Unimech Aerospace and Manufacturing Limited

Unimech Aerospace reported Q2 FY26 revenue of ₹62 crores, a 1% year-on-year increase, and H1 FY26 revenue of ₹125 crores, up 4% YoY, exceeding initial expectations. Despite this, the company faced headwinds from additional U.S. export tariffs, which led to lower sales and a drop in EBITDA to ₹18.5 crores, representing a 30% margin for H1 FY26. The tariffs have also caused a shift in customer order patterns from build-to-inventory to conservative build-to-order, resulting in longer lead times.

The company's order book stands at a healthy ₹105 crores as of the first week of November, with 95% pertaining to the tooling business. A significant highlight was a $4 million order for ground support equipment under the LEAP engine program, a substantial increase from historical orders of $0.5-1 million. Unimech is actively diversifying into precision engineering, including semiconductor, medical, and defense, with over 50 FAIs completed and bids submitted for nuclear projects amounting to approximately ₹800 crores, with more RFQs expected by December 2025.

FY26 is a year of strategic investments for Unimech, focusing on capacity expansion through new facilities and scaling high-value engine tooling operations. The company added five large machines this quarter, bringing its total machine count to 146 and total machine capacity to 6.83 lakhs. However, capacity utilization is currently low at 55% and is expected to trend lower in the near term due to the focus on prove-outs and FAIs for new segments, which are less efficient for machine utilization. Management anticipates utilization to improve by 7-10 percentage points by mid-next year.

Due to the U.S. tariff impact^🌐s and changed market dynamics, the earlier FY26 revenue growth guidance of 40% is no longer practical, and margins are expected to be lower than last year. Despite these near-term challenges, Unimech remains confident in its long-term strategic goals, targeting ₹1,000 crores in revenue by FY29. This long-term vision includes a segment mix of 65% aero tooling and 35% nuclear/precision, aiming for blended gross margins of 62-63% at peak.

Unimech is actively evaluating acquisition opportunities and joint ventures, with advanced discussions for JVs in the Middle East (oil & gas, aerospace & defense) and the U.S. to enhance its market presence. Progress on its minority investment in Dheya Technologies includes the DET-500 engine achieving self-sustained operation at 34,000 RPM and AS9100 certification. The DET-200 engine certification is underway and expected next year, along with ECU delivery in Q1 next year, strengthening Unimech's position as Dheya's exclusive manufacturing partner.

Working capital days are projected to increase from the current 110 days to approximately 150 days in the future, driven by longer lead times for nuclear projects and larger GSE orders. To mitigate the near-term effects of tariffs, Unimech is establishing a free trade warehousing zone, with operations expected to commence in Q4 FY26, and leveraging drop shipment mechanisms to ensure steady deliveries to non-U.S. customers, which account for 65-70% of consumption.