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

Ladies and gentlemen, good day, and welcome to the Astra Microwave Products Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. S.G. Reddy, Managing Director. Thank you, and over to you sir.

Thank you, and good morning, everyone. A warm welcome to all the participants joining the post results earnings call of our company. I'm joined by Mr. M.V. Reddy, Joint Managing Director; and Atim Kabra, Strategy and Development Director; and SGA, our Investor Relations Advisers. The results and the investor presentation for Q1 have already been uploaded on the company website and stock exchanges. I hope you had a chance to review them. In terms of the performance, the quarter performance is on the expected lines. The revenue and profitability were moderate -- modest, I should say, primarily due to temporary delays in customer approvals and closing some of the last stage technical issues, which are expected to normalize in the coming quarters. Overall, India's defense industry is increasingly moving towards indigenous design development and manufacture of advanced subsystems and systems with the total solutions. We believe companies with proven engineering capabilities and experience in these areas are well positioned to benefit from this transition and Astra being one such company. In terms of the opportunities, our stand-alone order book as of quarter end stands at INR 2,156 crores, providing strong visibility for the upcoming period. Around 66% of this order book is from defense and the rest that is 34% is from space, metrology and hydrology sectors. Our consolidated order book stands at INR 2,849 crores, which includes service orders of about INR 244 crores, which are typically more accretive to margins. Staying in the order book, I would like to highlight that in the month of July, we secured a significant order worth about INR 2,205 crores from Hindustan Aeronautics Limited for procurement of critical subsystems for Uttam Radar. As you know, this is a landmark achievement for our company and reflects the long-standing trust placed in our capabilities, technology and execution track record in the defense sector. My colleague, M.V. Reddy, will throw more insight into this order, its execution cycle, et cetera. Looking ahead, we continue to see healthy progress through our key programs and remain confident in our growth trajectory. We are targeting a top line growth of more than 15% year-on-year, resulting into about INR 1,350 crores for this financial year, maintaining a healthy bottom line. With the addition of the significant new orders, we see substantial long-term opportunities ahead and remain focused on leveraging our capabilities, strengthening our execution and delivering sustainable multiyear growth over the long term. I now hand over to Mr. M.V. Reddy and later on Atim Kabra, who will provide more insight into new product developments, the business outlook for the near and long term and the strategies adopted to take the company to the next level of growth cycle. I request M.V. to take it over.

Thank you, S.G. Good morning, everyone. I extend a warm welcome to all investors, analysts and stakeholders joining today's earnings call. We are pleased to present our key business updates. First, as S.G. had mentioned, we have achieved a remarkable and significant milestone at the end of July '26 with the receipt of long-awaited strategic order. As on date, this is the single largest order in the history of Astra, and it is a direct result of a decade of continuous efforts, the landmark of Uttam Radar, which I was talking about, which has effectively doubled our entire order book. So with this major win, our total order book sells to a record-breaking of INR 4,300 crores as on date. I'm also pleased to announce that we have emerged as the lowest bidder in AAAU of Mk1A program. This is a news of a few days back. And probably in a month's time, we will be able to get this particular contract. Alongside this major milestone, the daily operations remain strong. We booked new orders worth of INR 185 crores in Q1, matching our performance guidance exactly. Revenue for the quarter stood at INR 182 crores, driven by robust operational execution and steady demand for our advanced technology. Similarly, our joint venture, Astra Rafael Comsys performed well, both in terms of order book and also the execution is going in within the guided figure. As on date, ARC, that is Astra Rafael Comsys has an order book of INR 836 crores. In the current year, we are planning to book sales of INR 360 crores. We continue to strengthen our positioning across the defense, space and semiconductor segments. During this quarter, we secured one good order from Bharat Electronics about INR 45 crores worth of contract for all MMIC chipsets, proving our strong capabilities in radar core components. We also won significant contracts from key defense and space entities, including BDL and Space Application Center. Our production lines demonstrated timely execution and robust delivery capabilities. We successfully built and delivered wide profile of high-technology systems like [indiscernible] 5G, Ashlesha and Rohini modules, [ MPDR ] modules and also in EW segment, we have delivered the [indiscernible] and other programs. Beyond manufacturing, we are also making great steps in innovation. I'm pleased to inform that in the month of July, we conducted successful technology demonstrations in Jalandhar for 2 unique first-of-the-kind products, the electromagnetic wall and vehicle-mounted anti-drone system, which we were discussing with you for a few months. These are all initial based first-of-kind versions that can be fully customized in months to come to meet specific end user requirements. To support this rapidly growing volume and complexity of work, we have invested steadily in automated process engineering workflows and advanced infrastructure. Our production lines and our team are fully ready in all aspects for seamless large-scale execution. Future is exceptionally bright and armed with INR 4,300 crores order book, as I mentioned, and also a healthy pipeline in coming quarters, scaling technical capabilities, we are confident in our ability to deliver consistent growth and long-term value. Our core focus remains on executing our current order book efficiently and while aggressively pursuing new opportunities in both domestic defense and global export markets. Thank you. And now I wanted to hand over to Mr. Atim Kabra, our Director of Business Development and Strategy. Over to you, Atim.

