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* Astra microwave in Q1FY25, reported overall decent performance on all the key parameters supported by large order execution, better product mix and healthy performance in JV also. We believe going forward ASTM is expected to deliver strong growth backed by good chunk of economic interest in large programs like Arudra radar, AESA radar, strong revenue visibility of JV, utilizing own IPs for domestic and export market and introduction of LEAP program which is focusing on 360 degree growth for ASTM. Management has guided to achieve a top line of Rs10-11bn in FY25 with significant growth in order book while also maintaining a margin in the range of 16-18%.

* In Q1FY25, AMPL reported decent top-line line growth. Revenue for the quarter grew by 16% YoY to stands Rs 1,552mn (our est Rs 2,301mn) vs Rs 1,337mn in Q1FY24 led by muted demand from the industry. Gross Profit came at Rs 679mn (jumped +80% YoY) vs our ets. Rs 828mn and gross margin stood at 43.8% (expanded +1555bps YoY /+566bps QoQ). Due to low raw material cost. EBIDTA came at Rs 240mn (up 677% YoY / -70% QoQ), vs Rs 31mn in Q1FY24. Margin came at 15.5% (expanded 1316bps YoY) vs CEBPL est. 13.5%, due to lower staff cost and cost control measures. APAT came at Rs 72mn significantly improved YoY basis, vs Rs -67mn last year same period and margins expanded by 968bps YoY, led by decent topline execution and margins growth. The company's current order book stood at Rs 19.5bn as of March 31, 2024 which also includes Rs. 121.67cr pertaining to service orders (~2.3x of FY24 revenue). Order booked during the quarter is Rs 302.18 cr.

*  Advancing Radar Technology and Expanding Market Reach Through Strategic R&D Investments: Advancing growth by developing innovative radar technologies, including the Sband phased array and AATRU for electronic warfare. Recent successes with DRDO and AESAR underline the company strong R&D capabilities. They aim to deepen market presence and explore new segments, leveraging the “Make in India” initiative to broaden product offerings. The company invested significantly in R&D over the past years to enhance digital expertise and modernize technology. The company focus remains on improving operational efficiencies, understanding customer needs, and advancing product quality. By strengthening these capabilities, they aim to maintain leadership and adapt to industry trends.

*  Platforms acquisition and Modernization drives the company’s core business: In recent times lots of defence platforms acquisition and modernization is going across all forces, like (war ships, fighter jets, tanks, underwater platforms, UAVs etc.), and these platforms can deliver in medium to long term. In the modernization front MoD has planned to modernize to be equipped with upgraded electronics like Radars, EW systems, etc. To all the existing platforms like Fighter Jets, Ground stations, Communications, War Ships, etc.

*  View and valuation: We are positive about the growth story of ASTM due to its position as a long standing supplier of various equipment and systems, ongoing innovation in diverse products. We have a positive outlook on ASTM, supported by 1) Huge addressable market (i.e. Rs.240-250bn), 2) Military modernization across all segment (Naval, Army, Air Force), 3) Diversified business model, 4) The company’s healthy order book, would support the growth story of the company. We ascribe “BUY” rating on the stock with a TP of Rs.948, valuating it on 45x of FY26E EPS increasing the multiple given the expectation of new order in coming quarters like radar for MK1, Sukhoi-30MKI up-gradation which will be largely getting executed from FY26 onwards.

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