Aequs Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Record revenue, consumer still loss-making: Revenue hit an all-time high of ₹326.2 crore (51% YoY) on aerospace ramp and consumer scale-up, but the consumer segment EBITDA loss widened to ₹15.9 crore as utilization sits at just 31%.
• Aerospace order book provides multi-year visibility: The USD \$814 million order book, with over 90% of parts single-sourced, will be delivered through 2031 and supports a nine-month segment EBITDA margin of 24%.
• Consumer electronics inflection has begun: Products are qualified, commercial shipments started in Q3, and the customer is asking Aequs to increase capacity; the business is now fully industrialized with revenues flowing.
• Profitability timeline is deliberately open-ended: Management declined to commit to a PAT-positive date, framing the choice between faster capacity addition for a happy customer versus near-term profitability as a strategic trade-off it is still evaluating.
• What to watch next quarter: Whether consumer utilization ticks up from 31%, any new customer additions beyond Mattel, and whether management provides a firmer timeline on the consumer segment breakeven path.

Aerospace: The Profit Engine

• Record quarter, strong book: Revenue hit an all-time high driven by program ramp-ups, and the order book of USD \$814 million in total contract value provides visibility through 2031, with contracts continuously renewing and new ones converting from the RFP pipeline.
• Margin profile defended: Nine-month segment EBITDA margin stands at 24%, and management is comfortable at this level, citing scale that is significantly larger than competitors, a vertically integrated ecosystem that requires investment but yields deeper customer insight, and a global cost structure that supports long-term partnerships.
• Single-source moat: Over 90% of aerospace parts are single-source, creating high switching costs and embedding Aequs deeply into customer supply chains.
• Utilization headroom: India aerospace utilization is at 71%, with a typical target of around 75%, leaving room for growth without major new CapEx.
• Product mix expansion: The business is predominantly aerostructures but is expanding into landing gear and engine components, leveraging its vertically integrated ecosystem of forging, machining, and surface treatment; the company is already engaged with all landing gear customers.
• CapEx is continuous, not lumpy: Machines are ordered on an 18-24 month planning horizon due to lead times of up to one year, so CapEx flows steadily rather than in large discrete chunks.

Dinesh Iyer: "I think important thing while we will not comment on other companies, I think important thing to see is the scale at which we are operating, which is significantly larger as compared to the competitors you're referring to."

Consumer Segment: The Investment Phase

• Loss widened on low utilization: Consumer EBITDA loss expanded to ₹15.9 crore from ₹9.5 crore because the majority of capacity has come online but utilization is only 31%, leaving fixed costs uncovered.
• The operating leverage thesis: As utilization improves with scale, operating leverage is expected to improve profitability; at steady state with ideal capacity, consumer segment EBITDA margins should be similar to aerospace at 18-20%.
• Two sub-segments, two trajectories: Consumer electronics programs are now industrialized with revenues flowing and the customer asking for more capacity; toys has Hasbro growing and Mattel onboarded as a new customer with long-term strategic agreements signed in Q3 and shipments already begun.
• Capacity fully committed: The capacity built in consumer electronics is fully committed by the customer; there is no demand issue, only the company's ability to scale at a quicker pace, and Aequs holds a very small share of the customer's overall market.
• No breakeven timeline: Management explicitly declined to give a timeline for consumer segment profitability, citing the tension between rising utilizations and the customer's request to add still more capacity, which would bring additional CapEx, depreciation, and a longer path to breakeven.
• Strategic choice framed: The PAT-positive timeline depends on the maturity of consumer electronics, and management characterized the decision as a deliberate trade-off: chase faster capacity growth for a satisfied customer, or prioritize near-term profitability.

Aravind Melligeri: "We cannot give that exactly at this point in time because our utilizations are going up. Also at the same time, our customers are happy and asking us to increase our capacity. So, we have to bring these factors together to figure out how things will work out. And we will need some more time to get to the answer to that question on timelines."

New Customer & Partnership Wins

• Mattel onboarded: Long-term strategic agreements were signed in Q3 for the toys vertical, shipments started, and revenue recognition began.
• PLI approval secured: Received approval from MeitY for PLI incentives under the electronic component manufacturing scheme for mechanical enclosures in consumer electronics.
• Defense JV for UAVs: Announced a partnership with Accel India and Vagus Defense to enter the UAV market, targeting design and manufacturing as a system-level contributor in defense.
• Ecosystem partnerships: Partnered with Magellan Aerospace of Canada for surface treatment, Aubert & Duval of France for forging, and Brazilian multinational Tramontina to tap the global cookware market.

Balance Sheet & Capital Allocation

• Deleveraged post-IPO: Net debt to equity reduced sharply to 0.1X following IPO deleveraging and an improved capital structure.
• Fixed asset turnover split: Consolidated fixed asset turnover moderated to 0.84X from 1.3X due to significant capacity additions in the consumer segment; excluding consumer additions, it would be 2.14X.
• Working capital reflects aerospace cycle: Net working capital days improved slightly to 120 from 132 in FY25, reflecting the long-cycle nature of aerospace programs and inventory build to support growth.
• Aerospace ROCE improving: Segment ROCE improved to 18.5% for nine months FY26 from 14.3% in FY25, driven by operating leverage.
• No new CapEx this year: No new CapEx is expected for the remainder of the year, though some capitalization will occur in Q4 for consumer electronics.

What Management Declined to Disclose

• No revenue or margin guidance: Management declined to provide guidance for FY26 or FY27.
• No consumer segment splits: Revenue splits between toys and consumer electronics, and between fresh-aircraft and MRO, were not provided.
• No wallet-share metrics: Content per aircraft for narrow-body planes was not disclosed.
• No client-wise revenue breakup: The Boeing versus Airbus split was not provided.
• No capacity specifics: Questions on consumer electronics capacity numbers (units per day) were declined.
• No PAT-positive timeline: Management declined to confirm whether FY27 PAT-positive guidance remains on track, and would not commit to providing clarity by the next conference call.
• No three-year revenue target: A suggested 25% CAGR was not confirmed; management stated only that aerospace can grow north of 20% and consumer can be much faster.

Aravind Melligeri: "It is a choice for us, on what path we want to take."

Guidance & Commitments

Key Metrics