Astra Microwave Products LTD

VCK Share and Stock Broking Ltd.
Sector: Electronics
Stock details
BSE code
532493
NSE code
Astramicro
Market cap (Rs crs)
1534.1
Free float (%)
44
52-wk Hi/Lo (Rs)
2990/382
Avg. daily volume
15000
558.34
Absolute Return 12M (%)
NSE Return 12M (%)
48.37
SHARE HOLDING PATTERN
Public
25%
FII
9%
Body
corpora
tes
10%
Promot
ers
56%
FOR PRIVATE CIRCULATION
Astra Microwave Products Ltd.

Time Period: Long Term
Current Market Price: Rs.2714
Recommendation: Buy
Target Price: Rs.560 ex bonus & split
Dated: 21st Sept 2005
Company Profile:
The company is pioneer and one of very few
companies from private sector involved in high
technology RF and radar and microwave super
components and sub system products for mission
critical applications in defence, satellite and space
and telecommunication sector.
Highlights:
?? The
company
s revenue has grown at CAGR of
53% and PBT has grown at CAGR of 67.5% since
last 5 years. The company has recorded 87%
jump in revenues to Rs.65 crs.and 127% jump in
net profit to Rs.23 crs in 2005 compared to last
year.
?? The company has appx. Rs.106 crs worth
orders in hand and this is going to increase
significantly as the company is in negotiation with
foreign defence majors for outsourcing some of
their critical applications.
?? The company has completed Rs.10 crs
expansion plan last year and it is further
implementing Rs.25 crs expansion plan during
current year in order to sustain the growth.
?? The company is consistent dividend payer since
its inception and has paid 50% dividend this
year. The company is a big spender on R&D and
spends about 13% of the revenue on R&D.
?? About 60% of the revenues come from BEL and
Bharat Dynamics and defence companies. The
official defence budget of Rs.83000 crs which is
quite a big hike over last year
s defence outlay
has already resulted in big outflow of orders and it
is expected to continue going forward.
1
VCK Research
Analyst: Niraj Shah

Valuation table (Rs. crs)
Year end March
FY04
Sales
34.98
Growth (%)
71.7
EBITDA
13.36
OPM (%)
36.9
Net profit
7.5
Net profit margin (%) 21.4
EPS (Rs)
14.1
CEPS
21.1
DPS (%)
30
ROCE (%)
35.9
RONW (%)
33.9
Sales/Assets
1.39
Interest coverage (x)
8.5
Debt/equity (x)
0.4
Enterprise Value (crs) 180
EV/Sales (x)
5.1
EV/EBITDA (x)
13.5
P/E (x)
198.5
P/BV (x)
62.6
Price/Sales
80.0
3.2
PEG Ratio
Stock Split and Bonus Shares

FY05 FY06E FY07E FY08E
65.1 102.6 134.0 194.0
86.0 57.6 30.6 44.8
30.81 62.0 81.0 117.0
45.1 60.0 60.0 60.0
17.06 37.1 48.3 74.0
26.2 36.0 36.0 38.1
32.0 7.0
9.1 14.0
42.4
8.2
10.3 15.0
50
65.3 51.9 52.5 55.6
57.5 52.5 47.3 45.1
1.72
1.6
2.0
2.7
18.0 24.0 12.9 19.1
0.44 0.47 0.27 0.14
1534.2 1550.2 1550.2 1550.2
23.6 15.1 11.6
8.0
49.8 25.0 19.1 13.2
58.1 40.0 30.7 20.0
31.28 21.0 13.25 8.5
43.0 27.3 20.9 14.4
0.46
1.02 0.37
The company is splitting the stock into

Rs.2 face value and also it has
announced 1:1 bonus shares and it has
fixed 15th October 2005 as Record Date
for this.
Products and applications:
1.Defence Applications: The Company

s
focus is on defence sector and R&D
efforts are thrust more into developing
new systems for Radar electronics,
Missile electronics, EW Applications and
telemetry components. In fact, the
company is specializing in custom made
and order made Research and
development against orders for the
same. About 66% revenue or Rs.43 crs
came from this sector.
2.Space Applications: The Company has started design and

