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Feb 20, 2013, 12.55 PM IST | Source: Moneycontrol.com

Astra Micro reports another quarter of weak growth: CRISIL

CRISIL Research has come out with its report on Astra Microwave Products (Astra). The company's 9MFY13 performance was below CRISIL Research's expectations. It reported revenues of Rs 484 mn in Q3FY13 against our expectations of Rs 750 mn. Performance was hit again this quarter by delays in final inspection/approval in the domestic orders.

CRISIL Research has come out with its report on Astra Microwave Products (Astra). The company's 9MFY13 performance was below CRISIL Research's expectations. It reported revenues of Rs 484 mn in Q3FY13 against our expectations of Rs 750 mn. Performance was hit again this quarter by delays in final inspection/approval in the domestic orders.

Astra's international orders (offset orders) were executed smoothly (last quarter they were delayed due to unavailability of raw materials). In Q3FY13, the company bagged an order from ISRO which increased the total value of unexecuted order book to Rs 9,400 mn. We expect the company to receive more orders (from Akash missiles programme) in Q4FY13. We have cut earnings estimates for FY13 to factor in the lower-than-expected performance. However, we maintain the fundamental grade of 4/5 based on the expected long-term growth.

Delay in inspection impacted execution of domestic orders
In Q3FY13, Astra executed domestic orders worth Rs 363 mn and export orders worth Rs 136 mn. Total revenues grew 3% y-o-y (31% q-o-q) to Rs 484 mn. The execution of the domestic orders was impacted by delays in inspection. We expect the execution to pick towards the latter part of Q4FY13. The company reported EBITDA margin of 27% (a 15 percentage point decline y-o-y). Interest cost has declined 29% y-o-y to Rs 11 mn. Astra has total debt of Rs 140 mn as on Q3FY13. It fulfils its working capital requirement with the advances received from clients against the orders.

Strong order book; likely to receive more orders in Q4FY13
Astra has a strong order book of Rs 9,400 mn (4.8xFY12 revenues). The order book consists of R&D orders (8% of total order book), domestic orders (25-26%) and export orders (65-67%). The company is likely to execute most of the export orders in FY14. Further, ongoing programmes such as Akash will continue to boost Astra's order book.

R&D products likely to fuel long-term growth
Astra works with government organisations such as Defence Research & Development Organisation (DRDO) in the development of new products. It has supplied prototype subsystems for programmes such as Aslesha Radar, Light Combat Aircraft (LCA), Medium Power Radar (MPR) and Airborne Warning and Control System (AEW&C). These prototypes are in different stages of testing. Induction of these sub-systems will lead to commercial production, which will benefit an already established player such as Astra. The total R&D order book as on Q3FY13 is Rs 740 mn.

Maintain fair value at Rs 55; current market price has strong upside
We continue to use the price-to-earnings method to value Astra at Rs 55 per share. At the current market price of Rs 40, the valuation grade is 5/5.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

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