Domestic brokerage firm Motilal Oswal has initiated coverage on defence electronics player Astra Microwave Products (AMPL) with a bullish 'Buy' recommendation, projecting a significant upside for the stock. The brokerage has set a target price of ₹1,100 per share, implying a potential gain of approximately 25% from current levels.
Long-Term Bet on Defence Electronics
In its latest research note, Motilal Oswal presented Astra Microwave as a compelling long-term investment opportunity within India's booming defence electronics sector. The target price is based on a valuation of around 38 times its estimated earnings for December 2027. The brokerage noted that this valuation offers a 15% discount compared to larger defence public sector undertakings (PSUs), accounting for AMPL's relatively smaller size.
The company, which specializes in designing and manufacturing critical electronics for defence, aerospace, and space applications, is poised to benefit immensely from the government's focus on indigenisation. Rising order inflows from the Ministry of Defence are expected to be a key growth driver in the coming years.
Transition and Key Growth Drivers
Motilal Oswal highlighted a strategic shift in Astra Microwave's business model. The company is evolving from being a component and subsystem provider to becoming a complete system solutions provider. This transition opens doors to larger contracts and improved profitability.
The brokerage identified several near-term and medium-term catalysts for revenue growth, including:
- Opportunities from Active Electronically Scanned Array (AESA) radar programs.
- Orders related to the Uttam radar for the Tejas Mk1A aircraft.
- Projects for the Electronic Warfare (EW) suite and Virupaksha AESA radar for Su-30 MKI upgrades.
- Weapon-locating radars and counter-drone systems.
- Meteorology-related orders under Mission Mausam and satellite launches.
While export opportunities are on the horizon, the brokerage believes they will take 1–2 years to contribute meaningfully to the top line.
Strong Order Book and Financial Projections
Astra Microwave's robust order book of ₹2,200 crore (₹22 billion) provides clear revenue visibility for the next three years. Backed by this pipeline, Motilal Oswal forecasts a healthy financial trajectory.
The brokerage expects the company's revenue to grow at a Compound Annual Growth Rate (CAGR) of 18% over FY25 to FY28. Furthermore, margins are projected to improve by 40 basis points, reaching approximately 26% by FY28. This operational improvement is anticipated to drive a Profit After Tax (PAT) CAGR of 23% over the same period.
Motilal Oswal also underscored the company's impressive and diverse clientele, which includes major defence and research entities such as:
- DRDO labs like RCI
- BrahMos Aerospace
- Bharat Electronics Limited (BEL)
- Hindustan Aeronautics Limited (HAL)
- Larsen & Toubro (L&T)
- Adani Defence and Aerospace
The stock has delivered multibagger returns historically, rallying 616% over the past five years and 200% over the last three years. Despite an 18% correction since May 2024 amid broader small-cap weakness, the stock is still up 16.6% year-to-date. If it closes 2025 in positive territory, it will mark its seventh consecutive annual gain.
Disclaimer: This analysis is for informational purposes only. The views and recommendations are those of the brokerage firm and not of the publisher. Investors are advised to consult certified experts before making any investment decisions.
