13 0.96 5.28% -4.32 -18.42%
PAT Margin 5.50% 6.90% 4.76% -0.74% -13.44% -2.15% -31.10%
EPS in Rs 14.28 18.43 15.03 0.75 5.25% -3.4 -18.45%

Why this company is still attrractive to me:
Management has aggressively positioned the company as an AI and sustainability play. Dynacons is upgrading data centres to handle intense computing requuriments.
AIOps embed Ai directly into the data centre, this involves predictive analysis for automated capacity, planning and anomaly identification. Green data centers and sustainable data centers are built by prioritizing space optimization and advanced cooling efficiency.
Their recurring revenue model is in the DaaS and Core banking as service segment, which the company uses to monetize its AI and sustainability initiatives over the long term.
Dynacons makes initial revenue by designing and building AI-ready, green data centers, because clients cannot easily manage these advanced computing environments internally, they sign long-term recurring contracts with Dynacons to continuously manage, monitor, and optimize the data centers.
AIOps Supercharges the Profit Margins of Recurring Contracts The integration of AIOps directly into data centers fundamentally changes the economics of Dynacons’ managed services. By deploying AI-driven predictive analytics, automated capacity planning, and anomaly identification within their own Network Operations Centers (NOC), Dynacons drastically lowers its cost-to-serve. This automation allows them to service massive, multi-year annuity contracts with fewer human resources, driving a significant expansion in their EBITDA margins as seen in FY results.

In the Q4 results they have mentioned about the RBI project secured by them in dec 2025, however no commentary on the recent 750 crore order. Lets see if management says anything in the Annual report.
DSO days streching to 28 days is a classic working capital trap when you work with government clients. I am seeing it as a cost to entry.
Talking about their balance sheet, while their trade receivables are increasing so are their payables. DSSL’s Trade Payables surged to ₹444.36 Crore . This means they are using significant supplier credit to naturally offset the massive ₹602 Crore in receivables, preventing a total liquidity drain.
Core Leverage is Still Highly Conservative Despite the massive order book, the company’s core debt profile is extremely lean. Their Debt-to-Equity ratio sits at roughly 0.25x , meaning they are highly under-leveraged and have massive untapped capacity on their balance sheet to fund further operations.
@Vijairahul This is my opinion about the DSO drag, balance sheet strength amd RBI order.
there is a concall by the company today lets see if they shed some light on the topics you raised.

note: Invested @ 1000 Levels. Added more today. 12% of portfolio, biased. Not investment advice.

3 Likes