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System-level Participation Supports Margin

We believe ASTM delivered a healthy Q4 and a steady execution in FY26, with the key positive being a sharp turnaround in cash flow [INR 370 Cr vs. INR (99) Cr YoY], reflecting improved working capital and execution discipline. ASTM’s strong order book (INR 26,100 Mn; ~2.2x FY26 revenue) provides a solid visibility, further supported by a well-diversified INR 1,600 Cr+ FY27E pipeline, growth led by radar, EW/missile electronics and space. While topline growth remains measured, Execution is expected to remain stable, with management guiding 15–20% growth (INR 1,300–1,400 Cr), driven by a balanced mix (~60% production / ~40% R&D). We believe ASTM is moving up the value chain towards an IP-led systems player, with increasing participation in full-system programs, which we think can support margin expansion in the medium term. We also view the proposed demerger as a positive for focus and scalability. Additionally, we assume the JV business (INR 625 Cr order book) will recover and scale up to INR 600 Cr+ revenue in FY27E, despite nearterm forex pressure. Overall, we believe near-term growth remains calibrated, but execution intensity and business quality are expected to improve meaningfully over FY27–28E.

Revenue in line; Margin ahead of Estimate

* Revenue for Q4FY26 was up 19.7% YoY and up 87.6% QoQ to INR 4,882 Mn (vs CIE estimate of INR 4,894 Mn)

* EBITDA for Q4FY26 was up 35.8% YoY and up 96.8% QoQ to INR 1,624 Mn (vs CIE estimate of INR 1,448 Mn). EBITDAM stood at 33.3%, expanding by 395 bps YoY and 155 bps QoQ (vs CIE estimate of 29.6%)

* RPAT for Q4FY26 was up 44.2% YoY and up 126.3% QoQ to INR 1,060 Mn (vs CIE estimate of INR 888 Mn). RPAT margin expanded by 369 bps YoY to 21.7% (vs CIE estimate of 18.1%)

View & Valuation: Following the recent sharp rally in the stock, we believe valuation has become stretched in the near term and, hence, downgrade the rating to ‘REDUCE’ (from ADD). However, we increase our target price to INR 1,300 (earlier INR 1,030), while maintaining the target multiple at 40x FY28E EPS, reflecting improved earnings visibility and business quality. Overall, while near-term growth remains moderate, we believe Astra’s improving cash flow profile, strong order visibility and gradual transition towards IP-led, system-level opportunities position the company well for sustained medium-term growth and margin expansion.

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