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Unimech Aerospace and Manufacturing Limited — Q1 FY26 earnings call

Call held 25 Jul 2025

Management summary

Unimech Aerospace and Manufacturing Limited reported a resilient Q1 FY26 with a 6% YoY revenue growth to INR63 crores and a PAT of INR19 crores. Despite a QoQ dip in revenue due to export market slowness and a 23% YoY EBITDA decline driven by higher employee costs, gross margins remained strong at 66%. The company maintains its FY26 guidance, supported by an INR81 crore order book, robust pipeline in nuclear and precision, and strategic initiatives to manage tariff impacts and enhance efficiency.

Highlights

Q1 FY26 revenue of INR63 crores, up 6% YoY, demonstrating a strong start to the fiscal year.
Gross margin maintained at 66%, similar to the last quarter, despite increased costs for qualification orders.
PAT at INR19 crores, representing 26% of revenue, supported by other incomes.
Order book at INR81 crores as of June '25 end, with expectations of large order inflows in Q2 and Q3 in aero tooling and precision segments.
Strong pipeline building across aero-tooling, nuclear, and precision segments, including bids for EMCCR tenders worth over INR400 crores and RFQs for Kaiga-5 & 6.

Concerns

Q1 revenue was slightly lower QoQ due to overall slowness in the export market post-tariff news.
EBITDA declined by 23% compared to last year and mid-last quarter, primarily due to increased employee costs and operating expenses.
Employee cost increased to over 20% of revenue due to new hiring, ESOP costs, and salary increments.
Working capital days are expected to increase from 100-110 days to 150-160 days due to the nuclear segment's requirements.
Uncertainty around tariff discussions may negatively impact gross margins and lead to slower shipments as customers delay to assess impact.

Key financials

01 Revenue ₹63 Cr +6%YoY
02 Gross Margin 66%
03 EBITDA ₹20 Cr -23%YoY
04 EBITDA Margin 31%
05 PAT ₹19 Cr
06 PAT Margin 26%
07 Adjusted ROE 23.7%
08 ROCE 14%

What they filed

Q1 FY27: revenue up 71.4%, net profit up 47.4% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	61	54	68	63	62 +2%	34 −37%	82 +21%	108 +71%
Expenses	38	38	41	43	43	32	47	68
EBITDA	23	16	28	20	19 −17%	2 −87%	35 +25%	39 +95%
Margin	38%	29%	40%	31%	30%	5%	43%	36%
Other income	5	8	10	11	10	11	15	7
Interest	1	1	1	1	1	2	11	2
Depreciation	2	3	4	6	6	7	7	8
Profit before tax	25	19	33	24	21 −16%	4 −79%	32 −3%	37 +54%
Tax rate	27%	20%	10%	21%	24%	38%	17%	24%
Net profit	18	16	29	19	16 −11%	2 −87%	26 −10%	28 +47%
EPS	3.79	3.06	5.74	3.76	3.08	0.47	5.13	5.48

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Aero Tooling
82% Revenue Share
Precision and Assembly
18% Revenue Share

Order book

high confidence

Total value

₹81 Cr

as of 2025-06-30 quantified

Composition

Tooling (product) 85%

Pipeline

L1 awaiting loa

EMCCR tenders for Tarapur-3 and 4 atomic power stations, 3 more EMCCR jobs for 220 MW reactors in Kaiga, Rajasthan. RFQs for Kaiga-5 and 6 nuclear power plants. 10+ new reactors, BSRs (12 new 220 MW reactors).

Cancellations & deferrals

deferred: Slower shipments as customers want to play out the tariff impact through drop shipments.

The order book is currently INR81 crores, with expectations of large inflows in Q2 and Q3, driven by aero tooling and precision segments. The company has submitted bids for EMCCR tenders worth over INR400 crores and is seeing strong pipeline building in nuclear and precision segments.

