Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Astra Microwave

Business

Astra Microwave Products Limited (Astra) was incorporated in 1991 by a team of distinguished scientists with experience in RF/Microwave/Digital Electronics and management of projects with high technology content. Astra Microwave Products Limited, engaged in the business of design, development and manufacture of RF and Microwave Components, sub-systems and systems used in defense, space, meteorology and telecommunication

With over 30 years of experience in microwave radio frequency (RF) applications, AMPL has moved up the value chain from sub-systems to high value-added systems

Astra has 3 Automatic assembly lines for PCBA assembly, 5 class 10K cleanrooms, functional test infrastructure that extends from 30MHz up to 40GHz, in-house Environment test facilities including EMI/EMC facility and a first for any Indian Private Industry – Near Field Antenna test and measurement range.

Total workforce (as on March 31st, 2023) – 1,290

Read Pick1, Pick2, Pick3, Pick4, Pick5, Pick6, Pick7, Pick8, Pick9, Pick10, Pick11, Pick12, Pick13, Pick14

Subsidiaries

In fiscal 2014, AMPL floated the 100% owned BEPL as a captive supplier of raw material for overseas orders. In fiscal 2015, AMPL floated the 100% owned ASPL in Singapore, as a supplier of MMIC products for semi-conductors. In fiscal 2019, AMPL set up a joint venture, Astra Rafael Comsys Pvt Ltd, with Rafael Advanced Defence Systems for production of communication systems and sub-systems for defence.

Product Portfolio
The company’s product portfolio spans across Defense, Space, Meteorology, Homeland Security and Systems Vertical

Has a diverse range of microwave products like filters, transmitters, receivers, antennas etc.

Manufacturing facilities

5 facilities in Hyderabad, Continuous investment in World Class Infrastructure for Assembly, Functional and Environment testing. Astra’s facilities are approved by several foreign companies for production

R&D Capabilities
Track record of new product development; now graduated to a SYSTEM integrator in Radar. Dedicated R&D facility at Bengaluru to manufacture radars

Strong in-house capability in the microwave radio frequency (RF) applications domain.
Executes orders through BTS (Build To Specifications) and BTP (Build To Print) route

Customers and Regions of Revenue

• Clientele includes Indian Government Laboratories, Indian Defense
• Public Sector Undertakings, Indian Space Research Organization
  and many foreign OEM’s

Revenue mix

Geographical spread of total revenue stands as follows: India – 60% and Exports – 40%

Applications

Defense

• Radars
• Electronic Warfare
• Missile Electronics
• Telemetry
• Counter-Drones

Space

• Flight Model Application
• Ground based
  Application
• INSAT MSS Terminals

Hydro/Meteorology

• Water Level Measurement (Bubbler/
  Radar Sensor)
• Automatic Weather Stations (AWS)
• Agromet Met Stations (AMS)
• Automatic Rain Gauge (ARG) X
  Band Doppler Weather Radar

Other areas of work

• Antennas
• MMIC
• Contract Manufacturing
• Homeland Security

Awards and Certifications

The company has various certificates such as AS9100D & BS EN ISO 9001:2015, ISO27001:2013, ISO9001:2015, ISO14001:2015, ISO45001:2018, ISO/IEC17025:2017.

Awards

LAToT Ceremony for Coastal Surveillance Radar

Excellence in Innovation, Design Technology, R&D 2021

Counter-Drone System LAToT Handing over Ceremony

Award for Excellence in Aerospace lndigenisation-2021

ELCINA EFY Award for Business Excellence

Fundamental Ratios, Cash, Loans, EBITDA,PAT etc

Debt to equity is under control < 1

ROCE, ROE> 15

Pledge 0%

Short and long term liquidity under control

Q1FY24 have been weaker than expected while Q4FY24 has been good

Opportunity Size

Various tailwinds in the defence sector are creating a wide range of opportunities for Indian firms. Company expected to hit 6000-8000cr cumulative revenue in next 5 years if TAM is correctly addressed

Triggers

Consistent order inflows

Defence spend in India has received a mega boost
Opportunities to develop and supply products which are published as negative import list by GOI
Government of India’s Atma Nirbhar Bharat initiatives

Bidding for the whole system – the complete radar system – for both DRDO and for future MoD requirements

Favorable policy initiatives like Buy (IDDM – Indigenously Designed, Developed and Manufactured),MAKE-II, MAKE-Ill

Expansions and Acquisitions for future growth

QIP has been done at 270 rs for Reducing working capital and corporate purposes

Operating margins can improve further

Focusing on domestic defense order can lead to 20% OPM in coming years.

