Astra Microwave Products Limited (ASTRAMICRO) Q3 FY23 Earnings Concall Transcript

Astra Microwave Products Limited (NSE:ASTRAMICRO) Q3 FY23 Earnings Concall dated Feb. 10, 2023.

Corporate Participants:

S. Gurunatha Reddy — Managing Director

Atim Kabra — Non-Executive Director

Maram Venkateshwar Reddy — Joint Managing Director

Analysts:

Hitanshu Bhatia — Gandi Securities — Analyst

Riya Verma — NR Securities — Analyst

Vignesh Iyer — Sequent Investments — Analyst

Ketan Gandhi — Gandhi Securities — Analyst

Pulkit Jhunjhunwala — Investor — Analyst

Subrata Sarkar — Mount Intra Finance — Analyst

Viral Shah — Shah Investments — Analyst

Amit Dixit — ICICI Securities — Analyst

Bhavik Shah — Emkay Ventures — Analyst

Shuja Siddiqui — Investor — Analyst

Abhishek Dave — Bright Securities — Analyst

Ashit Kothi — Investor — Analyst

Simal Deep — Negen Capital Services — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Astra Microwave Products Limited Q3 FY ’23 Earnings Conference Call. This conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinions and expectations of the Company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note this conference is being recorded.

I now hand the conference over to Mr. S. G. Reddy, Managing Director. Thank you and over to you, sir.

S. Gurunatha Reddy — Managing Director

Thank you, Vikram, and good afternoon to everyone. A warm welcome to all the participants to the fourth earnings call of our Company. I am with my colleague, Mr. M.V. Reddy, Joint Managing Director; and Mr. Atim Kabra, Director, Strategy and Business Development; and SGA, our Investor Relations advisers.

The results and investor presentation for the quarter ended — third quarter ended are uploaded on our website and stock exchanges. I hope you have an opportunity to look at it.

I’m happy to inform you that we have reported another quarter of stellar performance and recorded our highest ever quarterly profitability. We achieved a record EBITDA and PAT was INR53 crores and INR30 crores, respectively, for the quarter ended December.

For 9 months period, we have delivered INR86 crores of PBT, which is our guidance for the entire year. This quarter is a good quarter, not only in terms of sales and profitability, but also in terms of products delivered by the Company.

We have delivered following systems to our customers during the quarter. Radiation more test and evaluation facility, 7.3 meter antenna system for IDR, SD radar for Kolkata University and PAT M2 for IDR. We expect to deliver about INR270 crores of sales during quarter four and reach an overall top line of about INR85 crores. Bottom line at a PBT level will be about INR110 crores. We expect to end the year with an open order book of about INR1,750 crores. For the next financial year, we are confident to book about INR900 crores orders and delivered a top line of about INR950 crores. and the bottom line at PBT level of INR135 crores.

Long-term view for the next five years ending 2028, we are confident to deliver accumulative topline of about INR8,000 crores carry over our book of INR6,000 crores at the end of 2028. During these years, we are confident to deliver bottom line at PBT level of 15% to 18% of revenue. Before I open this discussion for question and answers, I introduce my new colleague, Mr. Atim Kabra, who joined our Board as a whole time director taking off looking after the business and the strategy development on 1 January 2024.

Atim, I warmly welcome you —

Atim Kabra — Non-Executive Director

Thank you, SG.

S. Gurunatha Reddy — Managing Director

Yeah.

Atim Kabra — Non-Executive Director

Thanks, SG, and hello, everybody. As a fellow shareholder in my mind, I represent all shareholders. And I’m very excited by what I see in potential business at Astra.

My desire is that we delayed Astra with radars, that we know that our company is a key enabler in electronic warfare and a key enabler of missile subsystems. We know Astra as being a key player in the satellite space. And lastly, its products in meteorology and weather segments are important for the nation. We are looking at a significant growth phase for the Company, which has delivered a very healthy return to its shareholders with a — and we are looking at a five-year cumulative sales execution for cost of close to $1 billion in gross sales.

To put it in perspective, that’s nearly 10 times our current sales trajectory cumulatively. And we hope to grow our order book alongside to a very, very healthy number at the closing of year five. Even better is that we expect this rear-ended sales growth to be with improving margins and rising return ratios. Kudos to our R&D team, which is developing multiple exciting products under the leadership of our Founder, Director, Mr. Chitrakar.

And as Astra continues to go up the value chain, we are right up there in systems and solutions already. We are proud to be a part of Atmanirbhar Bharat. While we continue to work with our valued partners from overseas and progress in our JV with Rafael Israel is a proof of this besides our esteemed export partners. That’s our vision. That’s our very simple story, and we’ll explain as we go along in the question-and-answer sessions. SG, MV?

Maram Venkateshwar Reddy — Joint Managing Director

Yeah. Now the forum is open for question and answer.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Hitanshu Bhatia [Phonetic] from Gandi Securities. Please go ahead.

Hitanshu Bhatia — Gandi Securities — Analyst

I’m I audible?

Operator

Yes, you are. Please go ahead.