Source: Prepared remarks

Capital allocation

high confidence

Capex Capex disclosed

We are investing heavy in this year, but we'll also keep close eye on how external factors impact business and suitable calls will be taken to rationalize the investments and costs if required.
Debt Debt disclosed

This might involve some kind of funding -- debt funding related to be required for which I have already factored additional data around INR50 crores ready, but not yet availed.
M&A Precision Manufacturing Targets Acquisition · Pending regulatory

To advance inorganic growth by evaluating precision manufacturing targets in India and the US.
Any acquisition finalized might move to next year to completely integrate with our business.

On the inorganic growth, through acquisitions and JVs, we continue to evaluate precision manufacturing targets, both in India and the US. ... However, we understand any acquisition we finalize might surely move to next year to completely integrate with our business.
M&A Global Growth through JVs Joint venture · Pending regulatory

To accelerate global growth by exploring joint ventures outside India.

In parallel, we are also exploring joint ventures outside India to accelerate our global growth. We'll share details as soon as any deal is closed.
Liquidity Liquidity disclosed INR120 crores of undeployed IPO money, with INR90 crores to be used this financial year and INR30 crores for working capital next year.

So, as of now, INR120 crores of undeployed money is there in an IPO fund. So in this some portion in the -- around 50% is going to be utilized by March, which is towards kind of loan repayment or borrowing repayments. So that is one thing, one of this year kind of thing. But beginning of April next year, working capital, around INR30 crores of working capital will be fixed we planned. I can say, like, out of INR120 crores, INR30 crores will be next year deployment and INR90 crores is going to be used in this financial year.

Guidance & targets

Revenue

Revenue Growth Revenue · FY26 · High confidence 35-40%

I think in the last call, we have guided the growth of 35%-40% growth, the revenue plan and what we have given. Considering the fact that at that time also, we have factored the impact of tariff slowdown. We anyway factored the slowness in Q1 and Q2 and post that Q3 and Q4 will pick up. All those things we have factored in our budget and thereby the guidance we have given. And we remain sticking to that and we are confident that H2 will definitely pick up and H1, though its slowness is there.

— Ramakrishna Kamojhala

Profitability

EBITDA Margin Profitability · FY26 · High confidence 30-32%

Despite all this, we are still targeted to maintain EBITDA margins in between 30% to 32% for this financial year, because some strong initiative will lead in place to ensure cost saving also leading in process improvements, like, solar power installation or availing benefits of energy costs under Karnataka Aerospace Defense Policy, negotiation of contracts with our existing supply chain vendors, etcetera.

— Ramakrishna Kamojhala

Capacity

Capacity Utilization Level Capacity · next 24 months · High confidence 85-90%

I'm, again, reiterating again here that our target is to attain optimal utilization level of around 85% to 90% machine capacity in next 24 months' kind of thing.

— Ramakrishna Kamojhala

Efficiency

Fixed Asset Turnover Ratio Efficiency · High confidence 3-3.5 times

And thereby, asset turnover will be maintained in the range of 3 times to 3.5 times.

— Ramakrishna Kamojhala

Headcount

Employee Cost as % of Revenue Headcount · eventually · Medium confidence 14-16%

From 20-22% today

Yes, by year end, you might see 20% to 22% of the employee cost over revenue. But eventually it could be around, my fair guess is around 14% to 16% of revenue employee cost should be there on the revenue side.

— Ramakrishna Kamojhala

Operating Expenses

Operating Expenses as % of Revenue Operating Expenses · full year basis · High confidence 12-13%

Operating expenses is expected to be around 12% to 13% of revenue on a full year basis.

— Ramakrishna Kamojhala

Working Capital

Working Capital Days Working Capital · High confidence 150-160 days

From 100-110 days today

As of now, working capital is around 100 days to 110 days, probably this will increase to 150 days to 160 days, because of the nuclear segment occupying major role.

— Ramakrishna Kamojhala

Mix

Domestic vs Export Revenue Mix Mix · 2 years down the line · Medium confidence 75-25

From 90-10 (export-domestic) today

I think probably it will not change too much for next 1, 1.5-years. But I would say 2 years down the line, you would start seeing some increase in domestic business. So, you might see about 75-25 or something like that.

