Astra Microwave Products Limited (532493) Earnings Call Transcript & Summary

Thank you, Steven, and good evening, ladies and gentlemen. And we welcome you to this Q3 conference call. I'm with my colleague, Mr. M.V. Reddy, Joint Managing Director. The results were taken on record by the Board of Directors in yesterday's meeting. We have shared the broad financial results with all of you. For the benefit of all of us again, I'll repeat some of the numbers. For the quarter, we did about INR 149 crores of net sales. These are after adjustment of various things, both in terms of the accounting standard and also the late delivery charges. And for the 9 months period, it is about INR 286 crores. Gross margin is close to about INR 61 crores for this quarter. And overall, for the 9 months is about INR 140 crores. Operating income is about INR 32 crores for these 3 months, and it is INR 49 crores for the 9 months period. Profit before tax is about INR 32 crores for these 3 months, and the first 9 months, it's about close to INR 50 crores. In terms of percentages, it is about 21% for the quarter and about 17% on the net sales. And profit after tax for the 3 months is about INR 23 crores, which is 15% of the net sales. And for the 9 months period, is about INR 36 crores, which is about 12% of the sales. These are the broad numbers in terms of the financial performance for this quarter and 9 months period. In terms of the breakup for the sales, for this quarter, out of INR 156 crores, defense and defense PSUs contributed about 16% of the sales, space program is about 39% and exports about 43%. And for the 9 months period, the corresponding percentages are about 18% for the defense, 45% for the space, and 35% for the exports. Few balance sheet items, which I want to share before we move to the question and answers. The cash and cash balance, along with margin money deposits, which are secured for the various bank guarantees kind of thing is about INR 75 crores. Advances paid to suppliers is about INR 90 crores. And in terms of the major liabilities, advances received from the customer is about INR 195 crores. Debtors is about INR 217 crores, out of which beyond 180 days is about INR 65 crores. The order book position at the end of December, stand-alone, is about INR 1,285 crores and orders booked during the current 3 month periods is about INR 426 crores. At the consolidated state, it is about INR 1,440 crores is the order book at the end of the 9 months period, whereas order booked for this 3 months period is about INR 491 crores. These are the broad financial numbers, which I want to share with you. Now we can move into the question-and-answer session.

[Operator Instructions] The first question is from the line of [ Nilesh Soni ] from IndiaFirst.

Sir, I have couple of bookkeeping questions. Sir, can you please give the split of the order book segment-wise at the end of Q3?

Segment-means in terms of the defense, it is about 18%. I'm sorry -- order book at the end of 9 months period, stand-alone. Overall, it is about INR 1,285 crores.

And the split between? Yes.

Yes, defense and defense base is about INR 192 crores. Space is about INR 282 crores. Hydrology and metrology is about INR 54 crores. Exports is about INR 751 crores, and others is about INR 6 crores.

Okay. And sir, what all orders we are expecting in this Q4 and for, I think -- in this Q4 and for FY '21?

Yes, Mr. M.V. Reddy will take it.

So in Q4, we are likely to get about INR 184 crores. So in that, defense about INR 150 crores. That is domestic, from the domestic sector. And the space, of course, not much is about INR 10 crores, and exports about INR 20 crores and meteorology, all put together, about INR 4 crores.

Okay. This is for Q4, right, sir?

Yes.

And sir, can you guide in same way for FY '21?

FY '21, we are likely to book about -- as on date, we have a visibility of INR 500 crores. And in that, again, in the -- from the domestic defense sector, about INR 270 crores plus INR 50 crores, about INR 320 crores, and then exports about INR 100 crores, meteorology about INR 30 crores.

About INR 30 crores. And nothing space, sir?

Space about INR 50 crores.

Space about INR 50 crores. Okay. And sir, one more last question. What were the LDC for Q3 and 9 months FY '20, if you can share?

Yes, 3 months, it is about INR 3 crores and for the 9 months, it is about INR 5 crores.

The next question is from the line of [ Anik Das ] from Mount Intra Finance.

Hello?

Yes, please.

Yes. Sir, just a few update like space. On the space it seems the order is really small as of now. So in FY '20, we expect a significant slower the sales from space in that case, sir?

You mean FY '21?

Yes, FY '21, sir.

Yes, FY '21. Actually, we have a pending order, close to about INR 90 crores, which will be executed in the next year. But otherwise, in terms of order book, I don't expect a major order, except communications payload systems, which has contributed about INR 50 crores for the next year. And again, maybe FY '22, we will have a repeat production orders like what we got it in the last year. So next year, the order book from this space will not be much -- maybe about INR 50 crores, I'm expecting. But otherwise, we have backlog orders that can be executed for the next year, close to INR 90 crores.

