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29th April, 2011

Result Update

Defense/ Electronics Astra Microwave Products Ltd BUY

CMP   Rs 39    Astra  Microwave  Products  Ltd  (AMPL)  reported  below  expected  Q4FY11 
Target Price  Rs 50  results  at  EBITDA  and  PAT  level.  During  the  quarter  the  net  sales  declined 
 

 
by 6.5% to Rs 454 mn followed by 29.5% decline in EBITDA & 59.4% decline 
in  PAT.  EBITDA  and  PAT  declined  on  higher  employee  expenses,  material 
 
cost  and  interest  expenses.  The  management  has  guided  for  Rs  2  bn  of 
Key Data    revenue with 18‐20% of PAT margin in FY12E. The current order book of the 
Face Value (Rs) 2.00 company  is  at  Rs  2.97  bn  which  is  expected  to  strengthen  further  in  near 
Market Cap (Rs Mn) 3191
terms on new order inflows. The management expects order inflows of Rs 1 
Total O/s Shares (Mn) 81.8
bn for Askash missiles and Central Acquisition Radars in June 2011 quarter. 
Free Float (%) 81.1
52 week H/L (Rs) 52/35 Key Highlights
Avg Monthly Volume (BSE) 56284
 Q4 Revenue inline, Guides for decent FY12 results: Net  sales  during 
Avg Monthly Volume (NSE) 97373
Q4FY11  declined  by  6.5%  yoy  to  Rs  454  mn  which  was  inline  with  our 
BSE Code 532493
NSE Code ASTRAMICRO expectation. This quarter revenue was on a higher base of last year. For 
Bloomberg code ASTM IN the  full  year  AMPL  reported  Rs  1.61  bn  of  revenue  with  yoy  growth  of 
Beta 1.1 50.9%. For FY12 the management has guided for Rs 2‐2.1 bn of revenue 
Date of Incorporation Sept 1991 with 18‐20% PAT margins. The management expects Q4FY12 to be better 
Last Dividend Declared (FY11) 25%
than  first  three  quarters.  Further  the  management  guided  to  maintain 
Six month returns -6.72%
20% growth in FY13. 
Indices BSE 500
FCCB's Outstanding NA  EBITDA and PAT margins were below expected:  AMPL  reported  29.5% 
Warrants outstanding NA decline in EBITDA led by 1) little higher material content in execution (to 
the tune of Rs 30‐40 mn) in the quarter, 2) increase in employee expenses 
and  3)  other  expenses.  As  a  result  the  EBITDA  margin  for  the  quarter 
One Year Price / Volume Chart
declined  by  771  bps  to  23.6%.  The  interest  cost  for  the  quarter  grew  by 
60 3500000

50 3000000
131.1% yoy to Rs 19.6 mn led by higher short term borrowings which was 
2500000
40
2000000
further  repaid  towards  the  end  of  the  year.  This  results  into  PAT 
30

20
1500000
1000000
declining by 57.3% yoy to Rs 37.5 mn.  
10
Decent order book of Rs 2.97 bn:  The  Company  has  a  current  order 
500000
0 0 
Jan-10 Mar-10 Apr-10 Jun-10 Jul-10 Sep-10 Oct-10 Nov-10 Jan-11

Closing Price Volume


backlog of Rs 2.97 bn which is nearly 1.8x FY11 net revenue. Further the 
management expects to add Rs 1 bn of new order in Q1FY12. In Q4FY11 
Source: Capitaline
it witnessed order inflow of approx Rs 500 mn. The management expects 
fresh  order  inflows  of  Rs  1  bn  for  Askash  missiles  and  Central 
Share Holding Pattern (31.03.2011) Acquisition Radars. Besides this it is also expecting USD 3.5 mn of offset 
Public & Others
31.3%
Non Promoters
orders from Elta by December 2011. 
(Body Corporate)
21.5%
Standalone Financial Snapshot                                                                                           Rs in mn 
Particulars FY09 FY10 FY11P FY12E FY13E
FII's
Banks/MF's/Instituti
Net Revenue 1,168 1,068 1,611 1,857 2,124
20.0% Promoters ons/Ins
19.0% 8.2% Growth% -5.7 -8.6 50.9 15.3 14.3
EBITDA 307 246 418 530 594
Source: Company, KJMC Research
EBITDAM % 26.2 23.1 26.0 28.5 28.0
PAT 145 82 186 255 300
PAT Margin % 12.4 7.6 11.6 13.7 14.1

Pankaj Kumar EPS 1.8 1.0 2.3 3.1 3.7


Sr. Research Analyst P/E (x) 14.5 25.9 17.1 12.5 10.7
Phone - 022 4094 5500 Ext. 227 EV/EBITDA (x) 7.6 9.5 8.0 6.2 5.5
Email : pankaj.kumar@kjmc.com  
ROE % 11.0 5.9 13.1 16.1 16.7
Source: Company, KJMC Research
Astra Microwave Products Ltd 1
Q4FY11 Result Table Rs in mn