— Anil Puttan Kumar

Product Mix

Precision Components Revenue Share Product Mix · medium term · Medium confidence 30%

From 18% today

And on the component side, like precision components, like what orders over next, like say 1 or 2 years, we are seeing, because our medium term guidance is that we, our precision components would rise to 30-odd percent of total revenue.

— Management

Product Development

DET-500 Certification Product Development · End of 2026, early 2027 · High confidence End of 2026, early 2027

We look at the certification of DET500 moving to about end of 2026, early 2027, which is as per the plan.

— Rajanikanth Balaraman
DET-200 AS9100 Certification Product Development · September-October · High confidence September-October

The teams are actually trying to get AS9100 certification by September-October and hopefully get the CEMILAC's certification by end of the year.

— Rajanikanth Balaraman
DET-200 CEMILAC Certification Product Development · year end · High confidence Year end

— Rajanikanth Balaraman

What to watch in Q2 FY26

EMCCR Tender Results

August/September

Current Bids submitted for 4 EMCCR tenders, overall above INR400 crores.

Target Results for submitted EMCCR tenders

Why it matters

These tenders represent a significant short-term opportunity in the nuclear segment and their outcome will impact the order book.

We have submitted four EMCCR tenders for Tarapur-3 and 4 atomic power stations, which is a 540 megawatts reactor, waiting for results in a couple of months. ... Expecting results in a couple of months (August/September).

Risks & concerns

Tariff impact on sales and margins
medium

Unsettled tariff matter may lead to slower shipments, potential gross margin compression, and requests for cost sharing from customers.

Management acknowledged
Increased employee costs impacting EBITDA
medium

Employee costs increased to over 20% of revenue due to new hiring, ESOPs, and salary increments, contributing to a 23% YoY EBITDA decline.

Management acknowledged
Increase in working capital days
medium

Working capital days are expected to increase from 100-110 days to 150-160 days due to the long-cycle nature of nuclear projects.

Management acknowledged
Slow capacity utilization ramp-up
low

Current capacity utilization is 58%, with a target of 85-90% in the next 24 months, indicating a gradual ramp-up process.

Management acknowledged
Long lead times for aerospace orders
low

Aerospace orders, especially for automation, typically take longer for execution and revenue recognition compared to defense orders.

Management acknowledged

Q&A highlights

4 direct, 1 evasive

Competitive positioning and timeline for nuclear opportunities Direct

So, while the recent announcement is more of BSR related, which is anyway more than 10 BSRs are going to come up in a couple of years. However, Unimech as of now there are three stages of opportunity when Unimech look at nuclear side. The first one is immediate, the short-term project, which is the EMCCR, which is a modernization project kind of thing. Second thing is a new, bigger reactor, 700 megawatt reactor, which is around 10 coming. And third opportunity is the BSR side, which is just now the announcement is happening. Of course, next 10 to 15 years, the roadmap is very strong.

Clarifies Unimech's multi-stage strategy and competitive advantage in the significant nuclear sector opportunity, detailing short-term and long-term prospects.

Asked by Jai Chauhan

Impact of tariff discussions on margins and customer behavior Partial

But how much the customer will ask us to contribute is something we will be able to give you more in Q2, kind of post-Q2 we'll be able to tell. But as of now, it's too early to see. But yes, some compression definitely would be there, in case tariff is going to be maybe more than 15% or 20%.

Highlights the ongoing uncertainty and potential margin pressure from tariffs, with management indicating they will have more clarity on customer contribution in Q2, a key risk factor.

Asked by Kamlesh Bagmar

Future domestic vs. export revenue mix Direct

I think probably it will not change too much for next 1, 1.5-years. But I would say 2 years down the line, you would start seeing some increase in domestic business. So, you might see about 75-25 or something like that.

Provides a specific long-term target for the domestic-export revenue mix, indicating a strategic shift towards increasing domestic business from the current 90% export reliance.

Asked by Balasubramanian

Status of engine stand orders and production Direct

I think I updated it in the last quarter. We already have orders for throughout -- for about 10 numbers. And then once we prove it, I think it will go into production mode.

Confirms existing orders for engine stands and outlines the path to full production, indicating a new revenue stream in the near future.

