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Strong Order Book Position Along With Improvement In Revenue Mix Should Be The Catalyst For Growth.

The company has a strong order book position of Rs.2,333 cr (more than 2x of revenue) as on Dec 2024, which is to be executed in next 12 to 24 months. Strong order booked coupled with healthy execution capabilities, the company has managed to achieve a revenue of Rs.643 cr in 9MFY25 as against Rs.555 cr in 9MFY24. Further, the company has been focusing on domestic order book, which has resulted in a significant improvement in gross margins to 44% in 9MFY25 from 30% in 9MFY22. For the next year, FY26, the company is confident of achieving the orders of Rs.1,300-1,500cr, of which majority of the orders are likely to come from the radar segment. AMPL has been moving up the value chain from manufacturing the components to development of high value radars and Electronic warfare systems. We expect the margins to improve on account of improving product and geographical mix.

Government's Push For Defence Manufacturing Presents Great Opportunities.

The armed forces are witnessing a large-scale modernisation drive to prevent and counter military escalation. This is driving the need for the induction of strong and modern warfare technologies into the military, pushing the demand for defence electronics. In 2021, the government disclosed plans to spend $130 billion over seven years on military modernisation and to boost India’s capabilities in the sub-continent. The plan includes the procurement of a range of weapons, missiles, air defence systems, fighter jets, submarines and warships, drones and surveillance equipment.

Radar systems constitute a key part of this upgradation programme. The armed forces are gradually replacing old-generation radars with new ones developed by DRDO. The size of the radar systems market is expected to grow from Rs.70bn to Rs.130bn over fiscal 2022-27 at a 14% CAGR driven by demand from the military forces for detecting enemy movements and replacement of the old radars. Key players in this space are DRDO and BEL. DRDO designs, develops, and tests new radar products and technologies. It enlists the private sector’s help in the development process for supply of critical sub-systems of the radar system. With the private sector gaining prominence, private players are now directly competing for defence tenders and providing turnkey solutions, based on technology transfer from DRDO or in-house developed products. A limited number of private players in the sector are capable of providing these critical systems and sub-systems, given that high technical expertise and relevant infrastructure required to produce these components.

Apart from the defence, AMPL is exploring opportunities in the space by foraying into satellite integration, testing and launch its own next satellite in the next couple of years. The company will use the existing Bangalore unit and have budgeted to spend ~Rs.40 cr in the next 3 years. It intends to offer complete satellite systems right from, the design capability to satellite bus, to the command, control, preloads, all under one group. We believe space to be equally critical in times of wars as well as in times of peace. Communication payloads, signal controls, high-end optics, hyper spectral cameras, they will all find uses in agriculture, Internet penetration, effective communications, remote sensing as well as warfare. So, nano satellites with custom usage to micro and large satellites will be a big market at scale.

Traditionally, Indian space economy has been dominated by the ISRO - a public sector entity. To improve the participation of private players in Indian space economy, the Government of India (GoI) has taken up various initiatives such as New Space India Limited (NSIL) - a wholly owned GoI Undertaking - inaugurated in 2019 to enable Indian Industries to scale up high-technology manufacturing base for space programme. Also, to create a level playing field for private players and non-305 government entities in Indian space industry, GoI has introduced Indian National Space Promotion and Authorization Centre (IN-SPACe) with aim to provide access to space infrastructure developed over the years to private players through a business-friendlymechanism

OUTLOOK AND VALUATION

We expect the company’s topline to grow at a CAGR of ~16% to Rs. 1,430 cr in FY24-27E. The increase in revenue is backed by healthy order book position (more than 2x of revenue) and continued support from Central Government to increase the production in India and export of defence products. Additionally, the management is increasing its focus on domestic sales which yields higher margin compared to export products. Thus, EBITDA margin is likely to increase to 23% in FY27 as compared to 18% in FY23. Hence, with an expected PAT margin of 15.5% in FY27E, we expect the PAT and EPS to be at Rs. 222 Cr and Rs. 23.4 respectively. We have assigned a P/E multiple of 48X to arrive at a price target of Rs. 1,114 which provides an upside of ~24% within 18 to 24 months from the current market price of Rs.898.

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