Hitanshu Bhatia — Gandi Securities — Analyst

Yeah. Congratulations on a good — great set of numbers, sir. I have two questions. One is on the 31st page of the investor presentation, you mentioned about NavIC and GPS receivers. So could you throw some more light on the prospects of it?

And the second would be that we have bid for the tender alongside some private players like Alpha Design, Alina Geosystems and also Manjeera Digital Systems. So what was the outcome of that tender with regards to the NavIC and GPS I’m talking about? Has it been awarded to us? And I mean also, I believe we have a customer relationship with the company Manjeera Digital Systems. So could you also elaborate on our relationship with Manjeera as well? Thank you. That’s it from my side.

Maram Venkateshwar Reddy — Joint Managing Director

Yeah. So this is regarding NavIC systems. As we have mentioned in last investor call, we have invested in a startup company called Manjeera Systems with their professional in this related design and all. So they are developing baseband chip and for NavIC products. And with using that chip, we are developing subsystems like receivers for various applications and also tracking units like vehicle tracking unit center, which are in development phase. So currently, the baseband chips are in the finance stages, and we expect these particular chips to get qualified from ISRO the next one-month timeframe. So probably by — in six months to eight months’ timeframe, we should be demonstrate these subsystems for NavIC applications. This is what our — we have a road map as far as NavIC is concerned.

Hitanshu Bhatia — Gandi Securities — Analyst

So the potential in the NavIC and GPS receiver, if you could throw some more light on it?

Maram Venkateshwar Reddy — Joint Managing Director

High potential is there. In fact, with the kind of applications which we are targeting, next five years, we should have at least about INR2,000 crores worth of business — minimum business, what I’m talking about from the different sectors.

Hitanshu Bhatia — Gandi Securities — Analyst

Okay, sir. And sir, the thing would be that — yes. Sir, please go ahead.

S. Gurunatha Reddy — Managing Director

Yeah, I will add to this, that to the best of our knowledge, there are only two companies in India, which are developing this chip. So around this chip, once it is approved, there will be not only us, but other guys also who would be developing the subsystems, which are in the receiver models, which M.V. is talking about. We will initially compete probably with imported reps, and we are very well placed in terms of our costing and margins over there. So this could be a very huge business as the business as the story translates into real-life applications.

Hitanshu Bhatia — Gandi Securities — Analyst

Okay. So the only doubt that I have is that if you have a customer relationship with Manjeera and you will be competing with them on the same tender, so how would that go out?

S. Gurunatha Reddy — Managing Director

M.V. can you please explain it?

Maram Venkateshwar Reddy — Joint Managing Director

Basically, initially, we competed. But now we are working together.

Hitanshu Bhatia — Gandi Securities — Analyst

Okay. So now there would be no conflict of interest with Manjeera?

Maram Venkateshwar Reddy — Joint Managing Director

Yes.

Hitanshu Bhatia — Gandi Securities — Analyst

And with regards to the tender that —

Maram Venkateshwar Reddy — Joint Managing Director

If you look at that, we have a relationship with only for one particular product. Other products even within NavIC feature, we may compete.

Hitanshu Bhatia — Gandi Securities — Analyst

Okay. And in regards to the tender that we had bid, so have we won the NavIC tender with the Ministry of Electronics affairs? Or what’s the outcome of that tender, sir, has the results come out yet?

Maram Venkateshwar Reddy — Joint Managing Director

No. We price pack, actually, we are not there. So — but as I mentioned, like Manjeera won the first order, where we are invested in a particular product to get developed. But otherwise, the second tender where we have participated on the price front, we lost it.

Hitanshu Bhatia — Gandi Securities — Analyst

Okay, sir. Thank you.

Operator

Thank you. [Operator Instructions] Your next question from the line of Riya Verma from NR Securities. Please go ahead.

Riya Verma — NR Securities — Analyst

Hi, sir. Thank you for the opportunity. I just had two questions. Firstly, on the gross margin side as there is an increase in our quarterly margin for two consecutive quarters now, I just wanted to understand the sustainability of these margins. So if you could please elaborate a bit on the reason for this margin improvement and how sustainable these factors are in the future.

S. Gurunatha Reddy — Managing Director

The margins delivered by the company at the end of Q3 are sustainable for the future. In fact, you could see — you can see the increment from now on. Your other question is how the change in margins has occurred? I didn’t get your first question.

Vignesh Iyer — Sequent Investments — Analyst

So I was just saying this margin improvement, what are the factors behind this? And is it sustainable?

S. Gurunatha Reddy — Managing Director

Yeah, it is sustainable that I already answered. In fact, it can improve. But the improvement is coming in because of the change in the sales mix of the company. As explained in the past many times, the domestic sales carry higher margin compared to the export sales. Up to now, the export sales are almost equivalent or more than the domestic sales. Going forward, the mix is skewed towards domestic. Therefore, the increase in margins is happening — improvement in the margins is happening.

Vignesh Iyer — Sequent Investments — Analyst

Okay. And one more question. What would be the long-term sustainable PAT margin level according to you?