development of Flight Module T/R modules for satellite
applications against development order. The company
expects to complete the development during this year
and start production in large quantities in current year
itself.
The company has also designed and developed Automatic
Weather Station (AWS) in association with ISRO.This product
is used to improve weather forecasting and related
information at local level. The company has signed MOU
with Antrix Corporation of ISRO to supply the same in
bulk quantity.
Only about Rs.1.53 crs or 2.34% of the revenues came from
this sector.
3.Telecom application: The company is the major supplier of
Cellular Repeaters, Jammers, CDMA Filters, VSAT and
Antennas. The company has successfully designed and
developed optical repeater for cellular applications and
it is expecting bulk orders for the same in this year.
VCK Research
Analyst: Niraj Shah
About 31% of the revenues or Rs.20.4 crs came from

this sector.
Exports
The company is believed to be in negotiations with some
foreign defence companies for the development of certain
critical application products as well as for the supply of
already developed high technology microwave components.
This deal is expected during this year and it can be a major
booster for the growth of the company. Announcement on
this front can be a major surprising boost for the stock
price.
Good Order book Position
The company has got about Rs.106 crs order in hand and
with the development of new products for space &
telecom sectors this order book is only going to swell
further. Besides, the company is now putting new
thrust on exports which is almost nil at present. This
will further add to its swelling order book.
Expansion and New Projects
The company is implementing Rs.25 crs expansion plans. The
company has raised debt of Rs.17.5 crs at an interest rate of
8.25% for the same and the rest Rs.7.5 crs.through internal
accruals. This expansion involves addition of testing and
environmental equipments and construction of new
manufacturing facilities.
VCK Research
Analyst: Niraj Shah
Increased Defence Budget
The defence budget for 2005-06 has increased by 7.8% to

Rs.83000 crs compared to Rs.77000 crs a year ago. The
major proportion of this budget is for the modernization of
the defence system. If we add the unspent amount from
previous years, this amount goes over Rs.1 lakh crs.
This big budget has resulted in the huge orders to companies
like Bharat Electronics, Bharat Dynamics, DRDO, etc.
Astra Microwave being the main and critical supplier of RF and
microwave components and sub systems for the systems
supplied by these companies is also going to be the major
beneficiary.
Telecom sector-world
s fastest growing
The telecom sector in India is growing at more than 20% per
annum and it is expected to continue to grow at the same
rate for coming few years.
VCK Research
Analyst: Niraj Shah
Astra Microwave is continuing to benefit from this growth as

also from the growth of finance and capital market.
The capital and stock market is going into new zone of growth
and the big stock broking houses are expanding and opening
many more branches throughout India and that mainly in
remote places because of the growth opportunities it
provides. The connectivity of all these branches is provided by
VSAT and so the demand for VSATs and allied components is
only going to increase with the growth of retail finance and
banking business. Astra Microwave is the only developer
of VSATs in India and it is well placed to benefit from
this growth.
Space Technology
ISRO
s 5-year budget is USD 3.3 billion. India
s space
program is already a money earner and it sells infrared
images from its remote sensing satellites to other countries.
If everything goes right, India
s moon mission Chandrayan
will be launched by end 2007. ISRO is also planning next
generation GSLV, Mark 3 for launching biggest satellites at
half the rate charged US, Russia or France. In fact many
African and Asian countries have shown interest and help of
ISRO in developing their space technology on commercial
basis. Astra Microwave is closely associated with ISRO in the
development of flight model and other mission critical
components since long time. So, all this progress and growth
of ISRO is indirectly helping the company with the
development of new products.
Financial Performance:
The company has achieved sales of Rs.65 crs registering
an impressive growth of 87%. The EBIDTA has grown
142% to Rs.30.81 crs. The net Profit after tax has grown
by 127% to Rs.17.06 crs compared to Rs.7.5 crs. In
fact, the company
s sales have grown at CAGR of 53%
and PBT has grown at CAGR of 67.5% since last 5
years.
VCK Research
Analyst: Niraj Shah
Concerns:
The majority of the company
s business comes from defence
segment. Generally, defence purchases and projects have
long gestation period and as such can affect the growth of the
company. Besides, any change in the defence policy can
adversely impact the company
s growth.
Valuation and Recommendation:
The company
s sales are expected to grow at CAGR of 45%
to cross Rs.200 crs in FY2007-08. The stock looks overvalued
by Simply looking at PE and other valuation parameters. But
this company has grown at more than 55% since last 5 years
and it is expected to maintain the momentum of growth and
even better it with the outsourcing of R&D in high technology
sector picking up. The company is believed to be in talks with
some major US and European defence manufacturing
companies as well as space agencies for the
development and manufacturing of critical RF &
microwave
radar
components.
Any
positive
announcement on this front will act as a big booster for
the stock price and rocket it into higher zone.
We recommend buy on the stock because of
tremendous growth potential it has got and in addition
it is a niche player in a very critical, high technology
exclusive and highly growing defence, space and
telecommunication sector. This is a very good
investment stock and can give the tremendous returns
over a period of 2-3 years. The stock has got very good
support at 2600 level and below that strong support at
2400 and becomes a value buy at these levels. We
expect the price target of Rs.560 with 2-3 years long
term view.
VCK Research
Analyst: Niraj Shah
Company Financials:
Income Statement
(Rs.Crs.)
Y/E March
Gross Sales
Net Sales
Other Income
Total Income
Total Expenditure
PBIDT
OPM (%)
Interest
PBDT
Depreciation
Tax (Incl. Def.Tax)
PAT
NPM (%)
EPS
FY 04
39.53
34.98
1.22
36.2
22.84
13.36
36.9
1.14
12.22
3.72
1.0
7.5
21.4
14.1
FY 05
76.03
65.1
3.19
68.29
37.48
30.81
45.1
1.4
29.41
5.48
6.87
17.06
26.2
32.0
FY06E
120.2
102.6
1.4
104
42.0
62.0
60.0
2.3
59.7
6.7
15.9
37.1
36.0
7.0
FY07E
156.0
134.0
2.0
136
55.0
81.0
60.0
5.8
75.2
6.2
20.7
48.3
36.0
9.1
FY08E
226.0
194.0
2.0
196.0
79.0
117.0
60.0
5.8
111.2
6.0
31.2
74.0
38.1
14.0
Balance Sheet (Rs. Cr.)

