Astra Microwave Products

Transcription

1 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Research Desk Stock Broking Capital Goods - Defence August 4, 2014 RESULT REVIEW Bloomberg: ASTM@IN Reuters: ASTM.BO Results in-line with expectation-maintain BUY Astra Micro s Net sales rose to Rs.1,874 mn and Net profit stood at Rs.191mn for Q1FY15, as against the guidance of Rs.2,000mn in Net sales and Rs.250mn in Net profit. Net profit margins expanded by 452bps YoY to 10.2% in Q1FY15 on account of improved sales. The operating margins were lower by 158bps YoY to 18.1% during the quarter due to higher revenue contribution from exports business. Strong order book: Book-to-Bill ratio stood at 1.1 at the end of Q1FY15. Order book stood at Rs.8,130mn with contribution from Exports at Rs3,800mn, Defence at Rs3,940mn, Space at Rs280mn and Metrological & Telecom at Rs110mn. We believe order book to reach to Rs6,714mn at the end of FY15. Robust export revenue: Revenue from the exports segment stood at Rs.1,140mn accounting for 60% of the total revenues due to the execution of offset contracts, while the remaining Rs.750mn was contributed by domestic segment during Q1FY15. On a QoQ basis, sales remained flat whereas it has seen a sharp growth on a YoY basis due to low base amid slower execution during Q1FY14 in which sales were at Rs.361mn and profits were at Rs.22mn. Recommendation BUY CMP Rs 137 Target Price Rs 188 Previous Target Price Rs 188 Upside (%) 37% Stock Information Market Cap. (Rs bn / US$ mn) 11/ week High/Low (Rs) 157/30 3m ADV (Rs mn /US$ mn) 141/2.4 Beta 0.97 Sensex/ Nifty 25,723/7,684 Share outstanding (mn) 81.8 Shareholding Pattern (%) Promoters FIIs 0.14 DIIs Others Stock Performance (%) 1M 3M 12M YTD Absolute (9.6) Rel. to Sensex (8.8) Margin expansion driven by revenue mix: We believe low margin exports business to contribute two-thirds of the revenues during FY15E. We expect export business to contribute significantly for revenue till Q2FY15, whereas in the last two quarters of FY15 there will be higher contribution from domestic segment which will boost the profit margins and cash flows. Outlook and Valuation: We maintain our estimates for FY15 and FY16 after Q1FY15 results which were in-line with our estimates. We maintain BUY on the stock for a target of Rs.188, representing 16.8xFY16E EPS. Performance Exhibit 1: Valuation Summary (Rs. Mn) Net Sales EBIDTA EBIDTA Margin (%) Adj. Net Profit EPS (Rs.) RoE (%) PE (x) Astra (RHS) Source: Bloomberg Earnings Revision (%) FY15E FY16E Sales EBITDA PAT Source: Karvy Research Analysts Contact Arul Kaarthick arul.kaarthick@karvy.com Sensex (LHS) For private circulation only. For important information about Karvy s rating system and other disclosures refer to the end of this material. Karvy Stock Broking is also available on Bloomberg, KARVY<GO>, Thomson Publishers & Reuters

2 Exhibit 2: IQ FY 15 In-line with expectation YE Mar (Rs. Mn) 4QFY14 1QFY15 QoQ % 1QFY14 YoY % Turnover Expenditure EBIDTA Depreciation Interest Other Income PBT Tax PAT Adjusted PAT PAT B/F EO Items EBIDTA (%) EBIT (%) Net profit (%) Exhibit 3: Quarterly segmental Revenue Order Book 1% 3% Metrological & Telecom 40% Domestic Exports 47% Space Defence 60% 48% Exports 2

3 Key Takeaways of Conference Call Revenue Guidance: Astra Micro management continues to maintain the guidance of sales of around Rs.6,500mn and Profit of around Rs.700mn for FY15. We expect Astra Micro to meet the guidance for FY15. Order Book: Management is confident of domestic order intake of around Rs mn and offset related exports orders worth US$ 90 million during FY15. In our view, offset contract is far from reach considering the lower allocation for defence capex in the Union budget Margin Profile: Blended margins are dependent on revenue mix from domestic and exports business. Astra Micro is expected to maintain margins similar to that of Q1FY15 throughout FY15. Working Capital: Astra s subsidiary Bhavyabhanu Electronics to remain as a captive supplier of PCB boards. We believe this could result in better working capital management with limited cash outflows as advances and also lower the requirements for short-term borrowing. R&D Pipeline: The company is focusing on developing products like Seekers, Advance Radar Warning Receivers and Wind Profile Radar which is expected to drive business volumes in the next 2-3 years. New R&D Centre: Astra Micro is setting-up an R&D center in Bangalore. The facility will deepen the company s focus on Radars for defence, security and other civilian applications. Financials Exhibit 4: Income Statement (Rs. Mn) Revenues Growth (%) Operating Expenses EBIDTA Growth (%) Depreciation & Amortisation Other Income EBIT Interest Expenses PBT Tax Adjusted PAT Growth (%)

4 Exhibit 5: Balance Sheet (Rs. Mn) Cash & equivalents Sundry Debtors Inventory Loans & Advances Investments Gross Block Net Block Miscellaneous Total Assets Current Liabilities & Provisions Debt Other Liabilities Total Liabilities Shareholders Equity Reserves & Surplus Total Net worth Total net worth & Liabilities Exhibit 6: Cash Flow Statement (Rs. Mn) PBT Depreciation Interest Tax Paid Inc/dec in Net WC ,085 2,445 Other non cash items Cash flow from operating activities 76 1, Inc/dec in capital expenditure Inc/dec in investments Cash flow from investing activities (In)/dec in borrowings Issuance of equity Dividend paid Interest paid Cash flow from financing activities Net change in cash

5 Exhibit 7: Key Ratios YE Mar (%) FY12 FY13 FY14 FY15E FY16E EBIDTA Margin (%) EBIT Margin (%) Net Profit Margin (%) Dividend Payout ratio Net Debt/Equity RoE (%) RoCE (%) Exhibit 8: Valuation Parameters EPS (Rs.) DPS (Rs.) BV (Rs.) PE (x) P/BV (x) EV/EBIDTA (x) EV/Sales (x)

6 KARVY STOCK BROKING EQUITY RESEARCH DESK Name Role Phone Number Id JK Jain Head of Research M Rajendra Prasad Research Analyst Joyjit Sinha Research Analyst De Arul Kaarthick Research Analyst Kaushal Kumar Jaitliya Research Analyst Prashant Kanuru Research Analyst Sai Prabhakar Research Analyst Varun Chakri Research Analyst Deepak Ranjan Sahu Research Analyst Vivek Agarwal Research Analyst

7 Stock Ratings Absolute Returns Buy : > 15% Hold : 5-15% Sell : < 5% Connect & discuss more at For further enquiries please contact: research@karvy.com Toll Free: Disclosures Appendix Analyst certification The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report. Disclaimer The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Stock Broking nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures nor other derivatives related to such securities. Karvy Stock Broking Limited Karvy Centre, Avenue-4, 2nd Floor, Road No: 10, Banjara Hills, Hyderabad India. Tel: ; Fax: For More updates & Stock Research, visit 7