ASTRAMICRONSEQ1 FY23August 18, 2022

Astra Microwave Products Limited

6,479words

131turns

14analyst exchanges

2executives

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Management on call

S. G. Reddy

MANAGING DIRECTOR

M. V. Reddy

JOINT MANAGING DIRECTOR

Key numbers — 40 extracted

rs,

radar. We are adept at designing and developing all kinds of radar subsystems like power amplifiers, receivers and exciters, filters, synthesizers, converters. In the area of signal processing and th

fforts our business mix is also evolving.Space and meteorology which combinedly contributed about 7% of our total revenues in FY22 will constitute about 16% of the order book as of January 2022. In

16%

orology which combinedly contributed about 7% of our total revenues in FY22 will constitute about 16% of the order book as of January 2022. In the last five years Astra has grown at a CAGR of 20% a

20%

out 16% of the order book as of January 2022. In the last five years Astra has grown at a CAGR of 20% and we are confident that in the coming years we will continue this rate as microenvironment fo

Rs. 1,663 crore

back of our deep domain expertise, we are able to create a solid diversified order book of about Rs. 1,663 crores which is executable in the next 12 to 13 months period. During Q1 FY23 we have received orders f

Rs. 253 crore

s executable in the next 12 to 13 months period. During Q1 FY23 we have received orders for about Rs. 253 crores. Now coming specific to the standalone financial performance for the company for Q1 FY23, our

Rs. 161 crore

cific to the standalone financial performance for the company for Q1 FY23, our revenues are about Rs. 161 crores which is a growth of about 34% year-on-year. Gross margin saw a small reduction from 39% to 35%

34%

nce for the company for Q1 FY23, our revenues are about Rs. 161 crores which is a growth of about 34% year-on-year. Gross margin saw a small reduction from 39% to 35% due to increase in material cost

39%

. 161 crores which is a growth of about 34% year-on-year. Gross margin saw a small reduction from 39% to 35% due to increase in material cost. EBITDA stood at about Rs. 25 crores which is a growth of

35%

rores which is a growth of about 34% year-on-year. Gross margin saw a small reduction from 39% to 35% due to increase in material cost. EBITDA stood at about Rs. 25 crores which is a growth of about

Rs. 25 crore

gin saw a small reduction from 39% to 35% due to increase in material cost. EBITDA stood at about Rs. 25 crores which is a growth of about 15.4%. The company reported profit after tax about Rs. 11.4 crores wh

15.4%

due to increase in material cost. EBITDA stood at about Rs. 25 crores which is a growth of about 15.4%. The company reported profit after tax about Rs. 11.4 crores which is a growth of about 18% year-

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Guidance — 20 items

S. G. Reddy

opening

“We expect to be the beneficiary for Uttam airborne radar for LCA Mk1, Mark1 which is currently being tested.”

S. G. Reddy

opening

“In the last five years Astra has grown at a CAGR of 20% and we are confident that in the coming years we will continue this rate as microenvironment for defense sector is very positive.”

Amit Shah

“What are the major reasons behind the fall and how do you see this trend going forward?”

M.V Reddy

“Going forward from Q2 we are expecting close to Rs.”

Amit Shah

“Usually when you talk about the order book you give some color on the kind of project that you are working on.”

M.V.Reddy

“All put together I think whatever we have been mentioned in the last call, so it is in line with our guidance.”

Subrata Sarkar

“Like how much will be radar and how much is counter drone or anti drone system?”

Subrata Sarkar

“Just one follow up question on the like I can recall like few quarters back on the con call we were contemplating the opportunity of some fundraising for a new project or JV basically.”

Subrata Sarkar

“Yes, if you can recall a few quarters back we were talking about the possibility of if we get into a specific project or some other JV then we were contemplating that we may raise fund at that point of time.”

S.G. Reddy

“This is a product line what we talked about and in fact we are very happy to share with all of you that a fortnight back we have signed an agreement with our JV partner and this product will be introduced into the JV in the near future, but as of today immediately no funds are required and depending on how the project takes off so we have to take a call on that fund requirement at a later date.”

Risks & concerns — 3 flagged

There are issues of semiconductors that the challenge is there all companies have been facing this crisis but somehow, we are managing for the current year we don't see any major challenges as far as the component shortage for the revenues are concerned.

— S.G. Reddy

But this is something like where with the BTP, we do not have any risk in executing this contract and the customer is providing the 100% cash flow, positive cash flow, and also with the infrastructure being provided by them, so we have been continuing to work on this, I think, but gradually we are coming out of this.

— M. V. Reddy

How is the concentration risk is what we want to understand.