S. Gurunatha Reddy — Managing Director

So PBT levels, I already said, probably 15% to 18% is the one which is sustainable.

Riya Verma — NR Securities — Analyst

Okay. Thank you so much. That answers my question.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vignesh Iyer from Sequent Investments.

Vignesh Iyer — Sequent Investments — Analyst

Congratulations, sir, on good set of numbers. Sir, I did hear you saying like revenue of INR950 crores is expected — you expecting around for FY ’24? And you mentioned INR135 crores, I missed it, what number did you mention it, INR135 crores?

S. Gurunatha Reddy — Managing Director

Yeah, you heard it correctly. Yeah.

Vignesh Iyer — Sequent Investments — Analyst

INR135 crores of what? I mean it is the EBT levels?

Maram Venkateshwar Reddy — Joint Managing Director

EBT levels.

Vignesh Iyer — Sequent Investments — Analyst

Yeah. Okay. All the commentary, your order book that you’re expecting around INR900 crores, can you explain to us what is area you’re targeting and you are expecting to get majority of the orders from? Like, say, if you could just say it’s from the missiles or which area of the defense. Just a ballpark number will do.

S. Gurunatha Reddy — Managing Director

Yeah. MV Ready will take that call.

Maram Venkateshwar Reddy — Joint Managing Director

Yeah. For next year, close to INR1,000 crores, we are targeting to book. Out of INR1,000 crores, INR930 crores are from the domestic sector. In that defense and aerospace together close to INR750 crores and from space sector about INR100 crores. Metallurgy and hydrology together about INR80 crores. And the exports, we have planned to book INR150 crores.

Vignesh Iyer — Sequent Investments — Analyst

Okay. And in exports also, we have almost like a similar margin profile to domestic?

Maram Venkateshwar Reddy — Joint Managing Director

No. In exports out of INR150 crores, INR50 crores is from BTS, again is BTS contracts and INR100 crores BTP, which is a low margin.

Vignesh Iyer — Sequent Investments — Analyst

Right. Right. Yeah. Got it. Got it. Thank you, sir. Thank you for the clarification. All the best.

S. Gurunatha Reddy — Managing Director

Thank you.

Operator

Thank you. Your next question from the line of Ketan Gandhi from Gandhi Securities. Please go ahead.

Ketan Gandhi — Gandhi Securities — Analyst

Sir, as a follow-up on NavIC, the tender which we lost it is in L5 band or L5 and S dual band module?

Maram Venkateshwar Reddy — Joint Managing Director

There’s a dual band.

Ketan Gandhi — Gandhi Securities — Analyst

Okay. So now we are working on L5 or S band?

Maram Venkateshwar Reddy — Joint Managing Director

Yeah, L5.

Ketan Gandhi — Gandhi Securities — Analyst

L5. okay. And government – any mandatory fitment of the NavIC chip into mobile telephone and all the other equipment?

Maram Venkateshwar Reddy — Joint Managing Director

Yeah. We expect these policies to be out. I think government — in fact, what we heard this government is working towards that. And the only thing is that waiting for the more manufacturer in this particular domain. Like only limited players have come in the indigenous development. Now once more number of players will be there, then I think probably policies can be made. That is what we heard about from different agencies.

Ketan Gandhi — Gandhi Securities — Analyst

Okay. And can — sir, in ISRO document, it’s written that L5 band’s expected cost per unit is around INR5,000 and L5 and S dual band is around INR10,000 per unit. Is that understanding correct?

S. Gurunatha Reddy — Managing Director

Yeah, yeah, you’re right.

Ketan Gandhi — Gandhi Securities — Analyst

Okay. I have some more question. I’ll jump back in the queue.

Operator

Thank you. [Operator Instructions] We have next question from the line of Pulkit Jhunjhunwala, [Phonetic] an investor. Please go ahead.

Pulkit Jhunjhunwala — Investor — Analyst

Hi. Good afternoon. Just wanted to get some clarification on the fundraising that we had proposed to raise INR400 crores. Any ideas on that? Could you give us some clarity?

S. Gurunatha Reddy — Managing Director

Yeah, we are on the job. Right now, the members voting is going on. And, yeah, we are on it. Probably you’ll come to know more developments maybe in the next fortnight.

Pulkit Jhunjhunwala — Investor — Analyst

And is it like an issue of shares or like which model are we going for in order to raise that INR400 crores. There will be dilution?

S. Gurunatha Reddy — Managing Director

Yeah, it will be dilution.

Pulkit Jhunjhunwala — Investor — Analyst

Okay. I’ll join in the queue.

Maram Venkateshwar Reddy — Joint Managing Director

Just clarify, the resolution is up to INR400 crores. I think —

Pulkit Jhunjhunwala — Investor — Analyst

[Indecipherable] management perspective on why do we need this capital at this point in time? Is it for working capital for future orders?

