Astra Microwave Products : Investor & Analyst Meet Transcript Q4 FY23

"Astra Microwave Products Limited

Q4 and FY'23 Earnings Conference Call"

May 29, 2023

Disclaimer: E&OE - This transcript is edited for factual errors. In case of discrepancy, the audio recordings uploaded on the stock exchange on 29th May 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

May 29, 2023

Moderator:Ladies and gentlemen, good day, and welcome to Astra Microwave Products Limited Q4 and FY'23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the belief, opinions and expectations of the company as on 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. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an Moderator: by pressing star then zero on a touchstone phone. Please note that this conference is being recorded.

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

S. G. Reddy:Thank you, Nirav. Good morning to everyone and a warm welcome to all the participants to the post results earnings call of our company. I'm with my colleague, Mr. M. V. Reddy, Joint Managing Director; and Mr. Atim Kabra, Director, Strategy and Business Development; and SGA, our Investor Relations Advisors.

The results and investors presentation for the Q4 and year ended are already uploaded on public stock platform. I hope that you had an opportunity to look at it. It has been a milestone year for us, as we have successfully completed our QIP and registered our best financial performance ever across all matrices. We closed the year with a topline of INR807 crores, EBITDA of about 18%. Our order book position is very healthy at INR1,544 crores. We are also happy that the amount of confidence expressed in our abilities by leading institutional investors in India and outside in our capabilities and growth prospects.

Before we talk about our performance in detail, I wish to inform you that, during the quarter we have booked about INR115 crores worth of orders, mainly comprising of INR48 crores from Radar, INR17 crores from EW and INR7 crores from Missile Electronics. On the sales front, out of INR253 crores, Radars have contributed to INR56 crores, EWs about INR29 crores, Missile Electronics INR16 crores and exports about INR138 crores.

During the quarter, the company has responded to INR350 crores worth of businesses through RFPs and closed purchase negotiations for INR134 crores, which is entirely for the domestic market. During the quarter, company has signed MoUs and other means of partnerships with Indian and foreign partners to deepen our products and the technology expertise. I'm not able to get into the specific details because of the strategic reasons.

Overall, there are various tailwinds in the defence space for players like us. Globally, the countries are spending large amounts of money in the military. Our government who spends about close to 3% of GDP on defense every year, is highly focused on increasing self-reliance. This Mission is driven by increase in R&D spend by DRDO labs and also by increasing private sector to invest in developing products on NCNC model.

With our long-standing relationship with our customers under several years of experience in high-tech oriented products, we plan to benefit immensely from this boost. In fact, we are

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Astra Microwave Products Limited

May 29, 2023

working on various items which are part of government's negative list and this presents a gamut of opportunities for us.

Coming to our stand-alone performance for the Q4, the revenue stood at about INR256 crores as against INR239 crores for corresponding year of last year, a growth of about 7.3%. Gross margin is about 28%. The domestic sales contributes higher margin compared to the export sales. In the last two quarters, the margins have improved in a very strong way because the domestics were more compared to the exports. However, in the quarter ended Q4, there is a slight correction because the export revenues are higher compared to the domestic sales.

Talking about full year performance, the revenue stood about INR807 crores as against INR735 crores for the last year. Gross profit has increased by about 36.7%. Due to changing geographical mix as compared to the last year, the overall domestic sales are higher in the current year. Similarly, the other gross margins have improved. Profit margins have improved essentially because of the change in the product mix of the company, where domestic sales have contributed more compared to the export sales.

The Board of Directors have recommended a dividend of about INR1.60 per share, that is 80% for the year ended financial year 2023. At the end of the quarter, our stand-alone outlook, as I said earlier, is at about INR1,544 crores. This order book consists of 24% of exports and 76% domestic orders. From this order mix available, it is clear that in the coming years, domestic business will be a major competitor to the overall business of the company, which means improved gross margins.

In the other order book update, I would like to share with you our joint venture partner, a joint venture company, Astra Rafael has very recently won an order of about INR158 crores from Hindustan Aeronautics Limited for supply of software-defined radios, which is executable in the next financial year. With a strong order book and inflow for financial year FY '24, we are confident to have a top line of about INR900 crores to INR950 crores and at a PBT of about INR150 crores, it's basically 10% this way and that way.

We have improved our profitability compared to the last financial year as explained above, and this is likely to improve further because of change in the overall product mix of the company and also with the proper utilization of the QIP fund, which was very recently. That QIP of INR220 crores, which will give a strong boost to our future growth by investing in newer technologies and develop newer products.

Company has identified about 10 products or projects to invest proactively and expect to come out successfully in the next 3 to 4 years. This proactive investment should help the company to sustain and improve its top on bottom line in the long run. The company is also in discussions with start-ups and the small private companies with unique expertise to jointly develop newer products with a joint ownership and sharing of profits. The idea is to have a larger pool of products to target wider market sales within defense and aerospace.

To conclude my opening remarks, I would like to highlight that Atma Nirbhar Bharat is becoming a reality and the industry is making great strides and also is very poised to capture

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	Astra Microwave Products Limited
	May 29, 2023
	this opportunity. Now I will hand over to Mr. Atim Kabra, Director, Strategy and Business
	Development; and to Mr. M. V. Reddy, Joint Managing Director, to share their thoughts. To
	start with, Mr. Atim Kabra will take over.
Atim Kabra:	Good day, everybody. I want to take this opportunity to sketch out the broad contour of our
	vision at Astra. As you are very well aware, we have today completed a significant milestone
	in our journey so far, where we have progressed from being a sub-component manufacturer to
	a system-level entity, as we have continuously moved up the value chain over the years. This
	journey is no different from what has been successfully accomplished and demonstrated by
	India's very successful IT industry. Likewise, we moved from being a sub-component supplier
	to a component supplier to being a subsystem for guys, and now we deliver complete systems
	also.
	At this point in time, we wish to also focus on creating multiple solutions. On a day trade,
	Astra branded solutions around our core competencies in RF and microwave domains. We
	want to transition from merely supplying radars and subsystems and systems to possibly
	supplying complete solutions, which will encompass radars and sub-components and
	subsystems as their core and around which solutions will be built, leveraging our extensive
	R&D capabilities as well as in-house expertise supplemented as SG very rightly pointed out by
	externally sourced capabilities through collaborations.
	And exercise is on within the company to identify strategic growth areas with large total
	addressable markets where we can identify specific market opportunities and issues where
	specific solutions can be offered. Yes, I'm going to illustrate this with some broad examples
	since its early days. Should we be content with offering anti-drone systems? Or shall we be
	expanding our offering and offer complete anti-drone solutions is a question, which we are
	debating.
	Are there other areas where the core tech powering anti-drone solutions can be applied to
	address different customer bases and both horizontal expansion of our offering can be achieved
	with a vertical deepening of our capabilities. Or should we be just supplying ground
	penetration radars, for example, or create solutions around ground penetration radars, which
	can help in, let's say, disaster management or better surveillance in our border area, etcetera,
	etcetera.
	Should we be exploring further extended applications of our RF receivers and data loggers to
	expand our weather-related offerings and other such related offerings, which arise from such
	capabilities? Should we be exploring launching Astra made satellite payloads? Should we be
	exploring the next frontline of warfare, which is space? Should we be focusing on establishing
	satellite communication systems or take our vision as we had mentioned, of a self sufficient
	India by exploring controlling satellite communication links both ways. These are a few areas
	and domains which are being explored as we speak.
	Work has commented on this and this transition from almost exclusively based -- being a
	tender-based business to an on-demand ready solutions company comes at a very opportune
	time where we have the required skill set and the tech within the company to achieve higher
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