Basic analysis of Astra microwave products

Basic analysis of Astra microwave products: Sensing the need for a sound, technologically strong private company capable of designing, developing and producing advanced RF and microwave subsystems and systems, the three promoters formed Astra Microwave Products.

In this fundamental analysis of Astra Microwave products, we take a closer look at its operations, finances, future plans, and more.

Company Overview

Astra Microwave Products Limited (ASML) was established as a private limited company in 1991, and its journey has been distinguished by continuous developments and milestones. It became a publicly traded company in 1995. We currently have four production facilities in Hyderabad and two research and development facilities in Hyderabad and Bangalore, India.

Astra is engaged in the design, development, manufacture and sale of high-value RF and microwave supercomponents, subsystems and system discoveries for the defense, space, telecommunications, meteorology and civil communications industries. They have established themselves as an industry leader with over 500 different RF instruments for research and testing.

They have over 26 years of experience in mass production and are supported by state-of-the-art assembly, integration and testing facilities. Collaborations with various Indian Government Laboratories, Defense Public Sector Undertakings, Indian Space Research Organizations and numerous multinational OEMs are among our previous experiences.

business division

The company operates under a single product segment. Classification by business sector includes defense, space, measurement, and export. The division of sales by sector is shown in the table below.

By geographic segment, 91% of sales are contributed by domestic customers, while international customers contribute only 9%.

industry outline

India’s defense industry is a critical pillar of the country’s economy and is gaining pace as national security concerns grow. India has regularly established itself as one of the top importers of defense equipment over the past five years, deliberately positioning itself to gain a technological edge over rivals such as China and Pakistan. These trends demonstrate a proactive strategy to modernize the military and reduce dependence on external defense procurement sources.

The government has played an important role in building a self-sufficient defense environment through various efforts, especially the ‘Make in India’ campaign. These policy support programs aim to increase India’s defense self-sufficiency by increasing domestic manufacturing of defense equipment.

As of 2021, India has the third-largest defense budget in the world, demonstrating its commitment to strengthening the country’s security infrastructure. Going forward, India’s ambitious target of exporting $15 billion worth of equipment by 2026 will position the country as a prominent player in the global defense sector.

The 2022-23 federal budget takes a proactive approach, allocating 25% of the defense R&D budget to private industry and startups. This strategic allocation has the potential to be a catalyst for innovation and pave the way for the development of cutting-edge defense technologies for the country. This not only reflects the government’s commitment to improving technology, but also establishes India as a hub of innovation in the ever-changing defense technology landscape.

Astra Microwave Products – Finance

revenue and profit

Consolidated operating revenue was reported to have increased by 8.7% from Rs.750.46 Crores in FY22 to Rs.815.52 Crores in FY23. The company has one customer who contributed more than 10% to the total revenue amounting to Rs 192.99 Crores compared to three customers amounting to Rs 440.72 Crores in FY222. On a 4-year CAGR, the company has grown at 29.18%.

Profit after tax was reported to have increased by 84% from Rs. 37.87 crores in FY22 to Rs. 69.83 Crores in FY23. The improvement in profitability compared to the last fiscal year is due to a change in sales composition in which the proportion of domestic sales compared to export sales increases. The decline in PAT in FY21 was primarily due to the concentration of sales towards exports with lower gross margins. On a four-year CAGR basis, the company reported 62.66%.

profit

AMPL reported a 6.22% increase in operating profit margin (OPM) from FY22 to FY23. On a five-year average, the company’s OPM is approximately 14.51%.

Net profit margin (NPM) was reported at 9.49%, up 4.01% from FY22 to FY23. The 5-year average NPM is 6.53%.

rate of return

Return on capital employed increased by 6.38% from 10.72% in FY22 to 17.1% in FY23. This increase was primarily due to increased revenue and margins. The five-year average ROCE is 11.36%.

Return on equity was reported to have increased by 4.75% from 6.62% in FY22 to 11.37% in FY23, due to the increase in profits for the year. The 5-year average ROE is 6.69%.

debt analysis

Debt/equity increased from 0.14x in FY22 to 0.29x in FY23. The average D2E is also less than 2. The company has low debt, giving it the opportunity to borrow when needed.

The interest coverage ratio increased from 3.34 times to 4.1 times. The 5-year average ICR is 3.46 times.

Fundamental Analysis of Astra Microwave Products – Key Indicators

Main Content:

• Debt ratio is low.
• The company’s PER is higher than the industry’s PER.
• The promoter retention rate is only 6.54%.

future prospects

• AMPL focuses on research and development and is at the forefront of the wireless communications revolution. Beyond radar subsystems, the company’s goal is to provide complete defense and aerospace solutions that include radars, subsystems and components. When working with startups, AMPL encourages joint efforts to create joint products, emphasizing joint ownership and profit sharing.

• AMPL is committed to expanding its product portfolio and reaching a wider market by developing a variety of solutions under the Astra brand and emphasizing its core technologies in the RF and microwave domain. The company aims to produce unique products by leveraging in-house knowledge and external collaboration.

• AMPL demonstrates its strong commitment to grow and drive improvements in its RF and microwave technology operations in the defense and aerospace sectors through a large capital expenditure of approximately Rs. 4.5 billion.

conclusion

In concluding this article, it is worth mentioning that our government spends close to 3% of GDP on defense every year and focuses on creating great opportunities by increasing self-reliance. They have chosen about 10 projects or products in which they are investing aggressively and expect to see results in the next three to four years.

The biggest cause for concern is that the company’s core revenue source is the defense industry, and the conversion of projects into significant orders largely depends on the government’s choices. These dynamics result in uneven and unbalanced sales patterns that are beyond the company’s control.

Let us know your thoughts in the comments section below.

Written by Ashish Agarwal

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