Yes. Thanks, guys. Hi, everybody, and congratulations S.G. and M.V. For a fantastic order win. I think it cements our role in the overall aero defense ecosystem, and we are very, very grateful to our DPSU partners like HAL and BEL for their trust and faith in our abilities. Besides the fact that Astra has grown under the tutelage of various defense labs and DRDO. So from a bottom of my heart, I think our hearts, a sincere heartfelt thanks to everybody who has been our partner. But with these kind of orders comes a very heavy execution responsibility. And after attending one of our review meetings recently, I think it is not an understatement to define how proud we are of our colleagues who have worked and are working relentlessly in a focused manner to further the cause of defense ecosystem in India. We often talk of orders, strategy, vision, but fail to highlight that we are defined by our human resources. Infrastructure and capital can be sourced by many, but it is our human resources cultivated over decades that define us. And we are very fortunate to have created an ecosystem of colleagues who are now increasingly coming together and collaborating across their domains, sharing their knowledge towards creating systems. I was playing the game of Zynga recently, and I realize that as we move up to greater heights, we are only as strong as our base. While everybody has a critical role to play in the ecosystem, we can build a tall pyramidical structure only if the base is strong enough and wide enough to support the growth. I think that's where the strength of Astra lies. Analogically speaking, the base has to be wide, multi-scaled, sustaining and it has to be recurring. It has to have a steady, defensible margin. On top is what I call the next-gen solutions, wherein will lie the future as it unfolds, where we might have higher margins right now. But as more solutions emerge, what's at the top comes into the middle level and becomes more sustainable margin-wise and more mainstream. But all this is possible only if you have multi-talented, multifaceted teams that are unified by a common vision. As I was thinking about our conversation today, I look back and I realized that in the last 18 months or so, we have inducted many new leaders into our company to supplement the continuous influx at the middle levels, new resources as well as replacements for folks who have moved on. Resource rejuvenation has become the order of the day. Just to elaborate, we've had a new CTO, a new Head of HR and Admin, a new quality head. We strengthened our purchase department with a new head besides new domain heads who have joined our R&D team. And this is not to miss our new Head of Sales and Marketing. And it is these veterans combined who bring into the company new varied experiences and the knowledge that lays the foundation for higher sustainable growth. So we are very confident and comfortable with our order book. So the obviously, obvious focus shifts to execution. And that is what ought to be keeping us awake at night. Just to put things in perspective, in the next 5 years or so, we are expecting to do at least 6 to 7x our last year's annual turnover. Let me pause for a second to have that sink in. Every single year, we will do more than what Astra achieved in the last 33-odd years, and that's no mean order by any means. Thankfully, Astra has worked on the scale before during our offset business times, and we have the experience of driving significant business volumes through laser-focused execution. So we are beefing up our purchase departments and other departments as the risk, which I also want to highlight is stretch supply chains across the border, across every country because everybody is restocking on their ornaments inventory. So we've got to make sure that our supply chains remain intact and stuff comes in within the defined time lines. So what makes us fairly confident about our future order book? I think M.V. alluded to it. Astra is emerging as a significant player in the aircraft -- in the airborne segment. There are various airborne platforms, which are in the works and Astra happens to be a key part of many of these, be it Tejas, where Uttam Radar is Astra's