Astra Microwave Products : Investor & Analyst Meet Transcript Q1 FY24.

"Astra Microwave Products Limited Q1 FY24 Earnings

Conference Call"

August 14, 2023

Disclaimer: E&OE - This transcript is edited for factual errors. In case of discrepancy, the audio recordings uploaded on the stock exchange on 14th August 2023 will prevail

MANAGEMENT: MR. S. G. REDDY - MANAGING DIRECTOR, ASTRA

MICROWAVE PRODUCTS LIMITED

MR. M. V. REDDY - JOINT MANAGING DIRECTOR, ASTRA MICROWAVE PRODUCTS LIMITED

MR. ATIM KABRA - DIRECTOR-STRATEGY AND

BUSINESS DEVELOPMENT - ASTRA MICROWAVE

PRODUCTS LIMITED

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Astra Microwave Products Limited

August 14, 2023

Moderator:Ladies and gentlemen, good day and welcome to the Astra Microwave Products Limited Q1 FY24 Earnings Conference Call.

This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing '*' and then '0' on your touchtone phone.

I now hand the conference over to Mr. S. G. Reddy - Managing Director. Thank you and over to you, sir.

S. G. Reddy:Thank you. A warm welcome to all the participants to the post results call of our company. I am with my colleague Mr. M. V. Reddy and Mr. Atim Kabra and SGA, our Investor Relations Advisors. The results and investor presentation for Q1 FY24 are uploaded on our company website and Stock Exchange. I hope you had a chance to look at it.

The quarter gone by was a relatively soft quarter. Our topline performance was in line with quarterly guidance that we have given in the previous quarters. Having said this, the soft performance does not give a complete picture of where we stand as a company. The road ahead is very promising as we continue to have a robust order book of close to about Rs. 1,580 crores. This order book is a good indication of our long-term prospects. During the quarter, we have booked about Rs. 191 crores worth of orders which comprises of about Rs. 176 crores of domestic and Rs. 15 crores of exports.

Coming to our standalone performance for this quarter, our business which is lumpy in nature, we recorded a decline of about 17% in our topline on a year-on-year basis, which has resulted in a revenue of about Rs. 133 crores for this quarter as against Rs. 161 crores for the corresponding quarter of last year. The mix of topline is about 60% of exports and 40% of domestic, which was entirely reverse of our last Q1 performance. But this is the reason why there is a negative impact on the bottomline of the company. Domestic sales, which have a higher margin as compared to the export sales in Q1 of FY2023, since it was closed about 60%, there was a clearly visible improvement in the margins; however this quarter gone by has a lower amount of domestic business coupled with lower margin product mix, which has led to the overall lower margins. As a result, we saw a decline of about 7.6% in our gross margins as compared with 27.5% of last year Q1.

On the expenditure side, we have made a provision on advances as per the accounting standard has contributed an amount of 3 crores. I would like to clarify this is not an actual cost to the

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Astra Microwave Products Limited

August 14, 2023

company and it will get adjusted as we deliver the goods to the customers. The company reported loss after tax about Rs. 4.3 crores for this quarter, which was about Rs. 11.4 crores of profit in the corresponding quarter of last year. We expect to turn back positive in the coming quarters as major domestic business is scheduled to be delivered in the coming quarters, especially in Q3 and Q4. We maintain our overall guidance of about 900 to 950 crores for the entire year with 300 crores of exports and the rest from the domestic segment. With this revenue mix panning out, we are targeting a business profit of about Rs. 140 crores to Rs. 150 crores. We maintain our guidance as given in the last quarter.

Government of India's initiatives to foster local manufacturing as well as raising the transfer of technology from DRDO and ISRO would benefit firms like Astra. Further, we have been taking steps to move up the value chain from the sub-system vendor to a system vendor where opportunity size is huge. We have identified specific growth areas for the future expansion such as SATCOM systems, wind profile radars, ground surveillance radars, doppler weather radars, anti-drone systems and so on.

