ASTRAMICRONSEQ2 FY2023November 17, 2022

Astra Microwave Products Limited

6,231words

146turns

16analyst exchanges

2executives

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Management on call

S.G. Reddy

MANAGING DIRECTOR - ASTRA MICROWAVE PRODUCTS LIMITED

M.V. Reddy

JOINT MANAGING DIRECTOR - ASTRA MICROWAVE PRODUCTS LIMITED

Key numbers — 40 extracted

Rs.9 Crore

onths and we should be able to complete this development portion. The size of this radar is about Rs.9 Crores for one system and we have completed supply of subsystems for DRDO's long range radar that is LR

Rs.1850 Crore

d we believe that with a higher focus on BTS, we can sustain our healthy margins. Order book of Rs.1850 Crores as of September 30, 2022 echoes these trends. Of the total order book, 68% of the orders are dom

68%

der book of Rs.1850 Crores as of September 30, 2022 echoes these trends. Of the total order book, 68% of the orders are domestic orders and the rest 32% are export orders. Major part of our order boo

32%

echoes these trends. Of the total order book, 68% of the orders are domestic orders and the rest 32% are export orders. Major part of our order book is executable in the next 12 to 38 months period.

Rs.178 crore

ext 12 to 38 months period. In the quarter gone by, we have successfully executed sales for about Rs.178 crores, defense contributing for about 63% and the rest from the exports, space and meteorology. Within

63%

e by, we have successfully executed sales for about Rs.178 crores, defense contributing for about 63% and the rest from the exports, space and meteorology. Within the defense, radar and EW segments a

Rs.170.9 Crore

oming to specific numbers in the standalone performance for Q2 FY2023, the revenue stood at about Rs.170.9 Crores for Q2 as against Rs.176.8 Crores for Q1. That is a degrowth of 3.4% year-on-year. For half year

Rs.176.8 Crore

tandalone performance for Q2 FY2023, the revenue stood at about Rs.170.9 Crores for Q2 as against Rs.176.8 Crores for Q1. That is a degrowth of 3.4% year-on-year. For half year, year-on-year growth is about 12%

3.4%

stood at about Rs.170.9 Crores for Q2 as against Rs.176.8 Crores for Q1. That is a degrowth of 3.4% year-on-year. For half year, year-on-year growth is about 12%. Gross margins have almost doubled

12%

ores for Q1. That is a degrowth of 3.4% year-on-year. For half year, year-on-year growth is about 12%. Gross margins have almost doubled from 20.6% to about 40.4%. This shift is largely due to on a

20.6%

-on-year. For half year, year-on-year growth is about 12%. Gross margins have almost doubled from 20.6% to about 40.4%. This shift is largely due to on account of lower exports and higher contribution

40.4%

alf year, year-on-year growth is about 12%. Gross margins have almost doubled from 20.6% to about 40.4%. This shift is largely due to on account of lower exports and higher contribution of domestic sal

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Guidance — 20 items

S G Reddy

opening

“We expect to deliver this in the last quarter of the current financial year.”

S G Reddy

opening

“For the coming quarters, we expect to do sales of about Rs.200-plus Crores.”

S G Reddy

opening

“Within this defense is likely to contribute above 70% and the rest will be from export, space and metrology sectors.”

Ketan Gandhi

“Sir, what did you say in the last comment, next quarter turnover or next half turnover?”

S G Reddy

“Next half year, now what I have stated is for the next quarter, that is for Q3, we are likely to do about Rs.200-plus Crores.”

Ketan Gandhi

“And Sir, this will be fitted into LCA Mark 1, Mark 2 or all the LCA and others?”

M V Reddy

“I think in the next couple of months, we will be able to demonstrate this.”

Ketan Gandhi

“And Sir, my last question is next year, can we expect a turnover in the north of Rs.1000 Crores?”

M V Reddy

“Going forward, as you know, in space, the government took initiative to transform, they introduce the reforms and the clarity we know, we do not have full clarity going forward on the satellite.”

M V Reddy

“Going forward, business wise, yes, it is lucrative, but the only thing it takes some time for us to get into this.”

Risks & concerns — 2 flagged

So, is that even like achievable or will it be difficult?

— Bhavik Shah

whether it was something related to markets, which went wrong, we went into the export market which went wrong, so what exactly was the reason for the decline in revenues and what actually happened in the past?

— Akshay Kothari

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Q&A — 16 exchanges

Sir, what did you say in the last comment, next quarter turnover or next half turnover? Did you mention anything?

S G Reddy

Sorry, I did not get your question. Next half year, now what I have stated is for the next quarter, that is for Q3, we are likely to do about Rs.200-plus Crores. Okay, can you speak something about AATRU for ASPJ, where we are in terms of the development and when we can see the product coming into the production? Yes, we have delivered the AATRU for the first order and those AATRUs are being fitted in the aircraft. I think it is going on the flight test and the second order is under execution. In fact, we are going to deliver first unit by end of December. And Sir, this will be fitted into LCA

Just wanted to kind of what is your competitive edge because with the kind of opportunity which is perceived, a lot of players are coming in Indian and foreigners also. So what is the edge which Astra Micro have?

