1
Nov 01, 2016
Astra Microwave Products Ltd
Recommendation (Rs.)
CMP (as on Oct 30, 2016) 120
Target Price 138
Previous Target Price 151
Upside (%) 15
Stock Information
Mkt Cap (Rs.mn/US$ mn) 10363 / 155
52-wk High/Low (Rs.) 155 / 101
3M Avg. daily volume (mn) 0.4
Beta (x) 1.1
Sensex/Nifty 27930 / 8626
O/S Shares(mn) 86.6
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 16.1
FIIs 2.7
DIIs 32.2
Others 49.0
Stock Performance (%)
1M 3M 6M 12M
Absolute 8 (1) (3) (7)
Relative to Sensex 7 (1) (11) (11)
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
H2FY17E Likely to be Robust; Order Book Offers Visibility
H2FY17E likely to be robust: Astra Microwave Products (ASTM) management
continues to maintain its full year guidance with a negative bias for the targeted
revenue and PAT of Rs.4,500mn and Rs.650mn respectively. For the half-year
ending, revenue, EBITDA and PAT reach to Rs.1,472mn, Rs.314mn and Rs.137mn
which are lower by 28.3%, 27.9% and 40.7% respectively on YoY basis. During
Q2FY17, revenue, EBITDA and PAT reach to Rs.906mn, Rs.289mn and Rs.161mn
which are again lower by 14.6%, 4.8% and 11.0% on YoY basis.
Order book offers revenue and margin visibility: Order book mix remains
a key determinant as observed during H1FY17; over three-fourths of revenue
contribution came in from domestic businesses largely mitigating shrinkage in
absolute prots despite declining revenues. Order booking during H1FY17 comes
in close to Rs.1,630mn and outstanding order book by end of Q2FY17 stood at
Rs.5,610mn, of which domestic defence orders constitute close to 85%, exports at
7% and space at around 6%.
Margins relatively stable due to change in revenue mix: EBITDA margin
stood at 21.3% which is an expansion of 11bps despite declining sales largely
aided by increased contribution to the extent of 300bps. Higher other income
arrested EBIT margin decline to 61bps to 16.0% while higher tax rate had shrunk
PAT margin by 194bps to 9.3% during H1FY17.
Our View: We have revised our Revenue (net), EBITDA and PAT estimates to
Rs.4,117mn, Rs.861mn and Rs.482mn respectively for FY17E and Rs.4,483mn,
Rs.1,031mn and Rs.617mn respectively for FY18E which are lower than our earlier
estimates by 2.3%, 0.4% and 15.5% respectively for FY17E and lower by 7.4%,
1.8% and 16.1% respectively for FY18E largely due to change in our order book
execution rate, other income and tax rate assumptions.
Valuation and Outlook
At CMP of Rs.120, ASTM is currently trading at 21.5x of FY17E EPS of Rs.5.6 and
16.8x of FY18E EPS of Rs.7.1. We roll forward our valuation to FY18E estimates
and continue to maintain our ‘BUY’ recommendation for a price target of Rs.138
valuing the company at 19.5x FY18E EPS of Rs.7.1 for a 9-12 months period.
