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Margin resilience leads to a beat on profitability

Astra Microwave (ASTRA)’s FY26 results beat our estimates, fueled by better-thanexpected margins. FY26 inflows increased 29% YoY to INR16.6b. Export inflows saw strong momentum in 4QFY26, driven by higher value-added RF systems and SDR-related opportunities. Going forward, key growth drivers include Uttam radar, QRSAM, Su-30 upgrades, EW systems, weather radars, and strategic space programs. The company continues to focus on IP-led and proprietary defense solutions for domestic and global markets. We increase our FY27/FY28 earnings by 7%/15% to factor in better margins and higher other income. We believe ASTRA’s execution to ramp up beyond FY27 as these large ticket orders start getting finalized from 2Q-3QFY27. We reiterate our BUY rating with a revised TP of INR1,580 (earlier INR1,150), based on 40x Jun’28E EPS.

Strong margins lead to a beat on profitability

Revenue grew 20% YoY to INR4.8b, beating our estimate by 7%. Gross margin expanded 420bp YoY to 50.3%. This led to EBITDA beating our estimates by 39% at INR1.6b (+36% YoY), while margin expanded 400bp YoY to 33.3% vs our estimate of 25.7%. Due to higher-than-expected margin and other income, and lower-than-expected interest costs, PAT increased 44% YoY to INR1.1b (51% beat). For FY26, revenue/EBIDAT/PAT increased 11%/24%/26% YoY, while EBITDA margin expanded 310bp YoY to 28.7%. Orders inflows increased 29% YoY to INR16.6b in FY26, taking the consolidated order book to INR26.1b. OCF/ FCF stood at INR4b/INR3b in FY26 vs net outflows of INR1b/INR2b in FY25.

Defense pipeline remains strong

The defense segment revenue remained broadly flat YoY in FY26 at INR8.4b, while inflows increased 4% YoY to INR8.6b, taking the total order book to INR14.3b (+5% YoY). The business continues to scale across radar, electronic warfare, missile, and strategic electronics programs, with upcoming growth expected from large indigenous opportunities such as Uttam radar, QRSAM, Su30 upgrades, and BEL-linked platforms such as Himshakti. The company is also expanding into next-generation technologies such as digital array radars, photonics radars, counter-drone systems, and miniaturized radar solutions. Over the medium term, rising indigenization and increasing defense procurement are expected to support sustained growth.

Meteorology segment continues to expand

The segment revenue grew 40% YoY to INR460m, while inflows increased 43% YoY to INR2b, taking the total order book to INR3.5b (+83% YoY). ASTRA has successfully executed multiple X-band, C-band, and S-band weather radar projects and expects larger production opportunities in the next 2-3 years, led by rising weather infrastructure deployment. The segment is also expanding into specialized applications such as bird detection and ground penetrating radars, which could support future growth and improve the scale of the business.

Valuation and view

ASTRA is currently trading at 53.2x/40.5x/29.7x P/E on FY27E/FY28E/FY29E EPS. We reiterate our BUY rating on the stock with a revised TP of INR1,580 (earlier INR1,150) on roll forward to 40x Jun’28E EPS. We ascribe a higher multiple to better visibility of large ticket orders, QRSAM, SU-30 upgrades, Tejas-related orders, etc.

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