M V Reddy

Basically, if you look at the technology where we operate. We are first ones to enter into this and we have the maximum technology in control. For example, you take in active phase that is radar, wherein it is not only the TR model. Today, there are many companies entered into this business, but no company has the main components of the TR model. Like we have our own MMICs, which is being used in the TR module and with that, we can play around with TR module and then we can offer a multifunctional chipset and also we can offer an advanced version of TR model with a different power range and th

Thanks for the opportunity. I have two questions. Firstly, you mentioned about BTS opportunity in domestic and international market. I am curious to understand more on this front, especially for the export market. Can you throw some light on that part?

M V Reddy

We are discussing with some U.S. companies as well as Israeli companies for BTS market. We are in the field of subsystems and also recently, we have discussions with one of the major U.S. company to develop system, I do not want to give more details as it is yet to take final shape, but these are opportunities come in our way and by seeing our technological strength, they have been giving us this design services to us to develop jointly in few cases and then to develop based on their spec so that we can have contracts for global market. Secondly Sir, the new orders that you received this quart

Thank you for the opportunity. Congratulations on a good set of numbers. I wanted to know more about our space business. Can you give a little brief about it, how it is growing and are the margins better over here compared to defense business?

M V Reddy

The space business, we have order backlog close to Rs.200 Crores, where margins are reasonably good as compared to defense and the only thing is that the cycle time is more as compared to defense. Going forward, as you know, in space, the government took initiative to transform, they introduce the reforms and the clarity we know, we do not have full clarity going forward on the satellite. But at least in the strategic satellites, what we understand that ISRO is still going to build this satellite, in that we continue to be part of ISRO and as far as the communications satellites, yes, it all d

Thanks for the opportunity. I wanted to know the current working capital, so you can see cash flow from operations are been negative, any major because inventory of receivables have increased and decrease in contract liabilities. Is it because of execution?

S G Reddy

Yes, the major liabilities, which were there earlier pertaining to the advances received for the export sales. The sales are getting executed. The advances are coming down and hence, those liabilities are getting reduced. But otherwise, the working capital position as of today, we have a net liability of about Rs.80 Crores excluding cash at bank. Generally, the working capital or the inventory builds up towards the end of second quarter because we see substantial building happening in the later half of the year. That is one reason. The other reason, specific to this present area is that there

Thank you, Sir, for providing me the opportunity. Sir, I have a couple of questions. First of all, the first time it has been mentioned about the service order out of the total order book. So please tell us something about what is this about?

S G Reddy

The service orders pertains to our weather metrology products, the metrology products as a part of the purchase terms, they carry a warranty maintenance for a period of five years from the date of installation and commissioning. So whatever the orders we have disclosed as a part of service order, the entire amount pertains to weather-related products. Sir, this quarter, you have booked an order inflow of around Rs.340 Crores, so where defense is roughly Rs.330 Crores. So can you please tell us from which segment of defense it has come? In the order book of Q2? Order inflow, it has received aro

Congratulation on a good set of numbers. Sir, I want just understand first, what is the development on the electro-optics and Anti Drone front? Is there any update?

M V Reddy

Yes, electro-optics, we are addressing through our JV. That is Astra Rafael Comsys. In the last quarter itself, we signed this agreement with our partner and we are trying to address RFPs through this technology being developed by Rafael initially and going forward, we would like to set up the design house for this electro-optics in our joint venture. As far as Anti-Drone is concerned, as I mentioned in previous earnings calls also, we are developing radar with basics DRDO technology and refining it to suit to the user requirement. It is getting ready. I think mostly by January or February, I

Good evening, everyone, and thanks for the opportunity. Congratulations for a good set of numbers. I have a couple of questions. The first one is, if I look at your gross margin, it has remained quite lumpy increasing meaningfully in this quarter perhaps because of lower share of exports. However, in subsequent slides, you had quantified that you would like the ideal share of exports to be 30 and 70. So just wondering what kind of gross margin you are looking at? Because now we are expanding meaningfully, you hinted at Rs.1000 Crores of revenue aspiration, so what is the corresponding gross ma

S G Reddy

We said very repeatedly, the export business is a BTP, build to print. Therefore, the gross margins are around 8% to 10%. Whereas the domestic, even though we cannot really standardize what could be, but you are asking me what is your ideal expectations. Our expectations are about 30% to 40% kind of gross margins we expect as we go forward. Okay, wonderful, Sir. The next question is on Slide #31, where you have highlighted the long term business potential till 2028. So just wanted to understand category wise, you can mention whether there are some PSU also involved in these and there would be

I just wanted to know about the H2 that you have an estimate of booking around Rs.200 Crores for the Q3 and around maybe Rs.270 Crores to Rs.280 Crores in Q4. I just wanted to know what kind of margin profile are you looking for? Will we be seeing something similar to what is in Q2?

