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Astra Microwave – Darling of Defence Sector Punters

July 8, 2014

Astra Microwave Products Ltd. (AMPL) is engaged in designing and manufacturing of high value added Radio Frequency (RF) and microwave super components and sub-systems finding applications in Defence, Space and Civil communication systems.

According to media reports, the department of industrial policy & promotion (DIPP) has prepared a draft Cabinet note that proposes to allow up to 100% foreign direct investment (FDI) in defence as part of its plan to boost domestic manufacturing activities, markets are hopeful of better days for defence equipment makers. By permitting FDI in the sector it will help in reducing import bill for defence equipment, which in turn will boost manufacturing activities and create jobs. India’s spending on defence equipment has improved at a CAGR of 13% over the past 5 years.

L&T On Astra Board
L&T has made an investment in AMPL around five years ago; having a stake of ~10% in the company and has finally come on the board of directors. Now with L&T as board member means L&T is seriously trying to enter in to radar business and moreover this will give AMPL a backend support by providing long-term direction and strategic support. AMPL is also likely to take advantage of L&T’s execution ability and technological.

The company has a strong unexecuted order book of Rs. 975 cr. to be executed in the next 15-20 months. The defence segment dominated the order book, whereas exports accounted for Rs. 480 cr. worth of orders with 95% of the export order being from an Israel Defence Company.

Astra’s Profit Margin in the last 3 years has been around 12%. Expected EPS for FY15 & FY16 is expected to be Rs 7.2 and Rs 8.5 respectively. Lately, the stock has become punters Favorite and the target is set at Rs 180 on the Share Price of Astra Microwave.

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