Unimech Aerospace and Manufacturing Limited

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.

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.

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.

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.

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.

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.