Buy Astra Microwave Products; target of Rs 175: Edelweiss

Edelweiss' research report on Astra Microwave Products

AMP has started witnessing revenue traction from H2FY17 primarily led by better domestic executions which fetch higher margins versus export orders, thus driving profitability. We believe FY18 revenue guidance of INR 4,500mn (+10% growth YoY) is achievable given the recent traction in domestic orders and project execution. The Rafael joint venture (JV) is likely to contribute from FY19 onwards.

Outlook

We envisage AMP to bag several orders in domestic market led by priority missile/space programmes, where it has robust track record (with PSU’s like BEL etc) and enjoys significant cost advantage. We estimate 23% EPS CAGR over FY17-19 led by higher proportion of domestic revenue with reasonable RoE/RoCE of 16/19% by FY19. At CMP, the stock is available at 13.5x its FY19 EPS. Maintain ‘BUY/SP’.