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar - Standalone (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Net Sales 5312 6343 4196 4117 4483
EBITDA 837 1064 953 861 1031
EBITDA Margin (%) 15.8 16.8 22.7 20.9 23.0
Adj. Net Prot 509 608 564 482 617
EPS (Rs.) 6.2 7.4 6.5 5.6 7.1
RoE (%) 23.0 22.9 16.4 11.5 13.4
PE (x)* 8.1 19.9 16.3 21.5 16.8
Source: Company, Karvy Research, *Represents multiples for FY14, FY15 & FY16 are based on historic market price
Company Update
India Research - Stock Broking
BUY
Analyst Contact
De Arul Kaarthick
040 - 3321 6280
arul.kaarthick@karvy.com
Astra Microwave Products Ltd
Bloomberg Code: ASTM IN
Technology-Hardware-Communications Equipment
70
82
94
106
118
Nov-15
Dec-
15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug -16
Sep-16
Oct-16
ASTM IN
Sensex
Earnings Revision (%)
YE Mar FY17E FY18E
Sales (%) (2.3) (7.4)
EBITDA (%) (0.4) (1.8)
PAT (%) (15.5) (16.1)
Source: Karvy Research
L
L
L
L
L
L
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Nov 01, 2016
Astra Microwave Products Ltd
Exhibit 2: Q2FY17 margins under pressure
YE Mar - Standalone* (Rs. Mn) Q2FY17 Q2FY16 YoY(%) Q1FY17 QoQ(%) H1FY17 H1FY16 YoY(%)
Turnover (net) 906 1060 (14.6) 566 59.9 1472 2053 (28.3)
Op. Expenditure 617 757 (18.5) 541 14.0 1158 1618 (28.4)
EBITDA 289 303 (4.8) 25 1048.0 314 435 (27.9)
Depreciation 57 56 0.7 51 10.0 108 109 (1.2)
Interest 26 21 23.3 18 43.1 44 43 1.9
Other Income 15 7 111.4 15 4.1 30 15 98.9
PBT 221 233 (5.1) (30) NM 191 298 (35.7)
Tax (net) 60 52 15.7 (6) NM 54 67 (18.5)
PAT 161 181 (11.0) (24) NM 137 231 (40.7)
EBITDA Margin (%) 31.9 28.6 327 bps 4.4 2742 bps 21.3 21.2 11 bps
EBIT Margin (%) 27.3 24.0 332 bps (2.1) 2936 bps 16.0 16.6 (61 bps)
PAT Margin (%) 17.8 17.1 72 bps (4.3) 2212 bps 9.3 11.3 (194 bps)
Source: Company, Karvy Research, NM: Not meaningful, * Restated Numbers
Key Takeaways of Conference Call:
Guidance for FY17E and FY18E: ASTM maintains guidance numbers for FY17E and FY18E. ASTM has guided for standalone
order book of Rs.6000mn, revenues (gross) of Rs.4,500Mn and PAT of Rs. 650Mn by end of FY17E. For FY18E, the revenue
(gross) and PAT guidance currently stand at Rs.5,500Mn and Rs.800Mn, which could undergo revision by next quarter.
Order book remains stable: ASTM is yet to book the Rs.1,400mn deemed export order in which the company is L1 participant.
By end of Q2FY17, export orders were at Rs.400mn and are less than 10% of outstanding order book. Overall order book
guidance of Rs.6000mn includes the deemed export order.
Margin comfort going forward: Margins are function of execution mix, as the mix has turned in favour of domestic business.
ASTM is condent of maintaining gross margins for domestic business at over 50% levels, while for exports it expects the same
to be in the range of 80%-85%.
Update on CapEx, R&D activities and new ventures: CapEx plans are only of maintenance nature for FY17E and FY18E;
and are expected to remain in the range of Rs.150mn-Rs.250mn. Bangalore R&D centre is on track to complete the test facilities.
ASTM continues to peruse medium to long term opportunities in various radar and Radio-Frequency (RF) programs that include
development of seekers, Transmit/Receive (TR) modules for LRSAM, QRSAM, Uttam, AWCAS etc. These programs are in
various stages from design, prototype and engineering models.
Outlook on JVs and subsidiaries: Earlier, ASTM assured of revised guidance for JVs and subsidiaries which is yet to be
announced. Nevertheless, with focus on market in the opportune areas, in over ve year period, Canadian JV is expected to
peruse revenues of close to Rs.3,000Mn, Israeli JV of Rs.15,000mn while the same for Singapore subsidiary is in the range of
US$ 0.5Mn and US$ 1.5Mn during FY17E and FY18E respectively.
