Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Astra Microwave Products Ltd (BOM:532493, Financial) reported a significant improvement in gross margins, reaching 41.8% for Q1 FY25.
- The company achieved a consolidated order book of INR2,365 crores as of June 2024, indicating strong future revenue potential.
- EBITDA increased to INR23 crores from INR5 crores in the same period last year, with margins improving to 15% from 3.5%.
- The company has a robust order book with 88% domestic orders, which typically enjoy higher margins.
- Astra Microwave Products Ltd (BOM:532493) is actively involved in high-potential projects such as anti-drone radar systems and various radar and electronic warfare domains.
Negative Points
- Employee expenses have increased due to the addition of skilled professionals, impacting overall profitability.
- Despite the increase in domestic orders, the EBITDA margin for Q1 FY25 was lower compared to Q4 FY24, indicating potential execution of lower-margin orders.
- The company faces challenges in maintaining a consistent product mix, which affects margin variability.
- There are concerns about potential delays in key projects due to external factors such as geopolitical issues and supply chain constraints.
- The company is still in the process of finalizing and commercializing several high-potential projects, which may take time to contribute significantly to revenue.
Q & A Highlights
Q: If I look at not Y-o-Y, but Q-o-Q for mix in revenue, our domestic percentage has gone up, export has come down, but still we find that EBITDA margin has gone down compared to Q4. What caused this, and how do we see this trajectory going ahead?
A: It is very difficult to pinpoint exactly why this happened without looking at each individual product sale. However, in general, the margin variance is largely due to the product mix. Specifically, I would need to dig deeper to provide a precise answer. (S. Gurunatha Reddy, Managing Director)
Q: Are we limiting ourselves only to radar for the anti-drone system, or will there be a soft kill and hard kill mechanism as well? What kind of opportunity are we seeing by the end of FY25?
A: We are working on a soft kill anti-drone system and have completed the radar development portion. The soft kill system is expected to be completed in a few months. We are exploring the hard kill option but have not decided yet. We have responded to several RFPs and expect to receive orders worth at least INR500 crores this year. (M. V. Reddy, Joint Managing Director)
Q: Given our size, what stops us from growing at 30-40%? Is it the lack of external opportunity or are we too narrowly focused on certain segments of the defense industry?
A: Astra is now opening up from an IP acquisition and collaboration perspective. We are focusing on productionization of existing orders and productization for future growth. We are also collaborating with other IP holders to create better products without necessarily requiring large capital investments. (Atim Kabra, Director)
Q: Are we working on ensuring that we are not constrained in terms of production due to supply chain issues?
A: We do not expect any serious supply chain constraints. We have built resilience into the system and are fairly well set in this area. Our strategic components are within our control, which mitigates potential supply chain issues. (Atim Kabra, Director; M. V. Reddy, Joint Managing Director)
Q: What are the top five programs that would be critical for our order book and revenue growth in the next two years?
A: Key programs include various radar systems (airborne, ground, and shipborne) and electronic warfare systems. Specific opportunities include LCA Mk1A, Mk2, Su-30, Akash NG, and various electronic warfare programs. We are also expecting significant orders from the Uttam radar program. (S. Gurunatha Reddy, Managing Director)
Q: What is causing a delay in the Virupaksha project?
A: The delay is due to the customer (DRDO) working on the configuration part. We expect the RFPs to be floated by the next quarter. (S. Gurunatha Reddy, Managing Director)
Q: Can you elaborate on your Bangalore facility and the business segments it will cater to?
A: The Bangalore facility is dedicated to systems integration and testing, especially in radar and electronic warfare domains. It also includes a space division to address future satellite requirements. (M. V. Reddy, Joint Managing Director)
Q: What kind of margins does the Space business command, and is it the same as domestic Defense orders?
A: The margins for the Space business are more or less the same as those for domestic Defense orders. (M. V. Reddy, Joint Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