and the recent INR 2,200 crore order. Actually, it's around INR 1,870 crores without GST. So we have to keep that distinction in mind or AEW&CS Mk2, where we are part of the supply chain or the supply chain for Mk1, where we will have, I think, at least 25%, if not more, of the designated supply chain or the Su-30 upgrades, be it on the radar side or be it on the EW side, where we are Tier 1 and Tier 2, respectively, or be it Mk1A, we are already -- we and BEL, right, okay? We are L1, L2 for the 4 units of Mk1A with prototyping, which is going to be done. And that's huge, right? They are across every platform. So what does it mean in terms of numbers? M.V.R. confirms that we will see at least INR 1,600 crores being added this year. And we may improve that number by the way, over the next few quarters. So the way we look at it over the next few years' visibility, when we did our QIP, we made a commitment and Astra more or less delivers on its commitment. Again, that's another thing which we need to highlight. We had said that we are looking at somewhere between INR 8,000 crores to INR 10,000 crores worth of orders coming in over the next 5 years. Of this, and we just confirmed INR 4,300 crores is already in the bag, INR 5,700 crores, if we are looking at the higher end of those order books, okay, or just INR 3,700 crores to be added to make up that commitment. But I am glad to say that we are upping our visibility for the next 4 to 5 years. Our order intake over the next 3 to 4 years, I think should be in the region of at least INR 8,000 crores to INR 9,000 crores to be executed over the next 5 to 6 years. How are we coming at these numbers? INR 4,300 crores is our current order book. This includes, by the way, a little bit from the QRSAM, which we are expecting will happen -- will come to us partly before this year-end. So that will leave at least INR 700 crores, INR 800 crores worth of orders to be added from for QRSAM for the first 3 regiments only, at least for now. We are looking at least INR 500 crores to INR 750 crores orders from our Astra Rafael Comsys, our joint venture, and at least INR 3,000 crores worth of business coming in from Su-30, Virupaksha as well as Angad. This, if you add it up, is INR 8,000 crores to INR 9,000 crores worth of business alone coming in order intakes. So this does not include, by the way, chip sales, which may happen at a scale, which is better than imagined. It does not include anything from counter UAV solutions, electronic wall, which we are building. It doesn't include more products like the area denial systems, which we are making. And it does not include anything from exports to other countries where we are already fielding a couple of inquiries, serious inquiries. So guys, that is the kind of order prospects and business, which we are looking at. I would seriously insist that we look at our ability to deliver our year-end revenue targets to you, INR 1,350 crores for the current year, plus/minus INR 25 crores. Next year, you're looking at about INR 1,600 crores plus/minus INR 50 crores. And it is expected thereafter. that we will be in a different trajectory as production orders will play out for both Uttam and QRSAM, completely different trajectory from '29 onwards. I will wind up with a note on Space and Weather divisions being spun off as a separate listed company, replicating exactly the same shareholding pattern as Astra Microwave. You own 5%, you will get 5% in the new company. But the positive spin over there is that S.G. Reddy has graciously accepted the mandate to groom this new company and establish the same rigorous methodologies and standards as AMPL with almost -- utmost undivided attention. We will be discussing and sharing with you the detailed plans and introducing the new leadership teams in the next few quarters as we go along. But the company shall operate as an independent entity from April 1, 2027, is our expectation. We hope that our shareholders will experience tremendous value growth in the new company also like Astra Microwave Products. We continue to work on unlocking further value for our esteemed shareholders. So with this, I'll open the session for question and answers, please.

