The brokerage house Motilal Oswal has initiated coverage on this defence company with a Buy rating The brokerage has set a target price of Rs 1,100. This implies an upside of about 24% from current levels. The defence sector stock that is in focus here is Astra Microwave Products.
So what is driving this positive view, and why does the brokerage believe the stock could see 24 upside? Let’s take a look at key reasons behind the brokerage call –
Motilal Oswal on Astra Microwave Products: Strong growth visibility over the next three years
According to the brokerage report, Astra Microwave Products is entering a phase of steady expansion. Motilal Oswal expects the company’s revenue to grow at a compound annual growth rate of 18% between financial year 2025-2028. During the same period, operating margins are projected to improve by around 40 basis points to nearly 26%, which could support a profit after tax growth of 23%.
The brokerage has valued the stock at 38 times December 2027 estimated earnings, noting that this valuation carries a 15% discount compared to larger defence public sector companies, mainly due to Astra Microwave’s smaller size.
Motilal Oswal on Astra Microwave Products: Big defence programmes offer long-term opportunities
A key part of the investment case rests on the size of the opportunity ahead. According to the brokerage report, Astra Microwave’s total addressable market is estimated at Rs 24,000-25,000 crore through financial year 2028.
The company is expected to benefit from upcoming orders linked to major defence programmes, including Quick Reaction Surface-to-Air Missile systems, the Uttam radar for the Light Combat Aircraft Tejas Mark 1A, the electronic warfare suite and Virupaksha Active Electronically Scanned Array radar for Sukhoi-30 upgrades, as well as weapon locating radars. These projects are likely to be awarded over the next one to two years, providing fresh growth triggers.
Motilal Oswal on Astra Microwave Products: Execution expected to improve from FY27 onwards
Motilal Oswal believes that project execution could gather pace in the later years of the decade. As per the brokerage report, execution is expected to scale up between financial year 2027-2030.
The brokerage also noted potential contributions from meteorology-related projects under Mission Mausam and from satellite launches, which could lift revenues from the weather and space segments.
Motilal Oswal on Astra Microwave Products: Order book and partnerships add revenue comfort
Astra Microwave currently has an order book of around Rs 2,200 crore, which provides revenue visibility for nearly three years, according to the brokerage report.
The company has also entered into several joint ventures and strategic alliances to expand into newer areas. These include explosives for anti-drone systems, navigation systems through chip manufacturing, tactical radio communication systems, and electronic warfare solutions in partnership with global defence players.
Motilal Oswal on Astra Microwave Products: Cash flow outlook seen improving gradually
Another factor highlighted by Motilal Oswal is working capital efficiency. The brokerage expects net working capital days to decline from financial year 2026, which should support operating cash flows. However, it also cautions that the reduction is likely to be gradual rather than sharp.
At current levels, the stock is trading at 37.4 times estimated financial year 2027 earnings and 29.3 times financial year 2028 earnings.