Okay, sir. And sir, in details like any -- apart from this order guidance, which you have given in FY '21, is there any other possibility, sir, where we can get like order on that? Is -- particularly in terms of like the new developments, which are taking place in terms of either Akash or anything, sir?

Yes. Like the Akash, in fact, I mean army, BDL is expecting order from army as well as some space, let's say, from army. So that order, probably we are likely to get by March. That is we are hoping so because if BDL gets by -- at least by September '20, I think we should be hopeful to get this order by March '21.

Okay. So this is not factored in the defense INR 320 crore order, which we are expecting, sir?

No, it is not factored, as we are not sure of.

Next question is from the line of [ Sundar Bahubali ], an individual investor.

Congratulations on a good set of numbers. And you had guided us that we'll reach a profit of about INR 50 crores to INR 55 crores this year, which we'll do. So congratulations on that. Also, I have a question saying, you had said that we are targeting to get the order book of 3x revenue. How soon can we get to that and see tangible results? And do we have the capacity to execute orders of more than INR 500 crores per annum?

Well, as far as the capacity is concerned, we built that capacity to execute more than INR 2,000 crores worth of business. But these orders, like as we -- as I mentioned in the last phone call, we have been participating in many major programs. It all depends on the timing of these contracts to be synched. And then also the budget allocation and all. So at this point of time, difficult to mention that when we're going to get major orders, but yes, we have been participating in major contracts, so that will have a good order book. So at this point of time, whatever I just mentioned, the guidance is from the portfolio, and most of them are repeat in case. And some contracts were, of course, seen from the R&D stage.

But so when can we say that Astra can grow 15% to 20% for the next 5 years? If you have such a fantastic capacity, when can we expect growth to -- visible growth for the next 4 to 5 years of 15% to 20%?

So it all depends upon the timing of the contract, as I mentioned. So I think probably once these contracts are in -- one or 2 contracts we get it, that definitely will have a good growth in the company...

Which contracts, domestic?

Many programs we have participated. So some of the programs, which I do not want to reveal here in this particular concall, but yes, there are some good programs, which we have participated, which is order of the almost about INR 400 crores to INR 500 crores kind of contracts.

Okay. And why are debtors standing more than 180 days? When can we expect this to normalize?

Debtors. So it is a mix of issues like there are certain items, which are supplied, which can be cleared only when the ultimate system is proven. That is number one. Number two is that some of the supplies, which are made to meteorology and hydrology sectors, where we are also responsible for installation and commissioning. And these sites are spread all over India. So there's logistics, which are to be managed. The cumulative effect of these things generally push for the release of the payments. And consistently, we are trying to see that 180 days is kept at a minimum as we continue to do that.

So there's no issue on that front, right?

No, there is no issue. In fact, whenever we find anything is not realizable, immediately we are taking care of that in terms of provisioning and all. Therefore, whatever the debtors we are showing in the books of accounts as of today, they are all clean debtors.

So you had suggested that we will do INR 55 crores this year. Can you give a guidance on the revenue and PAT for the coming year -- for FY '20/'21.

Sir, revenue also we have broadly mentioned in the last concall. Now we can confirm that we should be doing close to about -- in the range of INR 525 crores to INR 550 crores of top line will be there for the next year. And in terms of the profitability, it will be PBT level. It will be in the range of about 10% to 12% of the net sales for the company.

10% to 12% of net sales?

Yes.

Okay. And any visibility on the HPR order?

HPR order is in the TEC stage. I think in maybe another 3 months -- 3 to 4 months, we'll have a more clarity on that.

Okay. And just one small suggestion if you can come out with the investor presentation with the order book and everything, it will be more helpful, sir.

We'll do that. We are available. And we will try to share more and more information as we go forward.

Also, any update on the Zuari stake buildup? Because again, one issue that the investors have is that we don't understand who is actual -- the actual promoter because this is what you had said last time also that whenever things are suitable you'll inform, but anything on that?

As of today, we are managing. I think we are managing well. So let us be happy with the situation. Let us see how it develops.

The next question is from the line of [ Kirti Jain ] from Sundaram Mutual Fund.

Sir, for the current year, we continue to expect around INR 480 crores, INR 500 crores kind of business, sir, or what is the expected revenues for the current year, sir?

It will be around that, around INR 475-plus crores kind of thing.

Okay. Sir, in the last quarter, it will be more of exports or how it will happen, sir?

Yes. Last quarter, it is 50-50 between domestic and exports.

Okay. So margins should be relatively little lower, right sir?

Yes. In the last quarter, yes, because our mix is going to change. The margins are going to be slightly corrected compared to this quarter.