S. Gurunatha Reddy — Managing Director

It is a mix of both. Primarily, as you know, the defense procurement policy, there is drastic changes have come in where the government is encouraging the private sector to take the risk, invest in new product development, get the product developed, so that the companies can compete as and when this business is available. And also because of this import embargo, a good amount of opportunities available for the private sectors to identify their key areas where they have the expertise. And we should be able to take that financial risk in developing those products and be ready for a demonstration as and when those opportunities arises. Majority of this QIP or the fund raise is to make the company financially strong so that it can invest in these technologies and develop their products. A small portion of that, of course, is therefore working capital. But I would say that majority of that is for the — this kind of new product developments.

Pulkit Jhunjhunwala — Investor — Analyst

Okay. Thank you.

Operator

Thank you. We have next question from the line of Subrata Sarkar from Mount Intra Finance.

Subrata Sarkar — Mount Intra Finance — Analyst

Hello.

Operator

Yeah. Please go ahead.

Subrata Sarkar — Mount Intra Finance — Analyst

Hello. Sir, a couple of questions. First, sir, can you clarify one small the target which you have given for 2000 — like next — after next five years, what kind of revenue and order book we were expecting that you told like can you reiterate once more, sir, for better understanding.

S. Gurunatha Reddy — Managing Director

For the next five years, starting from the financial year — we should be able to do a cumulative sales of about INR8,000 crores. Cumulative sales of about INR8,000 crores. And at the end of the year 2028, we should have an order book of about INR6,000 crores.

Subrata Sarkar — Mount Intra Finance — Analyst

Okay. Perfect. Sir, now from our presentation in 27 — slide number 27, you have mentioned like we have expertising — you have given the expertise of various players across segment. And there, we have mentioned like we have system expertise. So can you just elaborate a little bit like which systems we are talking about and what is the potential of that system, sir?

S. Gurunatha Reddy — Managing Director

In fact, first of all, no, your voice is not very clear. It is breaking away. You would like to know what kind of expertise we have in the systems. Am I right?

Subrata Sarkar — Mount Intra Finance — Analyst

Yes, sir. You have mentioned like we have system expertise. So I just wonder a little bit more elaboration on that.

Maram Venkateshwar Reddy — Joint Managing Director

Systems, we already started delivering radar systems. And we build a systems group within Astra and addressing radar and electronic warfare. In electronic warfare segment, we just initiated designing the systems for airborne applications and as well as for the ground application.

Whereas in radar, we’re already delivering this telemetry tracking radars and also surveillance small range surveillance radar. And we are developing counter-drone radar. And also, we are planning to develop a bird detection radar — kind of radar, we have in pipeline. So likewise, we have developed the system expertise within the company. And apart from that, in the future, going forward, in space domain also, we are trying to build payloads, satellite payloads.

Subrata Sarkar — Mount Intra Finance — Analyst

Last question, you have mentioned about like major purpose of this fund raising is — major part will go for new product development. So if you can elaborate again a little bit more like which area like or which specific product we want to be prepared with so that there is a new opportunity comes from the government side, defense side, we can explore that. So if you throw some light on what are the areas and new products we are trying to develop with these new funds?

Maram Venkateshwar Reddy — Joint Managing Director

Many projects, which we could see having good potential in going in future and which have been already come under import embargo so there we have picked up a few projects and also based on the responses what we have sent and what we are having that confidence to develop, so we could take a few project development, which are basically in domain of radar and electronic warfare in defense. And as far as the satellite is concerned, we are also getting into the defense payloads. These are the few important projects which we picked up.

S. Gurunatha Reddy — Managing Director

Yeah, we will not be able to share the names of the products.

Maram Venkateshwar Reddy — Joint Managing Director

You know the negative lists, which have come out, right? There are more than 400 items on the negative list.

Subrata Sarkar — Mount Intra Finance — Analyst

Yeah, that’s a major list.

Maram Venkateshwar Reddy — Joint Managing Director

Right now completion. Hello, can you hear me?

Subrata Sarkar — Mount Intra Finance — Analyst

Yes, sir.

Maram Venkateshwar Reddy — Joint Managing Director

So more than 400 items in the negative let. We are right now operating in 40, 45 items only, which are in our domain, out of those 400 plus, of which we are operating currently in around 15, which leaves us with a huge amount of products and which we can fill in, in the negative list alone, while we are developing a whole range of other products in the segments which MV Reddy just mentioned.

Subrata Sarkar — Mount Intra Finance — Analyst

Okay. Okay. Thank you sir. That’s all from my side.

Operator

Thank you. [Operator Instructions] we have next question from the line of Viral Shah from Shah Investments. Please go ahead.

Viral Shah — Shah Investments — Analyst

Hi sir. Just wanted to know, are we expecting any orders from Hindustan Aeronautics with respect to the new helicopter plant?

Maram Venkateshwar Reddy — Joint Managing Director

From HAL, we are expecting orders for the LCA Uttam Radar and also going forward, other H1 [Phonetic] radars, what we are going to develop for the H1 platforms.

Viral Shah — Shah Investments — Analyst

Okay. Thank you.

Operator

Thank you. We have the next question from the line of Amit Dixit from ICICI Securities. Please go ahead.