— Abhijit Mitra

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Q&A — 14 exchanges

Firstly, I would like to thank you for an excellent presentation. Now I would particularly want you to clarify some numbers you've mentioned on slide 30 of your presentation. You mentioned that the business potential of Astra Micro is around Rs. 14,500 crores till FY28. I just wanted to check how certain are we of the execution and is this business potential over and above the existing order book of Rs. 1,600 crores?

M.V. Reddy

As we mentioned earlier though we talked about for the 3 years, next 5 to 6 years, the total outlook, business outlook, it appears to be that we have a fairly good potential of close to Rs. 15,000 to Rs. 18,000 crores of orders which are likely to come in our domain expertise. In that I would say close to Rs. 8,000 crores we can say with 100% probability we can accept orders, in that the major chunk of business will come from the radar close to about Rs. 5,000 crores and then an electronic war fare of about Rs. 1,000 crores and missile and telemetry put together around Rs. 1,000 crores and spa

Gross margins have fallen from 39 to 35 year-on-year. What are the major reasons behind the fall and how do you see this trend going forward?

S.G.Reddy

Basically, the gross margin, we have to get into very micro details to explain in detail, but in general the fluctuation in gross margin is directly related to the product mix that is being executed on quarter-on-quarter. Therefore, it is not something which we have to really worry about. But there is a small effect of the FE changes that has happened in the first quarter. Maybe about 1% to 2% has contributed to that, but otherwise it is not a trend to really worry about. Okay, sir, could you please elaborate on the order book within the quarter and how does the pipeline look like for the rema

I have few questions. I was wondering if any further CAPEX is planned or required at your end to meet the growing order book and what kind of capital utilization are we working on?

S.G. Reddy

Yes, we need little bit of CAPEX that was planned in the last year itself. It is continuing in the current year. In terms of the absolute number in the present year we are spending about Rs. 12 crores of CAPEX.

This is regarding your business potential till 2028 which you have given. You have given like Radar and Counter Drone Systems potential of Rs. 8,000 crores. Can you just give a ballpark break up of that? Like how much will be radar and how much is counter drone or anti drone system?

M.V.Reddy

I see that radar subsystems is about Rs. 2,500 crores and AAAU and systems put together we have taken around Rs. 5,000 crores. This is a potential what we see in the next 5 to 6 years and then counter drone systems we have taken about Rs. 5,000 crores and these are all major part of radars. In this as I said out of Rs. 12,000 crores opportunity we are confident of booking Rs. 5,000 crores with 100% probability and the rest we have 30% to 50% probability as we have competitors in that segment and in EW, we have close to Rs. 2,000 crores visibility for next 5 to 6 years. In these programs like S

My first question is, are we still maintaining a guidance of Rs. 850 crores and 10% PBT?

S.G. Reddy

Yes. So there's no change in upward or downward revision. No. The second question is on the consolidated financials; you have reported a PAT of around Rs. 8 crores in the consolidated financials so is this loss on account of the JV which was breakeven in the last quarter, you were talking about JV being breakeven this year right? Yes, we mentioned that JV will break even in the current financial year but in the first quarter still it is in red only. So, what's the outlook there? Are we expecting it to breakeven or losses will continue? It will breakeven at the end of the financial year. Okay,

Hi, I just had a couple of follow-up questions based on your previous answers. My first question is the Rs. 8000 crores that you said is certain from Astra's business potential, could you just shine some light on what is our potential margin profile on this and what can be our bottom line from that revenue? And my second question is we have a JV with Rafael. So, could you just give a broad outlook on what can we expect from this JV 4-5 years down the line and what progress should we expect?

S. G. Reddy

I think in terms of the margins, it's too early to really talk about that, but otherwise these general standard margins what we are enjoying for the defense and aerospace industry that we should be able to have. I would say that in terms of the gross margin that is sales minus material cost should be anywhere between 35% to 40%. That is how we look at it when we look at the number of that Rs.8000 crores business potential. Then coming to the JV, as you are aware, currently it is executing supply of SDRs , i.e., Software Defined Radios, for one of the Indian Air Force programs to Rafael. Going

Thank you, sir. First of all, thank you for providing this excellent presentation. I have two questions. First of all, out of this Rs. 253 crores of orders that you have bagged in this quarter, around 127 is from defence. So, can you please tell us that what kind of order is this?

M. V. Reddy

You want the details of the orders? Yes. In segment wise I have already given. Just want to know the different orders that 127 that you have bagged from which program? See, in this the major orders what we have bagged is from EW Subsystems, that is from Shakti and Nine program, that is about (+) 70 crores. Then we have order from DCX that is basically for supply to ELTA, this is about Rs. 75 crores. Then we bagged orders from Caps, which is a space for Mark 1 Netra, that is S-Band TRML, that is about Rs. 7 crores. And we bagged one development contract from NSDL. This is something which we wou

In the defence segment could you just elaborate what sort of orders there would be in terms of whether it would be production or development?

