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Inflow visibility improving

Astra Microwave’s (ASTRA) 1QFY27 results were weaker than our expectations due to some execution slipping into next few quarters. Under-recovery in revenue affected overall margins, leading to a miss in PAT. In July, the company announced a large order inflow of INR22b from HAL for Uttam Radar, doubling the total order book to INR43b. We expect further such inflows from other programs such as QRSAM, Virupaksha and counter-drone over FY27-28, leading to a jump in execution from FY29 onward from these orders. Demerger process of space and meteorology is likely to complete over next few quarters. We revise our estimates by -2%/+2% for FY27/28 to bake in 1QFY27 performance and arrive at a revised TP of INR1,900 (earlier INR1,715) on roll-forward to 42x two-year forward earnings. A slightly higher valuation multiple takes into account large-sized order inflows materializing over time. Retain BUY.

Results below our estimates

Revenue declined 12% YoY to INR1.8b, missing our estimate by 22%. Gross margin remained healthy, expanding 60bp YoY to 47.3%, much better than our estimate of 42.0%. Healthy gross margins were offset by the lack of scale benefits amid lower revenue, resulting in an EBITDA margin of 18.7% vs. our estimate of 20.0%. Absolute EBITDA declined 19% YoY to INR331m vs. our estimate of INR450m. Lower-than-expected revenue, margin, and other income led to PAT coming in lower than our estimates. Adj PAT declined 24% YoY to INR123m vs. our estimate of INR262m. Consolidated order inflows surged 187% YoY to INR4.3b in 1QFY27, taking the closing order book at the end of Jun’26 to INR28.5b.

FY27 execution ramp-up to be visible from 2HFY27 onward

FY27 execution will be spread across radar, EW, space and meteorology programs, with key activities including HISAR, Su-30/Virupaksha, and Atulya. Existing EW orders from BHE are also expected to be executed during the year. Legacy DRDO space orders worth INR1b are planned for execution, while Doppler Weather Radar orders are expected to see deliveries before Mar’27. Management expects the current year’s revenue target of around INR13.5b to be achieved despite some programs slipping from 1Q due to inspection issues, development-stage clearances and supply-chain constraints. Stronger execution is expected in 2HFY27 as materials are available and projects move through final clearances. Growth is expected to accelerate from FY29 onward as Uttam and QRSAM transition into larger-scale production. ASTRA aims to reach ~6-7x FY26 revenue over five years. We expect revenue to clock a CAGR of 25% over FY26-29.

Uttam radar execution to commence from FY28

The recent Uttam Radar order worth INR22b has an execution period of around five years, with the first 12 units targeted for delivery by Sep’27. Thereafter, Astra expects to execute around 25 units annually as production ramps up and is evaluating completion of the entire order by FY31, ahead of the contractual FY32 timeline. The large size of the order implies that revenue contribution will build progressively as production scales up rather than being concentrated in the initial years. Astra’s participation in the airborne ecosystem, including Uttam, is also expected to support additional opportunities across future aircraft programs

Order pipeline remains strong

Management sees ~INR80-90b of identifiable order opportunities over the next three-four years, to be executed over the following five-six years. This includes ~INR7-8b of QRSAM opportunity for the first three regiments, ~INR5-7.5b from Astra Rafael Comsys, and ~INR30b from the Su-30 Virupaksha and Angad programs. Potential opportunities, which have not been included in its INR80-90b order pipeline, can come from MMICs, counter-UAV systems, electromagnetic wall solutions and exports in these estimates

Financial outlook and valuation

We revise our estimates to bake in higher inflows for defense segment, incorporating recently awarded Uttam radar and the upcoming QRSAM order, followed by other platform orders. With execution likely to ramp up from these projects by FY28-29, we expect revenue/EBITDA/PAT to grow at a CAGR of 25%/23%/35% over FY26-29. ASTRA is currently trading at 66.1x/48.3x/34.2x P/E on FY27E/FY28E/FY29E EPS. We arrive at a revised TP of INR1,900 (earlier INR1,715) on roll-forward to 42x two-year forward earnings. A slightly higher valuation multiple takes into account large-sized order inflows materializing over time. Retain BUY.

Key risks and concerns

Key risks include delays in awarding of larger platforms, lower-than-expected spending from the government on the defense sector, slower export momentum, and supply-chain related constraints.

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