Amit Dixit — ICICI Securities — Analyst

Yeah. Hi. Good afternoon, everyone, and thanks for the opportunity. First of all, congratulations for a good set of numbers. I have a couple of questions. The first one is essentially, if you look at the Q4 results of other companies like HAL BEL even BDL, they were a tad low on execution. So do we — going forward, do we see a risk of some of the orders that we were expecting getting delayed in FY24?

Maram Venkateshwar Reddy — Joint Managing Director

As of now, we — as of now, whatever the numbers which we have mentioned, I think we have a good probability in booking these orders — and this is as on date, whatever visibility we have, with that only we are presenting this. I think we should be in a position to book this INR1,000 crores order in next year.

S. Gurunatha Reddy — Managing Director

But Amit, we are not a quarterly driven company. Amit, we are not a quarterly driven company, right? So I think you have to look at this on a rolling quarter basis. There may be delays, some critical components may be delayed coming in, etc, etc. So I think this company is not a company where you can put in place a quarterly number and expect that we will hit that number every possible time, right? I think MV Reddy and SG Reddy have done a tremendous job in terms of exceeding the targets which have been set out

But be cognizant that there could be delays in the system itself, which can sometimes push the numbers out. And sometimes, maybe we can get lucky also, and we can be getting some excellent orders, which may not we may not have anticipated. You are aware that recently four Doppler radars were dedicated to the nation. The minister came out and said that he was expecting Doppler radars to be installed all over the country.

Now that’s a massive business, which we had not anticipated. But we will be getting up for that. We have delivered 10 Doppler radars to the country at this point in time. And that’s a significant piece of business, which can — which is evolving, which was not anticipated also.

Amit Dixit — ICICI Securities — Analyst

Great. Thanks for the clarification. The second question is essentially if it is possible to provide the breakup between BTS and BTP orders, I mean, as far as the execution is concerned in this quarter? And going forward, what would be the mix that you would be targeting between BTS and BTP?

Maram Venkateshwar Reddy — Joint Managing Director

Yeah. For the current quarter, we don’t have any BTS export — BTP export order. But going forward, next year, as I mentioned, out of INR150 crores, which we are expecting from the export segment, INR50 crores from the BTS and INR100 crores on the BTP. Rest all in domestic, as you know, all our BTS orders. We don’t have any BTP in the domestic business.

Amit Dixit — ICICI Securities — Analyst

Okay. Great. Thanks a lot and all the best.

Maram Venkateshwar Reddy — Joint Managing Director

Thank you. We take the next question from the line of Bhavik Shah from Emkay Ventures. Please go ahead.

Bhavik Shah — Emkay Ventures — Analyst

Hello, sir. Congratulations on a good set of numbers. Sir, I just wanted to understand the developments on the anti-drone front. So you’re going to demonstrate it by January or February if I am not wrong, you mentioned in the last call. So sir, any update on that front?

Maram Venkateshwar Reddy — Joint Managing Director

Yes. We are going to demonstrate very soon. I think it’s in the final testing stage. Definitely, we’ll hear good news in the next few weeks’ time.

Bhavik Shah — Emkay Ventures — Analyst

Okay. And sir, now could we sense what opportunity could this be for the company? Or we still need to wait for that?

Maram Venkateshwar Reddy — Joint Managing Director

Opportunity is there. Like we have participated in a few tenders recently from Air Force and Army. I think we are gearing up for a demonstration of this particular product. Once we are through, then I think we’ll be in a position to inform you exactly how much business we can get in this. But otherwise, opportunity wise, yes, we have a good amount of opportunity for this particular radar.

Bhavik Shah — Emkay Ventures — Analyst

Right, sir. And sir, any developments on the space front like last couple of years were not that good for the space end. So like how do you see space going ahead?

Maram Venkateshwar Reddy — Joint Managing Director

Yeah. As you know, that bar in communication satellite sector, which in fact been open for industries to take up the system is continually working on the strategic segment from which we can expect the subsystem order from ISRO.

And ISRO I think definitely, with some kind of a business we can get for the couple of years. Apart from that, as I mentioned, just now, we are also trying to build the satellite payloads for the strategic applications. That is something, which we are launching soon.

Bhavik Shah — Emkay Ventures — Analyst

Right, sir, right, sir. And, sir, any update on the capex front, like what is our capex till nine months? And what could be the capex going ahead?

S. Gurunatha Reddy — Managing Director

Yeah. For this financial year, the overall capex will be about INR25 crores. And up to nine months, I think we have spent close to about INR15 crores.

Bhavik Shah — Emkay Ventures — Analyst

Okay, sir. And any guidance on the capex front for next year?

S. Gurunatha Reddy — Managing Director

Yeah, for upgrading the existing requirements, probably we may be spending about INR10 crores to INR15 crores. But a larger plan in terms of creating facilities for the overall systems, whatever we are planning for. Those details probably we can share with you in the next call. [Indecipherable] gets over.

Bhavik Shah — Emkay Ventures — Analyst

Okay, sir. Thank you so much and all the best.

S. Gurunatha Reddy — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have next question from the line of Shuja Siddiqui, an investor. Please go ahead.