[Operator Instructions] The first question is from the line of Amit Ashok Thawani from Clear Blue Capital Advisors.

My first question is the press release says that we are targeting a top line growth of 10% to 15%, but the presentation says that we are -- our target is 15% to 20%. As a matter of fact, the same was the case even in the last quarter. Can you please explain which is the correct number?

Yes, in excess of 15% that is 15% to 20% growth is the right one.

Okay. My second question is what is the target year-end order book, both on stand-alone and consolidated?

See, apart from the Uttam, the order, we have guided to have an order book of about -- booking of order book of worth about INR 1,600 crores for the entire financial year. We stand by that.

The next question is from the line of Amit Dixit from Goldman Sachs.

The first question is around the order inflow. And you mentioned in the great level of details, platform-wise where we are expecting order inflow. Just wanted to understand if we have some play in the EW systems, ASPJ pod for Tejas for Su-30, et cetera. And also if we have some participation in LCH program of HAL?

Yes. Mr. Amit, as far as the EW is concerned for Tejas, yes, we are there as a part of pod jammer. We are having one of the major subsystem, AATRU, which has been already qualified for the Tejas LCA Mk1A platform. As you are aware that particular EW suite is under final phase of qualification. And once it gets qualified, then it will be inducted in the production program. So we will have the production orders also for that. Similarly, for Su-30, as Mr. Atim had mentioned, we are ready to take it for development of EW suite for Su-30 that is called Angad program. And we are one of the consortium partner, which has taken it up, and it is going steadily. And we are expecting this program will be completed within the time lines. So we are there both in Tejas and as well as the Virupaksha platforms in EW.

And LCH sir?

LCH also, we have been delivering some subsystems.

So if we take these 3 opportunities, these are probably not covered in the overall order inflow guidance that you gave. How much will be these opportunities? I mean, if I add all these 3, let us say.

Actually, whatever we have mentioned about next 4 years order book projections in that we did -- we consider like Angad for a few numbers and also a few numbers of the subsystems from LCH and all. But of course, this Tejas Mk1A is something which we have -- recently, we have taken it up. And then I think probably another, let's say, INR 500 crores to INR 600 crores may add up in the overall business in the order book projections.

Great, sir. The second question is essentially on -- you mentioned 2 very interesting products, EM Wall and vehicle-mounted counter drone system. Congratulations for conducting the test on both of these. Just wanted to understand the opportunity size. I mean, a very rough number will do. Also, in the last call, you mentioned that by Diwali, we will be having some 5 IP products with our own IP. Are these 2 part of that particular group?

Actually, let me take that. We had mentioned 3 products at least, okay? EM Wall, if you break it up, right, is itself 2 products, right? You have the counter -- you have the vehicle-mounted complete soft killing and soft kill and hard kill program. EM wall itself is an extension with possible additional layers of interceptors, et cetera, being thrown in. We are very well on track for Diwali, somewhere around Diwali, actually, for at least 2 complete radars of our own and one drone-mounted intelligence, electronic intelligence product. So we should have them.

Sir recent..

These are the solutions. None of -- not even a penny of these is -- none of a penny from these is included in our numbers, which we give you. That's all upside. If it happens, when it happens, if it doesn't happen, it was not there in the numbers. So that's all upside.

My guess is it will be more than pennies. It will be rather in pounds. But anyway, the question is, sir, BEL has indicated a few very interesting orders in their con call, Shatrughat and Samaghat orders for P75I. I'm sure we will have some play over there also. So very broadly speaking, if you could highlight the opportunity size for us in these 3 platforms?

Yes. We do have some subsystems for Shatrughat and Samaghat. We are there in the part of the development program with DRDO. And we do expect production orders from BEL as and when they get orders. Approximately around INR 100 crores to INR 120 crores worth of orders we expect for these 2 programs put together.

Okay. Sir, the last question, if I can squeeze, is in the interest cost, which we saw was down substantially in this quarter. So is it due to the lower working capital commitment we have or something else?

Yes. If you recall, at the end of last financial year, there is a significant amount of positive cash available in the books of accounts. So because of that, the utilization of the overdraft during Q1 is very minimal. So that is one of the significant reasons why the overall interest cost is down compared to the previous period.

The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management.

