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Revenue came at Rs.1901mn vs (our est. Rs.1738.5mn) registered a growth of +8.8% YoY/+42.2% QoQ. Driven by healthy order execution. Gross Profit increased to Rs.810mn in Q2FY24 (+15.3% YoY) vs Rs.703mn in Q2FY23. Gross margins improved by 240bps to 42.6% due to higher share of domestic business. EBITDA increased by 5.9% YoY to Rs.417mn (CEBPL est. stood Rs.382.5mn), and margin drop by 60bps YoY to 21.91%. decreased in margins was largely due to higher man power cost. APAT jumped to Rs.300mn (+46.2% YoY) vs our estimates Rs.199.9mn, PAT improved due to lower interest cost and higher other income. Order book for the quarter stood at Rs.18.67bn (including JV Rs.23.27bn), which is (2.2x of FY23 revenue. During the quarter company order intake was Rs.405cr.

Defence electronics manufacturing, a multi billion opportunity: In defence electronics the total addressable market size is around 240-250bn till FY28. out of which radar program contributes the most ~42% and followed by Trunkey projects 22% and rest others. The company is participated in various programs, expects potential business from Defence & Aerospace Rs.40bn, Space Rs.5bn, Trunkey projects, Metrology & Systems Rs.15bn, Exportsis Rs.10bn.

Platforms acquisition and Modernisation drives the company’s core business: In recent times lots of defence platforms acquisition and modernisation 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 modernisation front MoD has planning to modernise to 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 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 the growth story of the company. We maintain our “OUTPERFORM” rating on the stock with a TP of Rs.651, valuating it on 35x of FY26E EPS increasing the multiple given the expectation of new order in coming quarters like radar for MK1, Sukhoi-30MKI up-gradation.

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