Astra Microwave Products Limited

Astra Microwave makes radio frequency and microwave hardware in Hyderabad: transmit and receive modules, antenna array units, telemetry, electronic warfare subsystems, missile seeker parts and Doppler weather radars. It has been at this since 1991 and moved into complete radar systems from 2015.

Almost all of it goes to the government. FY26 standalone sales came from DRDO 28.2 percent, BEL and other defence PSUs 22.7 percent, the India Meteorological Department 18.0 percent, ISRO and SAC 6.4 percent, exports 11.9 percent mostly through Rafael, and private customers 3.0 percent.

What makes it hard to replace is that it makes its own chips, gallium arsenide and gallium nitride up to 40 GHz, rather than importing and assembling them. India keeps widening the negative import list, and when a part gets sanctioned the firm that can build it keeps the programme.

Two other things to know. Astra Rafael Comsys, the 50:50 joint venture with Rafael of Israel, holds a 625 crore order book but contributed only 8 crore to consolidated profit in FY26, down from 12 crore in FY24. And the board approved a scheme on 10 June 2026 to hive off the space, meteorology and hydrology businesses into a separately listed company with the same shareholders, running on its own from April 2027. S. Gurunatha Reddy hands over as Managing Director to Dr M.V. Reddy on 1 October 2026. Promoter holding is 6.54 percent, so the board and the institutions run this company.

On 30 July the company won an order from HAL worth 2,205.23 crore including GST, about 1,870 crore net, for 122 airborne antenna array units and 121 interface frames for the Uttam AESA radar, to be delivered over five years. That single order is bigger than the entire book before it. Management now puts the total order book at about 4,300 crore against 2,156 crore at 30 June.

On 10 August the June quarter came in weak. Standalone sales fell 10.7 percent to 176 crore, EBITDA fell 13.7 percent to 33 crore with margin at 18.8 percent against 19.5 percent, and profit fell 24.4 percent to 10 crore. Consolidated sales fell 11.5 percent to 177 crore and profit fell 24 percent to 12 crore. The stock dropped about 6 percent.

Compare only against the same quarter last year. Q4 FY26 did 488 crore, which is 42 percent of the full year in three months, because sales are booked when the customer formally accepts the equipment and acceptances pile up at year end. Management blames delayed approvals and last stage technical issues and expects to catch up in the second half. That fits how the business works, though nobody outside can verify it.

Guidance stayed where it was: FY27 standalone sales of about 1,350 crore, FY28 about 1,600 crore, and new orders of about 1,600 crore in FY27 excluding the HAL win. Longer term, management talks about winning 8,000 to 9,000 crore of orders over three to four years, to be executed over five to six.

Work that through. Add the 4,300 crore in hand to the full 8,000 to 9,000 crore they hope to win, spread it over six years, and you get about 2,050 to 2,200 crore of sales a year. From 1,156 crore in FY26 that is growth in the mid teens, which is exactly what the guidance says. The record order book and the modest guidance agree with each other.

The one genuine improvement is cash. FY26 standalone operating cash flow was about 376 crore against profit of 178 crore. Net debt fell from about 325 crore to about 45 crore while the company spent 87 crore on plant. The two years before that ran the other way, with operating cash flow of minus 187 crore in FY24 and minus 99 crore in FY25, so that across FY24 and FY25 the company reported 256 crore of profit and burned 286 crore of cash, funded by a 225 crore share issue and short term debt. Management has already said working capital will not improve from here and the pressure returns in the second half.

The HAL order runs to FY32, with twelve units due by September 2027 and about 25 a year after that. At roughly 15 crore a unit the first phase is worth around 185 crore, so the money arrives from FY29 onwards.

Nearer term, Astra says it is lowest bidder for the antenna array unit on the AMCA programme with a contract expected shortly. QRSAM orders through BEL should bring 700 to 800 crore for the first three regiments. The Su-30 upgrade work is described as at least 3,000 crore of opportunity, and the joint venture expects 500 to 750 crore of orders.

Nothing in the guidance includes counter-drone systems, the electromagnetic wall demonstrated in July, chip sales, the Tejas Mk1A electronic warfare suite that management sizes at 500 to 600 crore, or the BrahMos next generation seeker. All of that is extra if it lands.

There are 20.14 lakh warrants outstanding at 864 each, convertible by 29 December 2026, bringing in 130.5 crore for about 2 percent dilution.

Working capital is the operating risk. The cash conversion cycle was 374 days in FY26, with receivables of 687 crore and inventory of 609 crore against sales of 1,156 crore. Netting off payables and advances, roughly 90 paise is tied up for every rupee of annual sales. Getting to 1,600 crore by FY28 therefore swallows about 390 crore of extra working capital, close to all the profit earned in those two years. Management has ruled out issuing equity for working capital, which leaves debt.

The customers set the payment clock. Debtor days have swung between 128 and 273 over six years. When a lab or a PSU delays an acceptance test, sales slip by quarters and cash by years, which is what happened this quarter.

Margin has done the heavy lifting and cannot do it twice. Gross margin went from 28.7 to 49.1 percent and EBITDA margin from 11.8 to 28.0 percent between FY22 and FY26. Management now guides to margins similar to last year.

The order mix pushes the other way. At 30 June the book was 65.7 percent production work against 14.3 percent development, and the HAL order is production. In FY26, with sales at 51 percent production, margin was 28 percent. In the June quarter, with sales at 93 percent production, margin was 18.8 percent. Some of that gap is low volume over fixed costs, but not all of it.

Delivery risk sits on top. The company has to double output while changing its Managing Director and after bringing in new heads of technology, quality, purchasing, human resources and sales over the last 18 months, with supplier lead times stretching because all of Indian defence is restocking at once.

Return on equity was about 14 to 15 percent in FY26 and return on capital about 19 percent. Both improved, and both are held down by the working capital the business carries.

At 1,710 the company is worth about 16,245 crore, with almost no net debt and a book value of 1,314 crore, so 12.4 times book.

The table uses the company's own reported figures and its own guidance, which is given standalone. Consolidated profit runs about 8 percent higher.

The FY27 and FY28 profit numbers apply the company's own FY26 net margin of 15.4 percent to its own sales guidance.

Read the row across. The stock is on 86 times trailing earnings, 72 times FY27 guidance and 61 times FY28 guidance. Two full years of guidance delivered leaves the multiple in the sixties.

Carry the guidance out to FY31 at the top of the guided range, 20 percent a year, and consolidated sales reach about 2,900 crore. At the best margin the company has ever earned, 16 percent, that is profit of about 460 crore. At 1,710 you are paying 35 times the profit that arrives five years from now. At the bottom of the guided range it is 45 times.

The order pipeline supports mid teens growth, and the price needs a good deal more than that. The company has to grow faster than it is guiding, hold its peak margin while the mix shifts towards production work, and fund the working capital that comes with it, all at once. That is what you are underwriting at this price.

Two years running of operating cash flow at or above reported profit with debtor days under 180. Sales growing above 25 percent while margin holds at 28 percent through a production heavy mix. A firm AMCA award with a number on it, or counter-drone and homeland security work showing up in the accounts.

Against that: working capital eating last year's cash release as the HAL ramp starts, margin slipping below 25 percent, or FY27 sales landing below 1,325 crore, which after a 176 crore first quarter needs about 1,175 crore in nine months.

TenetFour Research. Educational analysis only. Not investment advice or a recommendation to buy, sell, or hold any security. Author may hold a position. Readers are responsible for their own decisions.