YoY YoY
Particulars Q4FY11 Q4FY10 FY11 FY10
Growth% Growth%
Net Sales 454.1 485.9 -6.5 1611.4 1067.8 50.9
Expenditure 346.8 333.6 4.0 1193.1 825.8 44.5
Purchases of Raw Material 187.9 148.2 26.8 780.7 523.9 49.0
Stock Adjustments 21.0 69.8 -69.9 -31.1 -49.6 -37.3
Employee Cost 71.5 55.6 28.7 242.4 180.6 34.2
Selling & Admin. Expenses 14.9 18.6 -19.9 50.7 38.4 31.8
Other Expenditure 51.5 41.5 24.1 150.5 132.6 13.5
EBITDA 107.3 152.3 -29.5 418.3 241.9 72.9
EBITDAM% 23.6 31.3 -771.1 bps 26.0 22.7 330.0 bps
Other Income 2.9 5.0 -41.6 19.4 16.7 16.2
PBIDT 110.2 157.3 -29.9 437.7 258.6 69.2
Depreciation 32.6 31.6 3.2 124.2 112.0 10.9
Interest 19.6 8.5 131.3 69.2 36.4 90.0
PBT 58.0 117.2 -50.5 244.3 110.2 121.6
Tax 20.9 25.7 -18.7 57.8 28.6 101.8
PAT 37.1 91.5 -59.4 186.5 81.6 128.6
-1065.3
PATM% 8.2 18.8 11.6 7.6 393.3 bps
bps
Extraordinary
-0.4 -3.4 299.6 0.5 -10.2 -
Items/Exceptional items
PAT (after Extra-
37.5 88.0 -57.3 186.1 91.8 102.6
ordinary/Exceptional items)
Equity Capital 163.7 108.3 51.1 163.7 108.3 51.1
EPS Rs 0.5 1.1 -58.3 2.3 0.9 158.0
Source: Company, KJMC Research

Outlook and Valuation


In terms of industry outlook, the company expects Rs 5bn of opportunity for 
Akash  Missiles  in  which  AMPL  is  targeting  50%  share.  Further  it  is 
expecting similar kind of opportunity in AWACS. These orders would flow 
in the next three to four years.  

Based  on  decent  order  book  of Rs  2.97  bn  executable  in  the  next two  years 
and  expectation  on  new  order  inflows,  we  expect  14.8%  CAGR  in  net 
revenue and 26.9% CAGR in PAT in FY11‐13E. We have marginally revised 
our estimates for FY12E and introduced estimates for FY13E.  

Revision in Estimates                                                                (Rs Mn) 


FY11E FY11 FY12E FY12E
Particulars % Change
Estimated Actual Previous Revised
Net Revenue 1,603 1,611 1,857 1857 0%
EBITDA 469 418 536 530 -1.2%
EBITDAM % 29.2% 26.0% 28.8% 28.5% -30 bps
PAT 233 186 273 255 -6.6%
PAT Margin % 14.5% 11.6% 14.7% 13.7% -100 bps
EPS 2.9 2.3 3.4 3.1 -9%
Source: KJMC Research

On  the  basis  of  FY12E  and  FY13E  EPS  of  Rs  3.1  and  Rs  3.7,  the  stock  is 
trading  at  a  P/E  of  12.5x  and  10.7x  respectively.  We  maintain  BUY  on  the 
stock with target price of Rs 50. At our target price the stock trades at FY12E 
P/E of 16x. 

