ASTRAMICRO - Astra Microwave Products Ltd. Share Price

Astra Microwave Products Limited reported a robust performance for FY '25 with a revenue growth of 15% year-on-year, reaching INR 1,044 crores. Management highlighted a notable increase in gross profit margins, which improved to 43.9% from 39% in FY '24. The EBITDA margin stood at 25.5%, while PAT reached INR 143 crores, maintaining a margin of 13.7%. The company received new orders worth INR 1,098 crores, primarily from radar and electronic counter-intelligence sectors.

Going forward, management provided optimistic guidance for FY '26, projecting a revenue growth of around 20% and aiming for a bottom line margin of about 18%. The order book target is set at INR 1,400 crores, with expectations of domestic orders exceeding INR 1,000 crores and export contributions at INR 300 crores. Additionally, the consolidated order book totals INR 2,304 crores, with 91% originating from domestic sources.

Key forward-looking points include:

1. A fundraise of INR 174 crores to enhance the balance sheet.
2. A dividend increase to INR 2.20 per share from INR 2.00.
3. Continued focus on domestic orders, especially in defense, with expectations for major projects like LCA Mark 2 and the Su-30 radar systems.
4. Anticipated orders of around $100 million from the joint venture company, Astra Rafael Comsys, expected to generate revenues of INR 350 crores.
5. Strategic initiatives aimed at positioning the company for sustained growth in both domestic and international markets while enhancing product capabilities across various defense applications, including counter-drone technology and radar systems.

Overall, Astra's outlook remains positive with a commitment to innovation and expansion in the defense sector, bolstered by a strong order book and strategic growth initiatives.

Key Questions and Responses from Astra Microwave Products Limited Q4 FY '25 Earnings Call:

Question 1: "What kind of subsystems/modules will you be developing for Project Kusha and what is your share in these platforms?" Answer: We are involved in the Kusha development, providing TR modules and Receiver/Exciters for radar. Our involvement extends to subsystems for QRSAM as well. We're eagerly waiting for BEL to finalize the contract by Q4 FY '25, which will enable us to gain our orders subsequently.

Question 2: "Can you explain the reasons for the increase in working capital, given the rise in inventory and receivables?" Answer: The increase in receivables relates to a significant amount of business executed in Q4"”INR 400 crores"”resulting in higher outstanding amounts. Deferred receivables include INR 24 crores tied to our joint venture, while weather-related products comprise a longer payment cycle over five years.

Question 3: "What are the growth opportunities you see in the space sector?" Answer: We've established our space division and are engaging in building our satellites due to growing reforms. We're also actively participating in various RFPs from IN-SPACe. Our aim is to generate revenue by building and operating our satellite constellations.

Question 4: "Does your order book expectation include potential orders from LCA 1A Uttam radar?" Answer: Yes, we have accounted for some numbers from that program in our FY "˜26 expectations. Although we anticipated the order this quarter, it seems to be deferred by a quarter or two.

Question 5: "Do you manufacture antennas for your systems in-house?" Answer: Yes, antenna design and manufacturing are core strengths of our operations. We established our capabilities back in 1992 and have supplied antennas for a diverse range of applications, ensuring all required antennas for our systems are produced in-house.

Question 6: "What led to the improvement in margins this year, and how sustainable is it?" Answer: The improvement in margins results from a favorable shift in our product mix, primarily due to increased domestic orders. As we focus more on domestic production, the value add is higher, thus enhancing our margins, making these sustainable based on our current trajectory.

Question 7: "What is the expected timeline from requests for emergency procurements to final delivery?" Answer: Emergency procurements typically take about 8 to 18 months from RFP to trials and contract finalization, depending on the program's complexity.

Question 8: "What is your strategy regarding supply chain risk concerning the procurement of gallium for TRMs?" Answer: We have secured a backup supply with a European foundry for gallium needed for TRMs, mitigating potential risks associated with geopolitical tensions.

Question 9: "What is your current competitive landscape in the defense sector?" Answer: We face competition across various segments but lack a competitor that mirrors our comprehensive product range from MMICs to radars. Therefore, while we have niche competitors, no single entity competes across our entire spectrum.

Question 10: "What is the total addressable market (TAM) for SDRs?" Answer: The TAM for SDRs is expected to grow to around INR 5,000-6,000 crores over the next five years, supporting our strategic objectives in that sector.