Aditya Infotech targets STQC-led market-share gains and margin expansion in CCTV

Investment View: STQC-Led CCTV Market Share Gains

Motilal Oswal Financial Services initiated coverage of Aditya Infotech Ltd (AIL) on August 19, 2026, with a BUY recommendation and a target price of Rs 4,200, compared with the report's CMP of Rs 3,314. The broker describes AIL as a compelling play on rising surveillance penetration, supported by its CP Plus brand, extensive distribution network and strong position in India's video-surveillance market.

AIL has more than 1,000 distributors and over 2,500 system integrators, along with more than 44 per cent share of India's video-surveillance market. It also operates the world's third-largest CCTV manufacturing facility. Motilal Oswal's positive view is based on expected market-share gains, margin expansion, technology progression, improving return ratios and cash-flow potential.

Video-Surveillance Market and STQC Opportunity

Motilal Oswal expects India's video-surveillance market to expand from Rs 10,600 crore in FY25 to Rs 22,700 crore by FY30E. Growth is expected to be supported by increasing security requirements and India's low domestic CCTV penetration.

The implementation of Standardisation Testing and Quality Certification (STQC) norms is a central thesis driver. According to the broker, the norms have curtailed imports and weakened the position of global manufacturers such as Hikvision and Dahua, creating an opportunity for organised domestic producers.

Motilal Oswal forecasts AIL's market share to rise to over 58 per cent by FY28E from approximately 44 per cent. Manufacturing capacity is expected to increase from about 1.9 million pieces per month in FY26 to 2.5 million pieces per month by Q2 FY27, supporting demand capture.

Financial Outlook

Motilal Oswal forecasts revenue, EBITDA and PAT CAGRs of 44 per cent, 58 per cent and 64 per cent, respectively, over FY26-FY28E. The broker expects operating margins and return ratios to improve as AIL benefits from scale, backward integration, a better product mix and lower reliance on Dahua distribution.

Backward Integration, Pricing and Product Mix

The margin expansion thesis is supported by backward integration, improving product mix and lower reliance on Dahua distribution. AIL is increasing in-house lens capacity from 0.3 million pieces per month to 1 million pieces per month by FY28E. It has also formed a joint venture with Orient Cables and is setting up in-house plastic and metal housing-component capacity of 30 million pieces annually in two phases.

The shift towards higher-margin IP cameras is important because IP products cost around 2.7 times analog cameras. AIL raised prices by approximately 6-7 per cent in January 2026 and 3-4 per cent in March 2026. Management anticipates further double-digit price increases amid component shortages, while Motilal Oswal builds in a 13 per cent pricing CAGR over FY26-FY28E.

Technology and Product Development

AIL is investing in technology through an R&D unit in Ahmedabad and a Taiwan subsidiary. Its partnership with L&T Semiconductor covers the manufacture of 9 million CCTV IP cameras over three years using indigenous Vision System-on-Chip technology.

The collaboration with Qualcomm Technologies is intended to accelerate the development of AI-enabled, edge-based video-security solutions.

Valuation

Motilal Oswal values AIL at 50 times FY28E EPS of Rs 84 to derive its target price of Rs 4,200. This compares with the stock's 39.5 times FY28E P/E at the report's CMP of Rs 3,314. The broker believes the premium valuation is justified by expected market-share gains, margin expansion, technology progression, improving return ratios and cash-flow potential.

Key Risks

• Relaxation of STQC norms or faster certification of competing products could reduce AIL's anticipated market-share gains.
• Supply-chain shortages and delays in passing on input-cost increases could pressure margins.
• Higher working-capital requirements could affect cash-flow generation.
• AIL could fail to keep pace with developments in artificial-intelligence technology.
• Capacity-expansion execution risks could limit the company's ability to capture demand.
• Weaker-than-expected demand could affect the revenue and earnings outlook.
• Regulatory changes, data-privacy concerns or cybersecurity breaches could adversely affect operations and reputation.