Aeroflex

Aeroflex reported a robust Q4 FY26, with total income growing 38% year-on-year to ₹126.5 crores. EBITDA for the quarter increased by 59% to ₹30 crores, resulting in a margin of 23.86%, an improvement of 326 basis points. For the full fiscal year 2026, total income stood at ₹443.3 crores, a 17% growth year-on-year, and EBITDA reached ₹99.7 crores, up 26% from the previous year, with a margin of 22.6%. This performance was attributed to an improved product mix and growing contribution from value-added solutions, despite a weak first quarter.

A significant highlight for FY26 was the successful entry into skid assemblies and advanced flow control solutions for high-performance liquid cooling applications, specifically targeting data centers and AI infrastructure. This new segment contributed approximately ₹21.2 crores in sales over the last four months of FY26, accounting for 5% of the total sales. The company showcased its portfolio at the Data Center World Exhibition, reinforcing its focus on next-generation thermal management technologies. Management aims for this segment to contribute 20-22% to the total business in the current financial year.

Aeroflex has aggressively expanded its manufacturing capabilities, scaling skid assembly capacity from 2,000 units per annum to 6,000 units per annum, with plans to further increase it to 15,000 units per annum within the next two quarters. The company also commissioned two robotic welding lines to enhance automation and precision. Additionally, investments are being made in a new annealing furnace facility, expected by year-end. The product development pipeline includes over 16 products focused on high-growth segments, with new hose assemblies for data centers and other advanced flow components expected to contribute sales from the next quarter.

The domestic sales contribution increased significantly to 31% of total sales in FY26, up from 26% previously, primarily driven by the traction from skid assemblies and Hyd-Air. While exports also grew in double digits during Q4, the substantial growth in domestic sales led to a shift in the overall sales mix. Management noted that for bellows and hose assemblies, the company is 25-30% cheaper on a landed cost basis compared to international alternatives, highlighting its competitive advantage in global markets.

For FY27, Aeroflex targets a similar revenue growth rate of over 35% as seen in Q4 FY26, with an EBITDA margin of around 23%, aiming for 25% annually in the long term. The company expects to achieve 60% utilization of its 15,000-unit skid assembly capacity by March 2027, which could translate to ₹325-330 crores in revenue at 75% utilization. The base business is projected to grow by 15-20%. Hyd-Air's current 60% utilization is planned for internal consumption to support high-end applications.

The company acknowledged bottlenecks in skid assembly production, primarily stemming from the design phase and stringent customer quality checks required by end-users. Management is working to streamline these processes, expecting improvements in the coming months. A significant concern raised was an income tax demand of ₹40 crores related to a 2019 waiver, which management is confident will be reversed upon appeal. Despite geopolitical issues, particularly in West Asia, the company's exports continued to grow, demonstrating resilience.