Shuja Siddiqui — Investor — Analyst

Thank you for taking my questions. Sir, there is a [Technical Issues] different sectors with whatever measures the government is taking. The question that I have is what are the constraints which are stopping you today from executing —

Operator

Sorry to interrupt Mr. Siddiqui. Your volume is very loud. Could you please speak a little close to your mic? Hold the mic close to you and then speak a little slow. Thank you.

Shuja Siddiqui — Investor — Analyst

Yeah. So my question is that there is a massive opportunity in the test today. The question to the company, what are the constraints that’s stopping the company from either executing more from the order already there and getting more orders going forward? How do you create the machine which continues to be on the treadmill of getting on orders and executing on orders?

S. Gurunatha Reddy — Managing Director

See, we are doing that. If you look at the profile of the products delivered by the company, it is largely components and subsystems what we are doing. This product base has its own limitations in terms of execution.

But going forward, that is what we are sharing with you. The overall environment is also changing where in the private sector has to be more aggressive in terms of bidding for the projects which we are planning to do. Therefore, you see more accelerated action coming in from the company in the near future.

Shuja Siddiqui — Investor — Analyst

Is there — are you in a position to share something at the moment about your future strategy?

S. Gurunatha Reddy — Managing Director

Future strategy, you already shared. See, we are planning to raise some capital resources so that we’ll be investing in new product developments so that we can compete with other people when the market is actually opening. Yes, that is what we are. We are graduating from a subsystem company to a systems company in a bigger way. And accordingly, we are planning our actions so that we’ll be there to take that market as and when it is open.

Shuja Siddiqui — Investor — Analyst

Do you need some [Indecipherable] like for you to get more — develop more products and get more strategic high-value products you will develop all of this on your own?

Maram Venkateshwar Reddy — Joint Managing Director

No, a few products, we are working with some foreign OEMs. One is that with joint ventures. We have one joint venture with [Indecipherable], where we have added a few other product lines apart from the SDR what we are manufacturing in JV. Like we have added electro optics and all. Iminently, we have some other products which we are discussing with some few OEMs. And you would see a few announcements in coming year or so. So I don’t want to reveal at this stage.

Shuja Siddiqui — Investor — Analyst

All right. Thank you.

Maram Venkateshwar Reddy — Joint Managing Director

Thank you.

Operator

We take next question from the line of Vignesh Iyer from Sequent Investments. Please go ahead.

Vignesh Iyer — Sequent Investments — Analyst

Thank you for the opportunity again, sir. I just wanted to know how — on the semiconductor side, how is the availability as compared to the earlier quarters. And if you could tell me what is the receivable days and a working capital cycle as on quarter three.

Maram Venkateshwar Reddy — Joint Managing Director

As far as — the availability of semiconductors is slightly improved as compared to the last quarter. I think the lead times are coming like in a normal mode. Still, yes, it’s not so comfortable as we enjoyed pre-COVID situation. But I think maybe next 1 or 2 quarters, we expect that should come in a normal. And as far as working capital, I think SG we will answer.

S. Gurunatha Reddy — Managing Director

Yeah, we have receivables of about INR300 crores. Domestic is about INR289 crores, and exports is about INR228 crores. In terms of the working capital days, it is typical to semiconductor industry where an RF and micro industry, where the stocking of inventory is one of the critical items for execution of the projects on time. And also these semiconductor devices, which is a very critical input is available only from specific markets for actually the global leaders.

Therefore, we are forced to place orders on hand in advance and the sort the [Indecipherable] for the net project duration cycle. Because of these factors, our working capital days are fairly high compared to the normal industry. And currently, it is around INR300 plus the number of days is the working capital days.

Vignesh Iyer — Sequent Investments — Analyst

Okay. Sir, if I am not wrong, our peak quarters as it comes to around quarter three and quarter four and with how things panning out, are we still looking to front-load the inventory going ahead? Or we might see some inventory days coming down?

S. Gurunatha Reddy — Managing Director

No, I don’t see — in terms of inventory management, I don’t see any major changes happening. As it is now, we are struggling for availability of the semiconductor devices. Therefore, as and when they are available, we have to buy and the stock it. Therefore, at least in the near future, I don’t see any major changes coming in.

Vignesh Iyer — Sequent Investments — Analyst

Okay. And sir, at the start of the call, you said that the current quarter margins of like 23% is you’re comfortable and you feel like this could be sustainable. So when you say that, I mean, EBITDA margins for the entire FY23 you see more or less at the same level, right?

S. Gurunatha Reddy — Managing Director

No, I am only talking at PBT level. The current year, we are likely to end about 13% to 13.5% of PBT. On a top line of about INR825 crores, we are projecting we have a PBT of about INR110 crores. I said these margins are sustainable, and there is a fairly good chance of improvement over this.

Vignesh Iyer — Sequent Investments — Analyst

Okay. That’s all from my side. Thank you.

S. Gurunatha Reddy — Managing Director

Okay. Thank you.

Operator

[Operator Instructions] Your next question from the line of Abhishek Dave from Bright Securities. Please go ahead.

Abhishek Dave — Bright Securities — Analyst

Hello. Am i audible?

