Top 5 Cybersecurity Stocks to Add to Your Watchlist

In this digital era, countries have to be prepared for a new kind of war - a cyber war.

India witnessed 1.3 million (m) cyber security incidents in 2022.

Cybercrimes in India have seen a multifold increase in the last five years. This includes some of the high-profile cases, such as the SBI data breach in 2019, Covid-19 test results in 2021, and the most recent AIIMS ransomware attack in 2022.

Although the rising number of cyberattacks is alarming, it opens up several opportunities for the cybersecurity industry. The Indian cybersecurity industry is estimated to reach US$13.6 billion (bn) by 2025.

The primary growth drivers would be government regulations and its attention to data privacy, and rapid technological advancements.

With a high potential for growth, now may be the right time to invest in the cybersecurity industry.

With that in mind, we have shortlisted five cybersecurity stocks using Equitymaster's Indian Stock Screener.

Take a look...

#1 Expleo Solutions

First on the list is Expleo Solutions, a global engineering, technology and consulting service provider.

The company primarily offers software services such as innovation management, transformation consultancy, digital transformation, and quality and testing to banking, financial services, insurance, aerospace, automotive, and healthcare industries.

In light of increasing cyber-attacks, it also ventured into cybersecurity testing. In 2021, it partnered with TEHTRIS, a well-known French enterprise specialising in cybersecurity services.

This partnership enabled Expleo to become India's leading cybersecurity software and services provider.

The company builds and implements cyber security strategies and assets to secure critical infrastructure, complex systems, and assembly lines for its clients in India, Europe, Asia-Pacific, Middle-East and North Africa.

In the last three years, Expleo Solutions' revenue has grown at a compound annual growth rate (CAGR) of 13.7%, driven by high repeat business from existing clients. The net profit also grew at a CAGR of 10.5%.

Over the years, the company has grown through acquisitions and plans on continuing this strategy, given its debt-free status and high cashflows.

Going forward, the growing demand for cybersecurity and the company's efforts to improve its service offerings will drive revenue and profit growth.

To know more about Expleo Solutions, checkout its factsheet and latest quarterly results.

#2 Sasken Technologies

Second on the list is Sasken Technologies, an Indian multinational technology company.

Based in Bangalore, the company offers product engineering and digital transformation services to global customers.

Some of the industries it serves are semiconductors, automotive, consumer electronics, industrials, and telecommunication.

After the pandemic with rapid digitisation, there is a high need to manage enormous amounts of data against cyber-attacks. Hence Sasken Technologies forayed into cybersecurity space.

It offers security management services for consumer electronics, especially android devices.

This addresses over 6,000+ common vulnerabilities and exposures on over 90 consumer electronics and enterprise device customer models.

Sasken also developed a secure cyber mesh that could be deployed to protect business operations on distributed cloud and computing platforms across all stages of the network, right from the data source to the application layer, anywhere, anytime.

Apart from cyber security, the company focuses on implementing future technologies such as 5G, artificial intelligence, machine learning, the internet of things (IoT), and blockchain.

Sasken enjoys a diversified revenue mix, with North America, Europe, India, and Asia Pacific regions contributing 29%, 25%, 31%, and 15%, respectively, as of December 2022. This helps the company mitigate country-specific risks.

In the last three years, the company's revenue has seen a muted growth. However, its profit grew at a CAGR of 17.6%.

As a result, the return on equity (RoE) has improved from 16.6% to 19.7% during the same time.

Owing to its high cashflows, the company has a consistent track record of paying dividends. Its five-year average dividend payout is 48.3%, and its five-year average dividend yield is 3.2%.

Going forward, the company's focus on new-age technologies will drive its revenue in the medium term.

To know more about Sasken Technologies, checkout its factsheet and latest quarterly results.

#3 Quick Heal Technologies

Third on the list is Quick Heal Technologies, a company whose name is synonymous with anti-virus software.

Established in 1995, the company has evolved into a 360-degree cyber security solutions provider in India.