We aim to achieve 70% Domestic 30% Export Revenue distribution over next 2-3 years. Domestic business on an average carries 40 to 45% of gross margin as against 8 to 10% gross margin in exports.

Order inflows

Orders are worth an aggregate amount Rs. 158 crores for supply of Software Defined Radio (SDR) by Astra Rafael Comsys Private Limited (Joint Venture) Company has received an order from India Meteorological Department (IMD) for Supply of C-Band Dual Polarized SSPA based Doppler Weather Radars for a total value of Rs.32.97 crores. Order is to be executed within a period of 18 months.

Orderbook as of March 2023 is Rs. 1,544 crores. This order book consists of only 24% of export orders rest 76% are domestic orders. The BTP segment is a major contributor of our export orders, which are executable in the next 24 months. The sales mix is anticipated to be skewed towards domestic, high margin business.

Orders are worth an aggregate amount order(s)/contract(s) awarded in brief; of Rs.16.8 crores for supply of Satellite sub-systems and weather data processing system from ISRO

Company has bagged orders worth Rs.158 crores for supply of Satellite sub-systems, Airborne Radar and sub-systems of Radar and EW projects, from DRDO, ISRO and DPSU’s

Order book of Rs. 1,956 Crores as on March 31, 2024, which is executable in the next 12 to 36 months period

Orders booked during the quarter ended 31st March 2024 are worth Rs. 472 Crores

Order book of Rs. 2,299 Crores as on March 31, 2024, which includes Rs. 105 Crores pertaining to service orders

Orders booked during the year ended 31st March 2024 are worth Rs. 1,636 Crores

Targeting JV and exploring fields like

Through JV or strategic alliances, offer improved technology and products.
Target the offset requirement in large defence procurement programmes of Gol.
In discussion with our JV partners to develop EO (electro-optics) product line. Bidding for the whole system – the complete radar system – for both DRDO and for future MoD requirements

Recently, we have also entered into a collaboration agreement with Teledyne e2v HiRel in order to provide semiconductor services to support the aerospace, defence, and reliability electronics markets. This agreement will pave the way for numerous new possibilities for us in the futur

Risks

Lumpy nature of domestic defence/space programs –Orders come in bulk and so are the payments.

Large working capital requirement: Gross current assets (GCAs) improved to 346 days as on March 31, 2022, from 398 days a year before, led by reduction in debtor days. GCAs are expected at around 400 days over the near to medium term with increased execution of domestic orders. The group primarily caters to domestic defence research and space establishments that usually have a long production cycle and longer working capital cycle compared with overseas orders. Though export revenue may be realised faster, it will be offset by stretch in receivables from domestic orders as domestic order execution is expected to increase in the future and thus working capital intensity would be a key monitorable. Furthermore, the group must maintain sizeable inventory to cater to all segments, as products are customised, and thus, requirements vary across segments.

Susceptibility to risks inherent in a tender-based business, and long gestation period for projects: The business depends on success in bidding for tenders invited by defence public sector undertakings and research establishments. Establishments such as the DRDO invite tenders from qualified vendors for their R&D requirement and commence bulk production on successful completion of product development. Long-term revenue visibility is primarily driven by the success of R&D projects at DRDO and the subsequent mass production of products.

Margins Volatility is high. Export vs domestic order execution changes margin profile and needs to be seen closely in coming quarters

Low Promoter holding

Cash flow from operations struggling

Technicals on 26-May-24

Disclosure –Invested. Do your own diligence before buying/selling

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

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