The Stock of Astra Microwave (AMPL) has been recommended by two different brokerage houses. Here is a detail of both the reports for investors benefit.Anagram Research has recommended to accumulate Astra Microwave, in its report dated 30th August 2008.

"At CMP of Rs 54.55, the stock is trading at 14 x its FY08 EPS of Rs 3.88. After the Defence Procurement Procedure 2006 made it essential for overseas suppliers to have value addition from within India – or called offsets – for major defence contracts. The offset stipulation would drive business opportunities in the defence sector in the medium term. DPP-2008 has been announced and will come into effect from September 1".

"Looking at Government focus towards defense spending & making essential for overseas suppliers for value addition within India, we think that it offers huge opportunity for players like Astra Microwave. We recommend Investors to “Accumulate” the stock at current levels".

In another report by Karvy Stock Broking on Astra Microwave it had recommended buy rating on Astra Microwave with target price of Rs 195

Detailed report on Astra Microwave:

The government's focus on private sector participation in defence as well the offset policy is expected to be positive for Astra Microwave (AMPL). The company has been working on a larger number of R&D projects which is expected to increase the predictability of revenues.

Space revenues are expected to contribute significantly to FY08 revenues. We expect earnings to grow at 44% CAGR over FY08 and FY09.We rate the stock BUY with a price target of Rs 195.

Astra Microwave is one of the few private sector companies engaged in designing and manufacturing of RF (Radio Frequency) and microwave subsystems used in defence, space and telecom applications. 60% of the company's revenues are from the defence segment, 25% from the space segment and the remaining 15% from the telecom segment.

Defence industry outlook in India:

The Indian government has been focusing on increasing the share of the private sector in the defence segment. For this purpose, the Ministry of Defence has introduced the "Offset policy" for defence procurement.

 It stipulates that all contracts over Rs 3 billion awarded to foreign companies must have a minimum offset of 30% and the offset obligation should be discharged in India concurrently.

The ministry of defence is trying to identify large private sector companies that can become lead system integrators, and also take responsibility for serial production. These industries will be termed as Raksha Udyog Ratnas (RURs) and will be placed at par with Defence public sector undertakings (DPSU). The RUR concept will provide an opportunity for the big players to play a very major role in the production of defence systems.

 In addition, the ministry of industries has also certified more than 30 large size private sector companies for the production of certain specific defence systems. These companies have been provided licenses for the manufacture and production of items for the ministry of defence.

 In the current scenario, subsystem providers like Astra Microwave are potential beneficiaries as they can partner with foreign defence suppliers who have to discharge their offset obligations as well as become suppliers to the private sector companies participating in system integration.

Business segments

Defence

Within defence, AMPL provide subsystems for various purposes like missile application, radar application, electronic warfare (EW).

The company gets associated