With its flagship products, such as Quick Heal and Seqrite, it has over 30% market share in India and a global presence in over 47 countries.

The company offers a range of services across data encryption, data loss prevention, endpoint security, network security, enterprise mobility management, and server protection.

As the pandemic triggered a number of cyber-attacks, the cyber risks to organisations and business enterprises have also increased.

Quick Heal was quick to act upon this and introduced 'Seqrite Hawkk', a cutting-edge suite of next-gen cyber security solutions for business enterprises.

The company is already well-positioned in the IT market with its anti-virus products. Banking upon its good reputation, it plans to expand its product offerings in cyber security further.

In the last three years, the company's revenue has grown at a CAGR of 4.4% on the back of higher market penetration. The net profit also grew by a CAGR of 3.8%.

An established presence in the cyber security market, highly experienced management, and growth opportunities in the cyber security space will help the company grow its product portfolio and revenue.

To know more about Quick Heal, checkout its factsheet and latest quarterly results.

#4 R S Software

Next on the list is R S Software.

The company is predominantly engaged in offering payment technology solutions to financial institutions, payment network providers, payment processors, and software companies providing products to the payment industry.

It has built unique payment platforms like Unified Payments Interface (UPI) and Bharat Billing Payment Solutions in India.

With increasing digital payments, the need for cyber security has increased. In light of this situation, RS Software designed an enterprise fraud risk management (EFRM) framework across all payment channels.

This framework can detect and prevent fraudulent activity early in the transaction lifecycle.

With the introduction of risk prevention services, the company is poised for growth with an established presence in payment technology solutions.

Apart from this, the company offers a host of services, including payment modernisation, data management and analytics, electronic bill payment, and tokenisation.

The pandemic affected the company's revenue and profit growth in the last three years. However, as digital payments are increasing its revenue grew by 32.8% YoY and the net loss contracted to Rs 7 m in the December 2022 quarter.

Going forward, R S Software plans to focus on cross-selling and grow in existing business areas.

To know more about R S Software, checkout its factsheet and latest quarterly results.

#5 SecureKloud Technologies

Last on the list is SecureKloud Technologies.

Formerly known as 8K Miles Software, the company offers software, managed, and platform services.

It also offers products and frameworks to solve problems around blockchain, cloud, and enterprise security.

The company has tech partnerships with Amazon Web Services, Microsoft Azure, IBM, Google Cloud Platform, and CA Technologies.

It serves reputed clients such as Novartis, GE Healthcare, Red Hat, Google, and Honda, spread across the healthcare, automotive, financial services, and entertainment industries.

As the world is moving towards the cloud, SeccureKloud also ventured into cybersecurity services.

It has integrated cybersecurity into the cloud infrastructure by adding security at each fold. The company also offers industry-wise cloud compliance across complex cloud environments.

So far, the company has worked with over 250 clients across industry verticals and prevented over 10,000 cyber threats.

In the last three years, its revenue reduced to half on account of change in business' strategy to disengaged high-volume low margin profits.

However, in the December 2022 quarter, the company's revenue has grew by 27.5% YoY, and its net loss reduced by half.

To know more about SoundKloud checkout its factsheet and latest quarterly results.

Snapshot of top cybersecurity stocks from Equitymaster's Indian Stock Screener

Here's a quick view of the above companies based on their financials.

Please note that these parameters can be changed according to your selection criteria.

This will help you identify and eliminate stocks not meeting your requirements and emphasise those stocks well inside the metrics.

Why should you invest in cybersecurity stocks?

With rapid digitisation and increasing cybersecurity threats, all firms are investing in strengthening their digital infrastructure.

Businesses worldwide are estimated to spend US$ 260 billion (bn) by 2026 on cyber security.

This, and with the government's 'Make in India' initiative, is encouraging companies to scale up their cybersecurity capabilities, making them strong global contenders in this industry.

With a slew of tailwinds, this could be a potential investment opportunity for long-term investors to diversify their portfolios.

However, before considering any company, do your due diligence with respect to its fundamentals and valuations.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...