Sir, first question is regarding the Uttam Radar order. What is the average execution time line? And what is the revenue booking that we can see over the next 2 to 3 years?

Yes. The overall, the execution period is about 5 years, as we have mentioned in the press release. Before FY '32, we must complete the total order. And the first Phase 1, the 12 numbers, which we are supposed to complete by September '27. exactly about 14 months from the date of order. And thereafter, almost every year on the average of 25 numbers plus, we should execute. As we ramp up the production, we can -- we are even thinking of executing the overall total quantity by FY '31 itself.

Got it, sir. Got it. And earlier on the margin front saying that margin is a key metric. So just wanted to understand what could be the margin range going forward because you'll be introducing a couple of new products as well. So on a longer-term basis, if you can provide some guidance on the margin?

Let me take that. Solution product pricing will be a function of the market, okay? I think the feedback from global markets, which we have received -- actually from not markets, one global market is that we are fairly competitive and that's at a very nice margin, okay? So that gives us the confidence that we should be able to maintain more or less our current margin trajectory. But we don't want to commit to you on the margins because there are a lot of factors which will come into play from incremental products, number one. Number two, I think what we are pitching for, what we are looking at is as we go into more and more systems and DcPPs, right, okay? You will actually have a long tail building in of business, okay? You will have AMCs, et cetera, which will kick in, upgrade cycles, which will kick in. So we have to look at the profitability across the product life rather than the initial margin. So there might be a trade-off between the order size and initial margin. But overall, we expect it to be healthier, if not as healthy as our current business at least. That's how we would like to address it.

The next question is from the line of Vikash Singh from ICICI Securities.

Your 5- to 6-year guidance, if I just chalk out the revenue plan, then we would cumulatively would execute somewhere around INR 17,000 crores to INR 18,000 crores. While on the order booking perspective, we have given INR 8,000 crores to INR 9,000 crores kind of the road map visibility. So are we -- so could you give us any other bigger orders chunk which we are expecting to receive in FY '28-'29, which would get executed in '30-'31. If you could give us some idea about the thing?

Vikash, I think there's some confusion there. I don't think we are executing INR 18,000 crores, INR 13,000 crores. The order book, which we are talking about, which we will take in over the next -- which builds up over the next 3 to 4 years, is to be executed over the next 5 to 6 years. So around INR 9,000 crores to INR 10,000 crores -- INR 8,000 crores to INR 10,000 crores if you take a range, right, is what we are looking to execute, right? So the idea is that when we -- let's say, I don't -- hold me to the years, plus/minus 1. Let's say, if you're talking of FY '31, right, and let's say, we are doing a revenue of $350 million, $400 million, okay? At that point in time, we need to make sure that we have enough irons in the fire to do $600 million to $1 billion. That path has to be chalked out by that time. We see -- we are fairly optimistic, honestly, guys, that given the kind of depth of engineering talent we have and the ability now to work with others and create solutions building on our core capabilities, we should be in a position to kind of aim much higher. But in terms of when we broke up the order visibility, we just gave you the current order book, okay? And obviously, we did not add over there, the annual incremental orders which we will get, okay, from our regular business. And we added 3 more programs, QRSAM, ARC and Su-30s to give you to reach the number of INR 8,000 crores to INR 9,000 crores, INR 10,000 crores, okay? Obviously, we are expecting much more. The regular business, which we do, that also should be kicking in. But from an estimate point of view, Astra would rather be conservative, right? As it unfolds, let it be a positive surprise, right, for you. But those are the kind of numbers we are comfortable sharing at this point in time.

No, sir. My calculation is basically coming from that our guidance was INR 1,350 crores this year, then INR 1,600 crores. And we think by FY '32, if you wanted to have even a 5x growth would have been INR 5,500-plus crores. So cumulative execution, it's not about the single year. Cumulative execution would have been to the tune of INR 18,000 crores, out of which INR 4,000 crores plus another INR 5,000 crores, INR 6,000 crores guidance we had. So just to add back in this, what is the average annual repeat orders, which you just said that you would continue to receive from the existing customer? Any numbers you can...

