Add Astra Microwave Products Ltd For Target Rs.1,600 by Choice Institutional Equities Ltd
Soft quarter; Growth visibility takes a step-up
Astra Microwave Q1 execution was soft, with revenue of INR 1,767 Mn, as customer approvals and resolution of final-stage technical issues delayed execution of certain programs. However, we view the quarter as timing-related rather than a deterioration in underlying demand. The management is confident of recovering the delayed execution in the next few quarters and reiterated FY27 revenue growth of >15% to ~INR 13.5 Bn. The management expects margin to remain broadly at FY26 level with some scope for improvement
The key development, in our view, is the INR 22.1 Bn Uttam radar order from HAL, which effectively doubles Astra’s earlier order book and materially strengthens revenue visibility. We believe the AMCA L1 position, along with Uttam, QRSAM, Su-30, Virupaksha and Angad, provides a strong multi-year growth runway, with management seeing INR 80–90 Bn of potential order inflows over the next 3–4 years. Importantly, we expect the ramp-up of Uttam and QRSAM production to drive a meaningful acceleration in growth from FY29 onwards.
Below expectation; revenue and profitability miss estimate
* Revenue for Q1FY27 was down by 11.5% YoY and 63.8% QoQ to INR 1,767 Mn (vs CIE Est. INR 2,497 Mn)
* EBITDA for Q1FY27 was down by 19.3% YoY and 79.6% QoQ to INR 331 Mn (vs CIE Est. INR 512 Mn). EBITDA margin stood at 18.7%, contracted by 179 bps YoY and 1,455 bps QoQ (vs CIE Est. of 20.5%)
* RPAT for Q1FY27 was down by 24.1% YoY and 88.3% QoQ to INR 123 Mn (vs CIE Est. INR 196 Mn). RPAT margin contracted by 116 bps YoY to 7.0% (vs CIE Est. of 7.9%)
View & Valuation:
We remain constructive on Astra’s multi-year growth visibility, supported by the sharp improvement in order coverage and increasing exposure to large, strategic defence programs. We therefore raise our TP to INR1,600 (earlier INR1,300), valuing the stock at 45x FY28E EPS, reflecting the stronger order visibility and improved earnings outlook. However, following the recent sharp rally in the stock, we believe the current valuation leaves limited room for further upside in the near term. We therefore maintain our REDUCE rating.
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SEBI Registration no.: INZ 000160131