Astra Microwave Products Ltd 2


Financial Summary

Standalone Profit & Loss Statement Rs mn Standalone Balance Sheet Rs mn

Particulars FY10 FY11 FY12E FY13E Particulars FY10 FY11P FY12E FY13E

Net Revenue 1,067.8 1,611.3 1,857.1 2,123.6 Sources of Funds


Equity Share Capital 108.3 163.7 163.7 163.7
Growth % -8.6% 50.9% 15.3% 14.3% Reserves 1,172.3 1,284.0 1,461.5 1,712.8
Total Expenses 821.4 1,193.1 1,327.4 1,529.4 Net worth 1,280.6 1,447.6 1,625.1 1,876.4
Preference Share Capital 0.0 0.0 0.0 0.0
Growth % -4.7% 45.3% 11.3% 15.2%
Total Share Holders' Fund 1,291.2 1,447.6 1,625.1 1,876.4
EBITDA 246.4 418.2 529.8 594.1 Secured Loans 434.2 340.1 340.1 340.1
Growth % -19.6% 69.8% 26.7% 12.2% Unsecured Loans 22.3 0.0 0.0 0.0
Loan Funds 456.5 340.1 340.1 340.1
EBITDAM % 23.1% 26.0% 28.5% 28.0%
Total Liabilities 1,747.7 1,787.7 1,965.2 2,216.5
Other Income 16.7 19.4 19.4 19.4 Application of Funds
Gross Block 1,492.0 1,572.0 1,672.0 1,672.0
Interest 36.4 69.2 69.2 69.2
Less: Accumulated Depreciation 544.7 668.8 804.3 944.0
Depreciation 112.0 124.2 135.5 139.7 Net Block 947.4 903.2 867.7 728.0
PBT 110.2 244.2 344.4 404.6 Capital Work In Progress 0.0 0.0 0.0 0.0
Investments 21.8 21.8 21.8 21.8
Tax 28.6 57.8 89.5 105.1
Current Assets 1,627.2 1,725.5 2,020.6 2,405.7
Reported PAT 81.6 186.5 255.0 299.5 Inventories 460.3 530.4 551.1 623.1
Growth % -43.7% 128.5% 36.7% 17.5% Debtors 825.9 814.9 1,021.9 1,255.7
Cash & Bank 215.5 192.6 241.3 279.3
Net Margin% 7.6% 11.6% 13.7% 14.1%
Loans & Advances 125.5 187.6 206.3 247.6
E/O Item -10 0 0 0 Current Liabilities & Prov 793.0 819.0 901.1 895.2
Net Current Assets 834.3 906.5 1,119.5 1,510.5
Adjusted PAT 71.4 186.0 255.0 299.5
Net Deferred Tax -55.6 -43.7 -43.7 -43.7
Growth % -50.9% 160.6% 37.1% 17.5% Total Assets 1,747.8 1,787.7 1,965.3 2,216.6

Standalone Cash Flow Statement Rs mn Ratios


Particulars FY10 FY11P FY12E FY13E Particulars FY10 FY11P FY12E FY13E
Profitability/Returns %
Pre-Tax Profit 110.2 244.2 344.4 404.6
EBITDA Mgn 23.1% 26.0% 28.5% 28.0%
PAT Mgn 7.6% 11.6% 13.7% 14.1%
Depreciation & Non Cash 112.0 124.2 135.5 139.7
ROCE 8.0% 16.6% 21.0% 21.7%
Interest & others 36.4 69.2 69.2 69.2 ROE 5.9% 13.1% 16.1% 16.7%
Per Share Data (Rs/share)
Chg in Working Cap 258.6 437.6 549.2 613.5 EPS 1.5 2.3 3.1 3.7
CEPS 3.6 3.8 4.8 5.4
Tax Paid -28.6 -57.8 -89.5 -105.1
BVPS 23.7 17.7 19.9 22.9
DVPS 0.5 0.5 0.5 0.5
Operating Cash Flow 185.7 284.7 295.3 155.5
Valuations (X)
Capex -149.6 -80.0 -100.0 0.0 PER 25.9 17.1 12.5 10.7
CPER 10.9 10.3 8.2 7.3
Free Cash Flow 36.1 204.7 195.3 155.5 P/BV 1.6 2.2 2.0 1.7
EV/Sales 2.2 2.1 1.8 1.5
Investments -146.7 -80.0 -100.0 0.0 EV/EBITDA 9.5 8.0 6.2 5.5
Dividend Yield % 1.3% 1.3% 1.3% 1.3%
Equity Capital 6.8 0.0 0.0 0.0
Turnover (X Days)

Loans -71.5 -116.4 0.0 0.0 Debtor Days 246.3 185.8 200.8 215.8
Inventory Days 177.4 151.5 148.7 140.1
Dividend -31.9 -48.2 -48.2 -48.2 Current Liability Days 267.1 226.2 214.9 195.6
Net Working Cap Days 270.6 197.2 199.1 226.0
Interest & Others -36.4 -92.2 -69.2 -69.2 Gearing Ratio (X)
Net Debt/Equity 0.2 0.1 0.1 0.0
Net Change in Cash -94.1 -52.1 77.9 38.0
Total Debt/Equity 0.4 0.2 0.2 0.2
Source: Company, KJMC Research

Astra Microwave Products Ltd 3


Mr. Girish Jain   Executive Director  jaingirish@kjmc.com  2288 5201 (B) 
     
Mr. Suresh Parmar   A.V.P. ‐ Institutional Equities  suresh.parmar@kjmc.com  4094 5551 (D) 
     
Mr. Vipul Sharma   A.V.P. ‐ Institutional Sales  vipul.sharma@kjmc.com  4094 5556 (D) 
   

 
Recommendation Parameters 
 

Expected returns in absolute terms over a one‐year period 
Buy  ‐  appreciate more than 20% over a 12‐ month period 
Accumulate  ‐  appreciate 10% to 20% over a 12‐ month period 
Hold / Neutral  ‐  appreciate up to 10% over a 12‐ month period 
Reduce  ‐  depreciate up to 10% over a 12‐ month period 
Sell  ‐  depreciate more than 10% over a 12‐ month period 

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Astra Microwave Products Ltd 4