Operator

Yes, you are, sir. Please go ahead.

Abhishek Dave — Bright Securities — Analyst

So I had one question. Sir, based on your current order book, can you give some guidance for the next year?

S. Gurunatha Reddy — Managing Director

It’s already done. At the top line, we’ll do around about INR950 crores and bottom line will be close to about INR135 crores at a PBT level.

Abhishek Dave — Bright Securities — Analyst

Okay, sir. Thank you.

Operator

We take next question from the line of Ashit Kothi, an investor. Please go ahead.

Ashit Kothi — Investor — Analyst

Good evening. Thanks. My question is, sir, drone technology is getting commercialized, are — is our company planning to get into providing sensors or any products or subsystems to this particular category?

Maram Venkateshwar Reddy — Joint Managing Director

You mean to say sensors for drone?

Ashit Kothi — Investor — Analyst

Yeah. I mean, sensors also would be required there also, right?

S. Gurunatha Reddy — Managing Director

But we are not addressing drone market. We are only addressing drone detection, like on the drone system, but not in the drones. We are not operating in the drones.

Ashit Kothi — Investor — Analyst

No, I got your point. When you are — my question was basically since you are already anti-drone devices kind of thing. So alternatively when the drone technology being exploited commercially for commercial applications, for the defense part of it. So over there, there could be need for so many other things apart from — I mean one of the major things would be sensors. So the —

Maram Venkateshwar Reddy — Joint Managing Director

We are not entering into that market as of now.

Ashit Kothi — Investor — Analyst

Okay. So no so lucrative enough for us to look into it?

Maram Venkateshwar Reddy — Joint Managing Director

No.

Ashit Kothi — Investor — Analyst

Okay. Thank you, sir.

Operator

Thank you. [Operator Instructions] We take next question from the line of Simal Deep from Negen Capital Services. Please go ahead.

Simal Deep — Negen Capital Services — Analyst

Yeah. Hi. Good afternoon. Sir, congratulations on a great set of numbers. Just a little bit of more strategic. Sir, could you just highlight some risks going forward in the business? Like ship shortages, which will happen through Taiwan and some other ones, if you can highlight them.

Maram Venkateshwar Reddy — Joint Managing Director

See, the major reasons are like timing of the orders based on the visibility what we have and the information, what we gather from our customers. We have been projecting, yes, there could be delays here and there based on the PRPs and based on the delays on overall projects from OEM and also from the user end. So those kind of delays are always there in the defense market.

As you know, it is not something new. And apart from that, on the execution front, yeah, though, the situation of the components, especially in the semiconductor and power supplies, we’ve been facing severe shortage, that I think probably has slightly improved compared to the last two quarters, but still more implement is required in that particular domain.

And because of that, probably on the execution front, like this current year also, we will be short of INR20 crores as compared to the original. But we have factored all these points, but we hope for the better situation in the component industry going forward in the next year.

Simal Deep — Negen Capital Services — Analyst

All right. Thank you for the honesty. Sir, one last question. So could you help me with some sort of more from testing clients, can you get some more work? Or are you diversifying in one of the more geographies as well?

S. Gurunatha Reddy — Managing Director

We are already there in the international market, apart from servicing the domestic industry.

Maram Venkateshwar Reddy — Joint Managing Director

See, one is that, like — in fact, Mr. Atim Kabra is looking after this particular area. Like we are trying to develop solutions for the countries using our particular systems, what we have today. And we are trying to sell the complete solution.

It’s too early to disclose about these solutions. I think probably maybe after the, I think next investor call, probably we can share in a detailed existing road map for this. But otherwise, yes, we are trying to explore the exports, like the international business with a different concept.

From the existing product, one second. For the existing product line, as I mentioned, my customers who are giving us BTP business already started giving us the BTS orders. We have initiated — we got a couple of good inquiries, which are trying to be metalized in the first quarter of the next year. And we are discussing with many companies for this BTS business as they are planning to develop systems for the Indian market. Yeah, Atim, go ahead.

Atim Kabra — Non-Executive Director

Yeah. And I was just adding that there, once you get into systems, there is an international market, which is there for us to compete in. But it works not on a tender basis, but on a slightly different sales process.

It will take time. We have — you should be aware that we have products which are identified and strategies are being put in place as we speak to explore those markets. And these are fairly big, sizable numbers. But we would be — but it might take time, so we’d rather come across to you and share the good news to you, and we have clear orders in sight on these markets from these markets. So this is a sizable opportunity where we can make a big difference to our client and to our bottom line also.

Simal Deep — Negen Capital Services — Analyst

Thanks a lot for your time.

Operator

We take the next question from the line of Pulkit Jhunjhunwala, an investor. Please go ahead.

Pulkit Jhunjhunwala — Investor — Analyst

Yeah. I was just wondering other investors when we see our peers are in space, we find ourselves in a situation where our top line is maybe twice there and maybe they trade at a sales to market cap of maybe 20 times and whereas we are less than one.

And we feel that we — although the management has done some great work, the operating margins are increasing. But when we do a brief comparison the operating margins that they are trading at, I mean, they’re having a more of 14% kind of operating profit margin.

