This defence-related stock soared 14.5% in weak market, hit record high

From its March 2023 lows, shares of Astra Microwave Products has more-than-doubled by surging 106 per cent on the bourses

Shares of Astra Microwave Products soared 14.5 per cent to Rs 513, also their record high, in a weak market on Wednesday as the Radio Frequency and microwave systems developer executed license-cum-transfer of technology (ToT) agreement between NewSpace India and Indian National Space Promotion and Authorization Centre (IN-SPACe).

"The TOT agreement aims to utilise the know how relating to MiniSAR: X band Airborne SAR. Astra Microwave Products has a very robust portfolio of Radars and this technology will help us enhance this further," the company said in an exchange filing.

At 12:24 PM, the stock was ruling 8 per cent higher at Rs 484 per share as against a 0.67 per cent decline in the benchmark S&P BSE Sensex. Over the past one year, shares of Astra Microwave have soared 45 per cent on the bourses as against a 13 per cent rise in the Sensex index. From its March 2023 lows, the stock has more-than-doubled by surging 106 per cent on the bourses.

Astra Microwave is a defence company, engaged in design, development and manufacture of sub-systems for Radio Frequency and microwave systems, primarily used in defence, space and meteorology. Its product portfolio includes radars, missile electronics, electronic warfare, satellites, MMIC (Monolithic Microwave Integrated Circuit), and communication systems. 

56 per cent of its revenue comes from defence, around 40 per cent from exports (including deemed exports), and balance 4 per cent from space & others. Its order backlog stood at Rs 1,580 crore at the end of the June 2023 quarter.

"With the government's focus on allocating significant capital outlay in defence and  space sectors, reducing defence imports and increasing domestic procurements with indigenising usage of raw materials, components, sub-systems, the future orders inflows opportunity for AMPL is huge in both domestic and export markets. Moreover, overall execution would improve as the risk of supply chain issues recedes with increase in domestic procurement of raw materials and sub-components," ICICI Securities said in a report

AMPL has moved up the value chain from manufacturing sub-systems to development and manufacturing a wide range of high-end, critical microwave and radio frequency application-based equipments led by expertise in microwave and radio frequency applications. 

The brokerage estimates revenue, Ebitda, and profit after tax (PAT) to grow at 15.5 per cent, 26.3 per cent, and 46.7 per cent CAGR, respectively, over FY23-25E. 

Its revenue has grown by 20.4 per cent CAGR during FY20-23 while Ebitda and PAT have grown by 21.4 per cent CAGR and 16.6 per cent CAGR, respectively, over the same period. 

In FY23, the compnay's revenue grew 8.7 per cent YoY to Rs 815.5 crore with Ebitda margin improving sharply to 18.1 per cent from 11.9 prr cent in FY22. FY23 PAT stood at Rs 69.8 crore, up 84.4 per cent YoY.

Meanwhile, the Defence Acquisition Council (DAC) approved nine capital acquisition projects worth Rs 45,000 crore in September. These include the acquisition of 12 more Su-30 fighter jets and their associated equipment worth Rs 11,500 crore, five Next Generation Naval survey vessels worth Rs 3,300 crore, 800 light armoured multi-purpose vehicles, integrated surveillance and targeting systems worth Rs 2,000 crore, and over 200 Drew Astro anti-tank guided missiles worth Rs 700 crore for Rudra attack helicopters.

Of this, Astra Rafael Comsys Private Limited (a joint venture of Astra Microwave) bagged Rs 96.49 crore worth of order from the Indian Air Force for supply of B-Kits, testers and trainer specific A-Kits for SDR sets of MIG-29 upgraded aircraft. In September 2023, it received total orders worth Rs 284 crore (including present order of INR 96.49 crore).

Analysts believe the Indian defence ecosystem is in a complete transformative space by catering to not just domestic requirements, but also pushing for exports. The government has made several moves such as creating two defence corridors, four indigenisation lists for platforms/weapons/systems/equipment and three lists for sub-systems/assemblies, FDI (automatic and government route), portals for innovation & technology and an offset policy. 

"India's defence capex budget estimate for FY24 is Rs 1.63 trillion versus Rs 1.52 trilllion in FY23, with defence capex (actuals) expanding at a CAGR of 13.3 per cent over three years. We cannot stress enough India’s geopolitical landscape (neighbouring countries), implying the need for urgent attention to India’s air, land and marine security. India is not only adding new systems with upgraded technology to its defence forces, but also replacing the older ones along with ramping up of exports at a fast clip. We remain positive on India’s long-term defence story," said a defence sector report by Nuvama Institutional Equities.