Buy Astra Microwave; target of Rs 175: Edelweiss

Edelweiss' research report on Astra Microwave

Astra Microwave (AMP) posted strong operational performance in Q4FY17 with sales and EBITDA jumping 26% and 49% YoY, respectively, despite INR110mn liquidated damages (LD) while intake was lower. Key highlights were: a) solid 57% gross margin (up 600bps YoY) riding domestic execution led to 27% EBITDA margin (up 400bps YoY), which adjusted for LDs paid stood at 34%; and b) new orders at INR4.1bn came below estimate led by spillage in Akash/space orders

Outlook

We expect AMP to benefit significantly from upcoming domestic missile programmes wherein it is one of the preferred vendors for PSUs.This will drive major portion of FY18/19E new intake/profitability. Maintain ‘BUY’ with target price of INR 175 at which it discounts FY18/19E earnings at 16.5x/13.5x

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