M. V. Reddy

We have both mix of development as well as production. As a part of our current order book, how much would be production and how much would be development? You mean to say total order we have on hand? Yes. Total orders, what percentage would be production and what percentage would be development? See, from R&D close to Rs. 300 crores in defence and rest all in production. I think out of (+) 600 crores, close to Rs. 350 crores are for the R&D, rest all in production. Okay. And sir the new orders on the export side would be having gross margins of around 10%? It's close to 8% to 10%. So, I could

Just to understand, one of your competitors in recent calls they mentioned about two radars scaled down version of space surveillance radar and ultra-high frequency bandwidth radars where the potential final products or projects can be each Rs. 1000 crores. So, did we participate, were the margins sort of unfavorable to sort of compete? What were your thoughts as to why we couldn't be the L1 there?

M. V. Reddy

See, in a competitive environment, like every company will have some strategy to be done to get into that. Yes, we did participate in those tenders which you are referring. We lost it and because the kind of margins where they bid for it, it is nowhere close to us. So maybe I think it is their strategy to bid for it, but for us it was not comfortable at all to bid for that particular margin. So, just to understand the margin profile here. What is comfortable margin profile for you for these kinds of tenders, is it 10%, 20%? It all depends upon like what are the programs like, what are the futu

You mentioned about entering into optoelectronics with the JV partner. Is it an existing JV partner or the new JV partner?

S.G.Reddy

This is existing JV. We have added this product line into this JV portfolio. That is our Rafael JV, right? Yes, that's right. Thank you.

Just a follow up on this counter drone system, sir. So, I suppose apart from you, L&T, Adani, who are the other companies out of the six companies who have received this? And is this for soft kill only, sir?

M. V. Reddy

This is soft and hard kill both and this apart from the I think…actually we should not name other companies in this our investors call. Better I think you get this information from DRDO. But there are about six licenses that have been given and this is both hard kill and soft kill options are there. Okay. Sir, just one clarification, these licenses are like on-tap, what I mean to say only these six companies will be visible or like this is open anybody who additionally can apply and can be get evaluated. I'm not sure what is DRDO policy but that time it selected six companies to give this lice

Good evening, sir. Can you throw some more light on the progress on the submarine antenna front and what can be the total potential in terms of its contribution to order book? And if you can just let us know who all would be your competitors in this space, please?

M. V. Reddy

In this it is a totally new development work we have taken with the DRDO. And this in competition we won, and this timeline is within 14 months we should complete the development portion and once we are through, I think as on today, no one has this complete solution. I think probably if we can complete successfully, we will be the first one to make this communication from submarine to the sea surface as far as the Indian companies are concerned. And sir, what is the size of this order? It is roughly about 9 crores for one system which we got in toto and future we have to see.

I have two questions. I want to understand this structure of the system that you are developing. Like Uttam, LR, MA part, where you are making AAA which is roughly 60% to 70% of the entire system. So, for the remaining 30% will you outsource, or will you integrate the entire system?

M. V. Reddy

The AEC radar, that technology is given to HAL. So, HAL is going to integrate. Whereas our AAAU we've been making total AAAU, and we would be supplying to the production agencies like HAL. But otherwise, the radar technology as on today it has been given to HAL So, HAL is going to build a total radar system. Okay. Sir, my next question is you are also making TRM for the long-range radar. Are these related to the long-range tracking radars having 600 to 800 kms range which is called the swordfish . And if it is so, what kind of TRM is required for this? I won't compare with that swordfish and a

Thank you.

Management

Speaking time

M. V. Reddy

Moderator

S.G. Reddy

Bhavesh Shah

Prabir Adhikary

Akshay Kothari

Subrata Sarkar

Abhijit Mitra

S. G. Reddy

M.V.Reddy

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Opening remarks

S. G. Reddy

Thank you, Aman, and good afternoon, everyone. I welcome you to this post results earnings call of our company. I am with my colleague, Mr. M. V. Reddy – Joint Managing Director and SGA, our Investor Relations Advisors. The results are taken on record at today's Board of Directors meeting. The results and the Investors Presentation are uploaded on our company website and stock exchange. I hope you had a chance to look at it. As you are aware, we are in this business for the last 30 years supplying RF and microwave components subsystems and systems for Defense, Space and Communication Meteorology and Hydrology. We have always tried to and with a steady progress climbed up the value chain from subsystems to a high value-added systems company as of today. On this call we would like to outline some of our product lines for greater understanding of our capabilities and expertise. We begin with our core area that is the radars. We have the capability to provide TRMs for active phased array r

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