Aeroflex

Aeroflex Industries achieved its highest ever quarterly performance in Q2 FY26, with total income reaching INR111 crores, marking a 16% year-on-year and 31% quarter-on-quarter growth. This milestone was accompanied by a record EBITDA margin of 23.5%, expanding 136 basis points year-on-year. The strong profitability was attributed to a favorable product mix focusing on higher-margin value-added products, continuous cost reduction efforts by the engineering team, and a beneficial foreign currency movement due to rupee depreciation.

The company is making significant strides in its new liquid cooling solutions business, securing a second order from a large listed US corporation. The first order is slated for execution in Q3 FY26, with the second in Q4, and this segment is expected to be a substantial contributor to the top line from Q3 onwards and a significant growth driver over the next 2-3 years. Additionally, the Hyd-Air subsidiary demonstrated strong traction, with sales growing to INR9 crores in Q2 FY26 from INR1.5 crores in Q2 FY25, and plans for capacity expansion are under discussion.

Aeroflex has budgeted a total capex of INR77 crores for FY26, with INR54 crores allocated to the hose division and INR23 crores for miniature metal bellows, to be completed by March 2026. As of Q2 FY26, INR19.74 crores has been spent on the hose division and INR6.08 crores on miniature metal bellows. These investments are projected to yield annual revenue potentials of INR650-670 crores for the hose division (at 20 million meters per annum capacity) and INR25-30 crores for miniature metal bellows at peak utilization.

Despite the imposition of US tariffs on Indian products, Aeroflex has not experienced any order cancellations from its US customers, reflecting strong customer relationships and product quality. While approximately INR5-6 crores worth of shipments were deferred from Q2 to Q3, management expects tariffs to potentially go down by the end of the calendar year, which could lead to a significant uptick in US demand. The company noted that US manufacturers also face tariffs on raw materials and have higher operating costs, making it difficult for customers to switch suppliers.

The company's strategy includes a deliberate shift towards manufacturing higher-diameter hoses (e.g., 6-inch, 8-inch), which, while resulting in fewer meters produced, offer significantly better margins and face less competition. This focus on value-added products contributed to 53% of total sales in Q2 FY26. Domestic sales contribution also improved from 19% to 27% in H1 FY26, driven by growth in Hyd-Air, and increased sales from sectors like steel plants, ports and terminals, and power.

For the first half of FY26, Aeroflex reported a total income of INR195.72 crores, a 5% year-on-year growth despite a challenging Q1. H1 EBITDA stood at INR41.87 crores with a margin of 21.7%, and PAT was INR21.4 crores with a margin of 10.93%. The company aims for mid- to high teens overall growth over the next 4-5 years and expects full-year EBITDA margins to remain within the 21-22% range, with liquid cooling and Hyd-Air contributing significantly to future performance.