S G Reddy

More or less, it will be similar to what is achieved in Q2. There may be a slight correction downwards, but more or less, it should be on the same lens. Okay and what would be the mix of domestic and export in H2? In the Q2, the domestic is going to be close to about 80% to 85% and the balance will be exports. In H2, right? Yes, in H2. Specifically Q2, I gave the number and Q3 and Q4 also more or less similar kind of numbers will be there. Okay, it is more of 85% and 15% and we expect it to be more or less similar, right? Yes. Thank you Sir. That is all from my end.

Good evening Sir. Thank you for the opportunity. My question is also with respect to margins like the earlier participants. So do you see a sustainable gross margin more in the line of 30% to 40%?

S G Reddy

Yes. Okay, and Rs.1000 Crore revenue aspirations for FY2023 or FY2024? Sorry, what is the number you said? Rs.1000 Crores revenue aspiration that you called out? 2023, 2024 is aspiration, yes. Okay, so in FY2024. All my other questions have been answered. Thank you.

I just wanted to understand, generally, we do not see this kind of low promoter holding in this size company, so any comments as to how come the promoter stake in the company is so low and any issues with regards to operations or prospects?

S G Reddy

No, there are no issues regarding operations and prospects. In fact, the low promoters we are seeing for the last five years, now the company has grown. But historically, this company has a low promoter state because the company was promoted by techno crats with a very low financial asset. Historically, yes, it has the low promoter stake. Thanks a lot.

Thanks for the opportunity again. Currently, we have 1,450 employees. So in order to fulfill our orders, would there be an increase with employee count?

S G Reddy

Yes, definitely as we grow in the topline additions are required, but we have a significant amount of existing employee force to take care of immediate growth needs. Our borrowings have increased significantly. I think they are around Rs.150-plus Crores levels and so in order to get more orders, would our borrowings keep on increasing? Or what is the plan? Most of the borrowings are working capital borrowings. Therefore, as we grow, I think the working capital requirements will be going up. So, the incremental increase will be there in the working capital borrowing. But we do not have signific

Thank you Sir for this opportunity. Sir, any guidance on the order book can be received during FY2023?

S G Reddy

As of today, the prospects, we are likely to book close to Rs.1000 Crores, but details, I think I can share only in the next concall. You are talking about FY2024 right? I am talking about for the rest of the year, sir, for FY2023 and FY2024 as well? So this year, for Q3 and Q4, we are likely to book close to Rs.300 Crores. Rs.300 Crores over and above that Rs.1800 crore plus order book, right? Yes. Next year, as we are saying that next year, you are expecting more or less Rs.1000 crores order book? Yes, that is what prospects we have to book Rs.1000 Crores, but it is, I can share it in the ne

Thank you for taking my question. I am sorry I joined late, I just wanted to know that the next year's order book that we have of Rs.1000 Crores, if I am not wrong. Sir, the margins for that, how would we see?

S G Reddy

We have mentioned, we will get into the details in the next quarter probably at that point of time, we should be able to throw some light on the margins also. Okay. I will get back in line if I have any other questions. Thank you.

You mentioned that your capacity, you can go up to Rs.2000 Crores turnover, right?

S G Reddy

Yes. Any sort of vision as to which, how many years do you think you can target that kind of revenue? Just have an internal vision?. Vision is at the earliest, may be three to four years from the next financial year. We would like to reach it there. Thank you.

Thank you for everyone for joining the call. We hope we have been able to answer your queries satisfactorily. For any further information request you to get in touch with SGA, our Investor Relations Advisors. Thank you very much and I hope to see you again at the end of the third quarter. Thank you.

Management

Speaking time

S G Reddy

M V Reddy

Moderator

Akshay Kothari

Ketan Gandhi

Prabir

Raj Rishi

Santanu Chatterjee

Vignesh Iyer

Bhavik Shah

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Opening remarks

S G Reddy

Thank you, and good afternoon to everyone. A warm welcome to all the participants to the post results earnings call of our company. I am with my colleague, Mr. M.V. Reddy and SGA, our Investor Relations Advisors. The results of the company and investors presentation for Q2 FY2023 are uploaded on our company website and stock exchange. I hope you had a chance to look at it. I am happy to inform you that we have reported a very good performance for Q2 and H1 FY2023 and our margins have improved substantially. Before we discuss further about the performance and recent developments, let me give you an update on ongoing projects and activities. Few radars like PPTR for DRDO is at an advanced stage of completion. We expect to deliver this in the last quarter of the current financial year. In the previous quarter, we had completed the first contract of 10 numbers of Doppler weather radar for IMD. We have participated for tenders for the next requirement for C&X Band DWR for IMD and we are ple

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