Now, I would like to share with you some business updates which have happened in the quarter. Astra has signed a tripartite agreement with LRDE, HAL for supply of critical subsystems for AESA radar. As you know, Astra has manufactured X-Band AAAU for ASEA radar and we'll be the industry partner for HAL for supply of these critical subsystems. On NavIC front, we should have clearance for commercial production by end of September 2023. In the meantime, we have developed a proto vehicle tracking unit by making use of the baseband chips and have completed the internal trails. We have also executed ISRO orders for course and timing receiver. In future, we are planning to develop these modules using our own chipsets. Our software drone radar based on DRDO technology is undergoing integrated testing and validation at LRDE. We will be able to commence internal field trials by mid- September. In the last one month, we have concluded negotiations for a few contracts worth about Rs. 160 crores from DRDO and DPSUs including satellite modules, airborne EW modules, development of airborne radars and production of radar modules. Recently, raised QIP funds are put to use as declared in the offer document.

With this, I'll hand over to Mr. M. V. Reddy and later on to Mr. Atim Kabra to share their views and thoughts. Thank you.

M. V. Reddy:Thank you. Good evening, ladies and gentlemen. First, thank you all joining in Q1 earning call that too late in the evening hours.

Although last quarter was a soft one as Mr. SG had mentioned in terms of P&L. But on the positive front, we made a good beginning by bagging reasonably good orders in line with our plans. Out of Rs. 191 crores which we booked in the Q1, Rs. 176 crores from domestic market, that's from DRDO and DPSUs. 80% of them are production in nature with reasonably good gross margins. We are also delighted to inform that we have concluded contracts worth of Rs. 160 crores and approximately Rs. 140 crores worth of contracts are in the final stage of

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negotiations. We're seeing a good visibility to meet our order book plan in Q2 and for the rest

	of FY24 as per guidance given in the beginning of the year.
	To share a few business highlights of the last quarter, apart from what Mr. S. G. Reddy had
	mentioned, we secured a few strategically important development contracts in DRDO and EW
	segment from DRDO. We further strengthened our footprint in Doppler weather radar market
	segment by bagging more contracts from IMD and ISRO. We are actively participating in
	many domestic and global opportunities in the domain of radars, EW and communication
	segments. We have successfully developed AESA seeker head and terahertz proximity sensor
	as we mentioned in the last investor call. We have also delivered digital active phased array
	modules to DRDO. We have initiated development of high frequency MMIC chipsets and few
	radar systems to meet embodied future requirements.
	With these initial remarks, I hand over to Mr. Atim Kobra to share his thoughts. Thank you.
Atim Kobra:	Thanks, MV, thanks, SG and hello everybody.
	As you know, our business mix comprises of low margin exports, high margin domestic
	business are which is born out of our R&D capabilities, and it has been our attempt to change
	the lopsided nature of business wherein revenue gets bunched up in the third and the fourth
	quarter primarily. And I must admit that we have not been very successful as yet in achieving
	the optimal mix as of now, even though we have managed to spread out the export orders over
	quarters almost evenly. The effort made over the first couple of quarters lays the groundwork
	every year for the surge we normally see in the third and the fourth quarter. So, while expenses
	have been more or less normalized, we are expecting a surge again as mentioned by SG on the
	revenue side in the third and fourth quarter. SG has just reiterated that we are on course to
	achieve our stated guidance of Rs. 140 crores to Rs. 150 crores of PBT in the current year,
	which would be a substantial jump over the last year on a year-on-year basis. SG and MV will
	discuss further details on the specific programs that we can talk about, but I wish to talk about
	our prospects and how we are shaping the company for a very sizable spot in the size and
	profitability over the next three to five years.
	As long-term shareholders, we have all seen substantial value accruing to the shareholders and
	rest assured that we are laser focused on the continued growth of the company. I had touched
	upon Astra moving into solutions and systems in the last conference call and a lot of our
	efforts have been concentrated towards the same direction. As a systems entity and as a
	systems integrator, the company needs to take a relook at our organizational structure to ensure
	that the focus attention on the various growth strategies which are being debated and deployed
	as we speak towards our real assets, which is our employees and our talent pool are
	functioning optimally in a SBU kind of a concept. We are exploring adjacencies with our
	current businesses, which I shall briefly explain in detail, and we have alluded to it, SG has
	alluded to it and as we finalize and get the board approvals for these initiatives, I'm sure you'll
	be equally excited as what we are.

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