Asked by Sagar Dhawan

Strategy for US/European warehouse facility and M&A Evasive

We are looking at exploring M&A opportunities, as well as some collaborations with JV. Let's say with US JV, no sorry, US entities. It's not definitely just a warehouse. ... So we are looking at an inorganic opportunity only M&A or JV opportunity. So you will hear from us in coming quarters about the progress.

Management clarifies that the 'warehouse facility' mentioned in the PPT is actually a broader M&A/JV strategy for global expansion, indicating potential inorganic growth avenues but with ongoing due diligence.

Asked by Vinit Agarwal

Deployment plan for undeployed IPO funds Direct

So, as of now, INR120 crores of undeployed money is there in an IPO fund. So in this some portion in the -- around 50% is going to be utilized by March, which is towards kind of loan repayment or borrowing repayments. ... out of INR120 crores, INR30 crores will be next year deployment and INR90 crores is going to be used in this financial year.

Provides a clear breakdown of how the remaining IPO funds will be utilized, including loan repayments and working capital, offering transparency on capital allocation.

Asked by Vinit Agarwal

3 min read 6 chapters

Detailed narrative

Q1 FY26 Performance and Market Context

Unimech Aerospace and Manufacturing Limited reported a Q1 FY26 revenue of INR63 crores, marking a 6% year-on-year growth. This performance is considered a strong start despite uncertainties from ongoing tariff discussions and a slight quarter-on-quarter slowdown in export markets. The company highlighted India's aerospace and defense sector entering a rapid growth mode, with global OEMs like Boeing increasing sourcing from India from $250 million to $1.25 billion in less than a decade, and domestic aviation passenger traffic up 15% YoY.

Profitability and Cost Structure

The company maintained a gross margin of 66% in Q1 FY26, similar to the previous quarter, despite increased costs associated with small qualification orders. However, EBITDA stood at INR20 crores (31% of revenue), a 23% decline YoY, primarily due to higher employee costs (over 20% of revenue) and operating expenses. Employee costs increased due to new hiring, ESOP costs, and salary increments, but are expected to stabilize at 20-22% for FY26 and eventually reduce to 14-16% of revenue. Operating expenses are projected to be 12-13% of revenue on a full-year basis.

Order Book and Pipeline Dynamics

As of June 2025, Unimech's order book was INR81 crores, with management anticipating significant order inflows in Q2 and Q3 across aero tooling and precision segments. The company has submitted bids for EMCCR tenders worth over INR400 crores and expects results in August/September. Additionally, RFQs for Kaiga-5 & 6 nuclear power plants have been received, with supply expected in H2 FY26. The pipeline for new reactors and Small Modular Reactors (BSRs) is robust, with opportunities for tenders worth INR500+ crores per reactor.

Strategic Initiatives and Capacity Utilization

Unimech is focused on disciplined execution and strategic investments, including a company-wide drive for cost and efficiency improvements. Capacity utilization for Q1 FY26 was 58% with 6.59 lakh machine hours, slightly up QoQ due to new additions. The target is to achieve 85-90% utilization in the next 24 months, aiming for a fixed asset turnover ratio of 3-3.5 times. The company is also investing heavily this year to support its growth plans.

Impact of Tariffs and Working Capital

Tariff discussions remain an unsettled matter, potentially leading to slower shipments and negative impacts on gross margins, as customers seek to mitigate costs. Unimech anticipates some cost sharing with larger customers but is confident in minimizing the long-term effect. The company expects its working capital days to increase from the current 100-110 days to 150-160 days due to the longer project cycles in the nuclear segment. INR50 crores in debt funding is ready to support this, though not yet availed.

Inorganic Growth and Product Development

Unimech is actively evaluating precision manufacturing targets for acquisitions and joint ventures in India and the US, with potential deals closing next year for full integration. In product development, the DET-500 engine is in initial verification/validation, with certification expected by end of 2026 or early 2027. The DET-200, with two units already sold, is targeting AS9100 certification by September-October and CEMILAC certification by year-end.

This is an AI-generated summary of a publicly available earnings call transcript.

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