M.V. you want to take that?

I think there's some confusion.

Yes. I'm not still getting the INR 17,000 crores.

Probably what we can do is maybe I think we'll give you more clarity when one-to-one. I think I don't know how you arrived at that particular figure of cumulative INR 17,000 crores. Even if we add all these things, it won't cross more than INR 10,000 crores. So anyway, I think probably we will have -- we'll give you more clarity in one-to-one discussions, yes.

Noted, sir. Sir, second aspect to the exports. You just said that you have pointed out that you are fairly competitive versus global players. Our export segment had not been growing. So any light you want to throw.

Yes. We did not have anything to -- we did not have any solutions to export. It is only now that we have built products, which are -- which can stand in the market along neck to neck with others. So as and when they play out, that's an incremental revenue stream and order stream, which will add to our business. With the time limit -- so what did we have as a complete solution? We did offset business, so-called exports, which was not really exports. It was deemed exports.

And sir, execution of this trial order platform?

Sorry, M.V. what are you saying?

Yes, yes. Actually, let me just clarify both on the export front. As you know, like we started off our export only on the BTP front, fulfilling the offset obligation that over a period of last about a few years. And subsequently, like we -- since offset guidance have been changed and also our business model, we have changed and we came out of the BTP business, we focus more on the BTS. So we have a couple of orders on the BTS front from a couple of players that which we have executed also and given some prototypes for qualification and all, which take time. And apart from that, on the MMICs, that is on the components front, yes, we have been pursuing it aggressively now and we are getting good leads from U.S. and other European countries. Probably it may take at least another couple of years to get the sizable orders for the -- our components, which we have been doing it. So these are some of the things which we have been focusing. And apart from that, as Atim had mentioned, the solutions what we worked out, we put complete solutions, which we wanted to prove it in for the Indian defense first. And there after that, we will start looking at the export. As and when we approach many OEMs and also services in the foreign countries, they have been asking us to provide a comprehensive solution, which includes other sensors apart from the radar, what we have been doing it. So that is the reason we have been focusing on the overall solution so that we can go to the customer with a complete solution. So that may take about a year or 2 to reach the particular stage.

[Operator Instructions] The next question is from the line of Prerit Jain from Motilal Oswal.

So you have painted a very clear picture on the defense side, like what the opportunities are going ahead and what kind of execution you're expecting. Can you shed some more light on the -- basically a satellite business and also a metrology business because metrology, the projects Mausam Mission -- project Mausam is going on? And what kind of Doppler weather radars are we expecting there? And also on the satellite part, we were building our own satellite. So any updates on that part as well?

We will like to do this in a structured manner over the next few quarters, right? -- if you will allow us that luxury. But to -- suffice to say that we are building our own satellite, which should be launched within the first 6 months of the new entity being listed. It is focused not on optics, but on some other use cases. We will be launching. It's a part of a constellation of satellites, which Astra will be launching. There is -- there are multiple product lines, which are being looked at, including being part of global supply chains for LEO satellites. But we would like to shed more light on it in a structured manner as we go along.

On the weather...

On weather also, we'll combine it together. we'll combine it together.

Actually...

Do you want to give an overview. Please go ahead.

Yes. Let me throw some light on Doppler weather radar, which he was asking. So as you know, we are the first Indian company to develop this Doppler weather radar in India to be supplied to IMD and having got it commissioned. And we have supplied more than 45 numbers of Doppler weather radars in various frequency band. Almost we have covered in every frequency band in last 4 years. And we have been supplying. We have orders on hand, which have to be executable for the next 2 financial years. And apart from that, under Mission Mausam, we expect more orders in the current financial year which probably we may go for execution in another 3 to 4 years. So we have a visibility to continue this particular production for the next 4 to 5 years to make sure that we will maintain the leadership. We set up the good infrastructure and as well as the resources. And as Mr. Atim had mentioned, we have wanted to go for a special focus entity as such so that we will have more focus to develop new products in this particular segment. So our focus is on the metrology and as well as in the hydrology segment, and we are coming out with the new products very soon. Clarified yours?