Exhibit 3: Financials
YE Mar (Rs. Mn)
FY17E FY18E
Old New % Change Old New % Change
Net Sales 4117 4213 (2.3) 4483 4840 (7.4)
EBITDA 861 864 (0.4) 1031 1050 (1.8)
EBITDA Margin (%) 20.9 20.5 39 bps 23.0 21.7 131 bps
Adj. PAT 482 570 (15.5) 617 736 (16.1)
EPS (Rs.) 5.6 6.6 (15.5) 7.1 8.5 (16.1)
Source: Karvy Research
3
Nov 01, 2016
Astra Microwave Products Ltd
Standalone Financials
Exhibit 4: Income Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Revenues 5312 6343 4196 4117 4483
Growth (%) 133.5 19.4 (33.9) (1.9) 8.9
Operating Expenses 4474 5280 3243 3257 3452
EBIDTA 837 1064 953 861 1031
Growth (%) 36.9 27.1 (10.4) (9.7) 19.8
Depreciation & Amortization 148 215 236 220 228
Other Income 78 61 84 62 67
EBIT 767 910 801 702 870
Interest Expenses 67 95 88 60 63
PBT 698 814 714 642 807
Tax 188 207 150 161 190
Adjusted PAT 509 608 564 482 617
Growth (%) 37.0 19.4 (7.3) (14.5) 28.2
Source: Company, Karvy Research
Exhibit 5: Balance Sheet
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Cash & Inventories 610 277 847 1920 2363
Sundry Debtors 1313 1119 1773 2030 2211
Inventory 1465 1336 1195 1495 1597
Loans & Advances 933 674 251 251 251
Investments 24 4 34 34 34
Gross Block 2312 2662 2848 2958 1721
Net Block 1257 1392 1347 1238 1119
Miscellaneous 11 7 21 21 21
Total Assets 5612 4809 5468 6989 7595
Current Liabilities & Provisions 2830 1485 829 1922 2024
Debt 262 315 555 582 612
Other Liabilities 84 108 109 109 109
Total Liabilities 3175 1908 1492 2613 2744
Shareholders Equity 164 164 173 173 173
Reserves & Surplus 2249 2737 3803 4202 4678
Miscellaneous 24 0 0 0 0
Total Networth 2413 2900 3976 4376 4851
Total Networth & Liabilities 5612 4809 5468 6989 7595
Source: Company, Karvy Research
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Nov 01, 2016
Astra Microwave Products Ltd
Exhibit 6: Cash Flow Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
PBT 698 814 714 642 807
Depreciation 148 215 236 220 228
Interest 67 95 88 60 63
Tax Paid (156) (207) (150) (161) (190)
Inc/dec in Net WC (987) (904) (266) 535 (180)
Others (60) (33) (25) 0 0
Cash ow from operating activities (290) (20) 596 1297 728
Inc/dec in capital expenditure (394) (328) (213) (110) (110)
Inc/dec in investments (1) 0 1 0 0
Others 277 59 (1) 0 0
Cash ow from investing activities (118) (269) (212) (110) (110)
Inc/dec in borrowings 144 284 (218) 28 29
Issuance of equity 0 0 64 0 0
Dividend paid (77) (105) (118) (82) (142)
Interest paid (63) (93) (70) (60) (63)
Others 0 0 567 0 0
Cash ow from nancing activities 5 85 224 (114) (176)
Net change in cash (403) (203) 608 1073 442
Source: Company, Karvy Research
Exhibit 7: Key Ratios
YE Mar FY14 FY15 FY16 FY17E FY18E
EBITDA Margin (%) 15.8 16.8 22.7 20.9 23.0
EBIT Margin (%) 14.4 14.3 19.1 17.1 19.4
Net Prot Margin (%) 9.6 9.6 13.4 11.7 13.8
Dividend Payout Ratio (%) 15.0 17.3 21.0 17.0 23.0
Net Debt/Equity (x) (0.0) 0.2 (0.1) (0.3) (0.4)
RoE (%) 23.0 22.9 16.4 11.5 13.4
RoCE (%) 28.6 27.5 19.5 14.8 16.7
Source: Company, Karvy Research
Exhibit 8: Valuation Parameters
YE Mar FY14 FY15 FY16 FY17E FY18E
EPS (Rs.) 6.2 7.4 6.5 5.6 7.1
DPS (Rs.) 0.9 1.3 1.4 0.9 1.6
BVPS (Rs.) 29.5 35.4 45.9 50.5 56.0
PE (x)* 8.1 19.9 16.3 21.5 16.8
P/BV (x)* 1.7 4.2 2.3 2.4 2.1
EV/EBITDA (x)* NM 0.5 9.3 10.5 8.4
EV/Sales (x)* NM 0.1 2.1 2.2 1.9
Source: Company, Karvy Research, *Represents multiples for FY14, FY15 & FY16 are based on historic market price, NM: Not meaningful
5
Nov 01, 2016
Astra Microwave Products Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
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