FY04
5.06
0.0
17.31
22.37
9.49
3.05
34.91
SOURCES OF FUNDS
Equity Share Capital
Preference Share capital
Reserves Total
Total Shareholders Equity
Debt
Deferred Tax Liabilities
Total Liabilities
FY06E
*
FY05
FY07E
5.31
10.6
10.6
0.0
0.0
0.0
31.37 60.0 102.0
36.68 70.6 112.6
16.01 33.5
30.0
4.38
2.38
0.0
57.07 106.48 142.6
FY08E
10.6
0.0
164.0
174.6
25.0
0.0
199.6
APPLICATION OF FUNDS
25.26
9.3
15.96
Net Block
0.44
Investments
2.33
Cash and Bank
30.45
Current Assets
11.88
Less: Current Liabilities
18.57
Net Current Assets
Misc.Exp. (Incl. Def. Tax assets) 0.14
35.11
Total Assets
Gross Block
Less Depreciation
37.86 64.0
66.0
70.0
14.72 21.4
27.6
33.0
23.14 42.6
38.4
37.0
5.65
8.65
10.0
14.0
7.07
4.5
4.1
5.5
52.86 105.0 174.2 260.0
24.8
50.0
80.0 112.0
94.2
148.0
28.06 55.0
0.22
0.2
0.2
0.2
57.07 106.45 142.6 199.2
*1:1 Bonus shares
VCK Research
Analyst: Niraj Shah
Cash Flow (Rs. Cr.)

Net cash From Operating
activities
Net cash From Investing
activities
Net cash From Financing
activities
Net Inc./(Dec.) in cash
Cash at the beginning of the
year
Cash at the end of the year
FY08E
FY04
FY05
FY06E FY07E
8.83
15.3
14.8
13.1
26.0
-12.45
-13.4
-29.0
-4.0
-8.0
3.74
0.12
2.98
4.88
11.5
-2.7
-9.5
-0.4
-17.0
1.0
2.21
2.33
2.33
7.2
7.2
4.5
4.5
4.1
4.5
5.5
Price Chart:
Disclaimer - The information in this report has been obtained from sources, which VCK Research believes to be reliable, but we do not
hold ourselves responsible for its completeness in accuracy. All estimates and opinions in this report constitute our judgment as of this date
and are subject to change without notice. VCK Research will not responsible for the consequence of reliance upon our opinion or statement
contained herein or for any omission.
VCK Share & Stock Broking Services Ltd.
Analyst: Niraj shah
41, Shakespeare Sarani, Kolkata - 700017

Email: research@vckgroup.org
Kolkata Office - Ph:(033) 22872387/ Fax: (033) 22478479
Mumbai Office - Ph:(022) 56325727/ Fax: (022) 56325737
VCK Research
Analyst: Niraj Shah

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