Okay. Okay. Sir, when you guided about the next year growth, despite order backlog being quite strong, why we are guiding a double -- just 10%, 15% kind of growth, sir. Any particular reason, sir?

Because -- most of the domestic projects, what we are likely to get -- or we got it, this is basically for 2 years execution period. So that only 50% or 40% will be executed in next year and balance will be FY '22.

Okay. And also, the time -- sir, margin now? Sir, margin now has been relatively strong. Like we are doing a PBT margin of 20 percentage plus in the current quarter. Why we expect it to come off, sir?

In terms of overall margin I said. Don't look at what has been matured in this quarter. If you look at...

Sir, YTD. YTD, sir.

Sorry?

YTD, have INR 50 crores of PBT on sales of roughly INR 290 crores. So just say of -- at 20% margin, we've done.

No. On INR 290 crores, we have done a PBT of about INR 50 crores. It is around 17%, right?

Yes, sir.

So in the last quarter, it gets corrected because the mix is going to change compared to what is there as of today. As a result, the -- whatever the numbers we said, huh? Those things are likely to happen.

Okay. So next year, like why we expect the margin to come up, sir, like from this current levels?

They're not coming off. I have given a band of 10% to 12%. Even the current year where the end of 12 months period, it will be close to about 10% to 12%, or maybe slightly better. So more or less it is going to be same in terms of the percentage terms.

The next question is from the line of [ Anirudh Jain ], an individual investor.

Just want to understand on our R&D process. So how we decide on some products, we want to do some kind of R&D? And whether we can able to pass the prices which we incur during the process to the consumer?

No exact question, I'm not -- I didn't get your question. So that R&D process, you mean to say that, are you in a position to execute these R&D projects in the time line of the customer? Or what exactly your question is?

Yes, so how -- whether customers tell us about do particular R&D on particular product or on R&D or we on our own go on...

Yes, R&D -- yes, I got your point. So we -- in our company, R&D is of 2 nature. One is that the -- again, it's the order which we received from DRDO or even ISRO and all kind of an organization. There is against this order, we develop -- design, develop and supply as per the customer's requirement. The second R&D is the proactive development, which we develop based on the requirement of the market. And that we will offer to the customers. So that is the second type of R&D. So we have both functions in our company.

Okay. So we can able to pass the R&D cost to the customer? Wherever orders are coming from customer?

Yes. Actually, that is -- basically it's competitive tenders. It is not something like which they are coming to us on a single proprietary case. It is -- most of these orders are in a competitive tendering mechanism. So obviously, we have to compete against these players and we have to win those orders.

Okay. Okay. I got you. Also, sir, on this export point. So can you just guide us on how we pan into ForEx risk and also comparatively the receivable days in exports must be lower. That is what my assumption is. So can you just guide us on that?

Yes. In terms of receivables, what you said is correct. It ranges around 15 to 20 days kind of thing. Therefore, we don't see much of risk in that. Whereas imports, we estimate the requirements in advance, wherever it is possible, and try to cover it up with forward cover.

Okay. Forward cover. And then also on the sector-wise if you can give us some light on which sectors are better in terms of margin for us?

Well, actually, the domestic sector is better than exports, that much I can tell you. So I don't want to go in -- further in details.

Okay. Okay. I got you. And just last question, sir. Is there any plan for promoter to increase the stake? So is it now in single digits?

No, we don't see immediately any increase in the promoters holding happen.

And just some light on this strategy with respect to the subsidiaries and changing?

One subsidiary with Rafael, which is Astra Rafael Comsys. It is a joint venture company started to work for delivery of the order, which is about INR 140 crores. Presently, the OJT, that is on the job training, those things are happening. So it will have full revenues in the next financial year. That is about the JV. The other 2 are our own 100% subsidiaries, Bhavyabhanu Electronics and Aelius. Bhavyabhanu, largely it is for capital consumption. It is also doing well and Aelius, as you know, it is a young company. Okay. It is doing well.

The next question is from the line of [ Harish Shiyad ], an individual investor.

This is regarding the PVC percentage we have achieved in the current 3 months and the 9 months. It was 21% and 17%, for the 3 months and 9 months. On the basis of exports of 43% and 35%. Still, we are saying that the fourth quarter will be 50-50 export and domestic. But then you are at 43%, you have done the 25%. So how it will come down to 10% to 12% by the year-end?

Year-end. No, there will be, year-end, certain provisions, which we have to make. Keeping all these into account, we would like to estimate around that.

Okay. But every year, you do the provisioning at the end of the year only? This is type of provision?

Yes. Largely, yes.

Okay. Okay. And the FY '21, we are targeting to INR 525 crores to 550 crores. What's the broad breakup between the domestic and export?

Domestic would be around INR 300 crores and exports would be around INR 250 crores.