Astra Microwave Products (AMP) has received an order worth INR 3.86bn from BEL to supply sub-systems for Medium Power Radar (MPR). The contract would be executed over the next three years. This order is significant, as this is one of the biggest orders the company has ever received. Besides, the execution is short-term, implying INR 1.3-1.4bn of revenue booking each year over the next three years, equivalent to 15-16% of FY24E revenue. Furthermore, margins are expected to be healthy, as this is a domestic defence order.
1) We expect revenue booking of INR 1.3-1.4bn p.a. from this order, as the duration is for three years. 2) This order has come in a little earlier than we estimated. We accounted for this order in FY25, in our inflow estimate of INR 12bn.
3) Margin in this order is expected to be better, as it is for sub-systems supply in domestic defence. This order is a trickle-down flow from BEL’s receipt of INR 28.9bn of MPR radar order in Mar’23. We expect more orders to flow into AMP, as BEL has received orders worth INR 320bn in FY24, of which 60-65% might see active participation of AMP.
We see AMP winning INR 3.86bn order from BEL, as a significant step in its growth journey. While we see potential from the trickle-down effect of the orders BEL has already received in FY24, we are more positive on AMP leveraging its internal competencies and R&D expertise in MMIC, anti-drone systems (with soft kill mechanism), meteorological radars and RF/microwave domains to create products and solutions around them.
As a result of its participation in different platforms, AMP sees a business opportunity of INR 70bn (almost INR 40bn in defence) through to FY28 of the total market opportunity of INR 240-250bn. We expect this endeavour to lead to higher revenue by comprehensively capturing opportunities and result in higher margins of 24-25% in the medium term. Maintain BUY with an unchanged TP of INR 800 on our DCF-based methodology.
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