So is there — I mean, I’m sure you heard so many things about what is in the pipeline from this call. I was just wondering, is there anything that you can share now where we can understand that our top line is bigger, our — the technical skills is better from what I’m understanding. So where are we lacking? Like do you think something is some — I mean, the opportunities are there for the taking? So could you just elaborate on that, please?

Maram Venkateshwar Reddy — Joint Managing Director

The opportunity set is there. We are now more proactive in communicating our story. You have seen how we have been — how forthcoming we have been in the last few investor calls. And as the story gets out, I’m sure there will be a set of investors, incremental set of investors who would be interested in us. Why somebody — this is a big market. we don’t want to comment on why somebody is being valued slightly higher, okay? Maybe they’ve communicated the story better, maybe they are better in the perception of the folks.

We are fairly confident about our story. We are confident, as we have very clearly mentioned to you and committed. But this is a rising, sustainable margin story. We have — we are RF guys. Our BOM is already there. As we increase in size, maybe there will be efficiencies, which will be coming in.

So suffice to say that we can only communicate to you that this is increasing sales, significantly increasing sales story with sustainable increasing margins for you. The return ratios will obviously look better. So where you value somebody in the food chain is not for us to comment.

But it’s a big market for everybody to operate, and I’m not sure everybody is equally competent.

Pulkit Jhunjhunwala — Investor — Analyst

Sure. Thank you.

Operator

We take next question from the line of Ashit Kothi, an investor. Please go ahead.

Ashit Kothi — Investor — Analyst

Yes, sir. Sir, just continuing with the earlier questions where the explanation was given with regards to the export market that the process is a bit different. It is not a tender system. If you could throw some more light, is it more a joint venture? Is it more on tie-ups, how exactly we are exploring the market, export market?

Maram Venkateshwar Reddy — Joint Managing Director

I will address it. Export markets don’t work on tenders typically. If you are looking at the civil industry, right, you are looking at ROI-based kind of an approach, which is where you define what the investments are for others and you are trying to capture the enhanced returns of the savings that they make. And therefore, explaining to the buyer what exactly is the ROI, right? So that’s one thing.

In a G2G tender, there is a very different dynamic which is at work, right? So depending on where exactly we see maximum sales impact and sales effort impact coming in, we would be employing a variety of strategies. It’s too early to say whether we would be partnering in any joint venture format with somebody else or not. But definitely, they will require partners across the globe as for local implementation. What form it will take? We don’t know. It’s very early days right now. Am I answering your question?

Ashit Kothi — Investor — Analyst

Yes, it would have been better. I mean if you would have thrown some more detail. But maybe it’s not possible.

Maram Venkateshwar Reddy — Joint Managing Director

Let’s save something for some surprise, right? Positive surprise.

Ashit Kothi — Investor — Analyst

Okay. right.

Maram Venkateshwar Reddy — Joint Managing Director

It’s very early days. It’s very early.

Ashit Kothi — Investor — Analyst

Okay. Fine.

Operator

[Operator Instructions] As there are no further questions — we got last question from line of Ashit Kothi. Sir, please go ahead.

Ashit Kothi — Investor — Analyst

Sir, as far as the move have come a long way from OTCI lifting in ’90s to where it is today. So if we have to look at Extra Microwave as from year onwards through next decade.

S. Gurunatha Reddy — Managing Director

Yes, I think we have already gave a picture for the half decade. Probably now looking at one decade, it is too early now. So we’ll take it forward from that.

Maram Venkateshwar Reddy — Joint Managing Director

I would say a defense industry as a sector has established. You are aware of Atmanirbhar Bharat. That is becoming a reality. You are aware of BAL, HAL making great strides. You are aware that they are cracking or they are beginning to crack the export market.

There are multiple defense itself, which are coming of age and with increasing visibility and increasing certainty about of business. The earnings stream in itself is becoming more predictable and sustainable. I think these are the ingredients for an industry which is becoming mature, will become more mature as we go further. And I think there is — it’s a such a sizable industry in terms of macro numbers that there’s going to be a huge amount of business, which should be coming across all participants.

We have to make sure we are conservative enough in terms of our balance sheet management and be prepared for the long haul. That’s our vision. That’s what we are playing at. So thank you for highlighting our journey from when we started. And I think as an analogy, which I like to say, is that we have lifted off the runway. We are gaining altitude and I think we will be at a cruise stage very soon, and that will be a very nice moment for all of us who have believed in the story.

Ashit Kothi — Investor — Analyst

Great, sir. Thanks a lot. And reserving my few more questions for the next meeting.

S. Gurunatha Reddy — Managing Director

Thank you.

Operator

As there are no further questions from the participants, I’d now like to hand the conference over to Mr. S.G. Reddy, Managing Director, for closing comments. Over to you, sir.

S. Gurunatha Reddy — Managing Director

Thank you for being there with us probably one hour. I hope to see you at the end of Q4. Thank you.

Maram Venkateshwar Reddy — Joint Managing Director

Thank you.

Operator

[Operator Closing Remarks]