Aeroflex Industries Ltd Q4 FY2026 Concall Summary

Key Takeaways

• FY26 closed strong, FY27 guided at ~35% growth: Total income grew 17% YoY despite a weak Q1, and management expects the skid assembly ramp to drive a sharp acceleration this year.
• Skid assemblies are the new growth engine: 617 units sold in four months, contributing ~5% of FY26 revenue; capacity is scaling to 15,000 units with a target of 60% utilization by March 2027, aiming for a 20–22% revenue share in FY27.
• Margins are improving but investment is front-loaded: Q4 EBITDA margin reached 23.86%, with a full-year FY27 target of ~23% and a long-term goal of 25%, even as the company builds out teams and capacity for new verticals.
• The US business proved resilient: US revenue grew in value terms despite tariffs and geopolitical noise, driven by a broader customer base and new orders for metal bellows.
• What to watch next quarter: Whether the skid assembly capacity hits 15,000 units on schedule, the pace of new data center product sales, and any conversion of the US exhibition leads for liquid cooling.

Skid Assemblies & Liquid Cooling

• Rapid revenue ramp: Skid assemblies went from zero to ~5% of FY26 business in four months, with 617 units sold for INR21.2 cr; management expects the segment to reach 20–22% of total revenue in FY27.
• Capacity build-out on track: Current capacity is expanding to 6,000 units, then to 15,000 by next quarter; the target is 60% utilization on the 15,000-unit base by March 2027 month-end, based on orders from the exclusive principal only.
• Design is the bottleneck, not manufacturing: The principal's design responsibility has shifted entirely to Aeroflex's team, and stringent, customer-specific quality audits and checks gate production; manufacturing capacity itself is much higher.
• Domestic-first, with global ambition: The entire current skid business is domestic, which will push the domestic revenue share higher; management aims to start at least some international supply in FY27 but has not finalized the route or partner.
• Pricing power from scarcity: Management stated Aeroflex is among the only players manufacturing and supplying skid assemblies in India right now, making the dynamic "more about supply than about pricing."

Asad Daud: "In India right now, we are among the only players, who are manufacturing and supplying skid assemblies. So, I think right now, it's more about supply than about pricing."

Data Center & New Product Pipeline

• Product suite expanding beyond skids: Hose assemblies for data center applications (last-mile cooling, firefighting, liquid transfer) are under development and customer approval, with sales expected to start from Q1 FY27.
• Annealing plant to unlock capability: The new annealing furnace, targeted for commissioning by year-end, will support data center hose assemblies, many of which require annealing.
• Exhibition leads in play: Aeroflex showcased its liquid cooling portfolio at the Data Center World Exhibition in Washington; leads have been obtained and the team has started working on them, though it is too early to comment on conversion.
• Innovation pipeline is deep: More than 16 products are under development, primarily focused on high-growth segments including data centers and AI infrastructure.

Metal Bellows

• Traction improved after a slow start: FY26 began with challenges from US tariffs impacting a new vertical, but orders picked up over the past couple of quarters; the current annualized run rate is INR12 cr.
• Long sales cycle, best margins: The sales cycle is longer than other products, but margins are the highest in the portfolio; as applications move into AI infrastructure, data centers, and aerospace ancillary, margins can be much higher than conventional industries.
• Capacity and utilization targets: Miniature bellows capacity is at 60,000 pieces with no major capex planned this year; the target is 50–60% utilization over the next two to three years, with peak utilization (~85%) potentially yielding ~INR80 cr in revenue.

Asad Daud: "Obviously, as we move our products into higher end, for example, applications such as AI infrastructure, data center, plus also some kind of ancillary to aerospace industries, definitely margins over there are much higher than other conventional industries."

Base Business & Geographic Mix

• Hose assemblies remain the anchor: The core product will stay the major revenue contributor for at least the next 2–3 years, even as skids scale; base business (ex-skids, ex-bellows) is expected to grow 15–20% in FY27.
• Domestic share rising by design, not distress: Domestic sales grew ~40%, shifting the mix, but exports also grew double digits in Q4 despite the West Asia situation; the ratio changed because domestic grew significantly faster, not because exports fell.
• US business defied headwinds: Despite tariffs, tariff releases, and war, US revenue increased in value terms year-on-year; growth came from the largest customer and new customers, plus initial orders for metal bellows.
• Tariff overhang cleared: The Section 232 tariff on Aeroflex products was reduced from mid-February to a current rate of around 10–15%; management stated there are no tariff issues as of now.

Asad Daud: "despite everything that happened this year in the U.S., despite all of that, the U.S. business has still shown a significant jump. I think that's... a great achievement by the team to get this kind of business from the U.S. despite all of these issues that have happened in the year."

Margins & Investment

• Q4 margin reflects operating leverage: EBITDA margin of 23.86% benefited from strong operating leverage and an improving product mix.
• FY27 margin target is ~23%: The full-year target embeds ongoing investment in team expansion across sales, marketing, operations, and technology; the long-term aspiration is to reach ~25% annually over the next couple of years.
• Metal bellows and skids are the margin levers: Both carry structurally higher margins than the base business, so mix shift alone provides a tailwind as they scale.
• Skid assembly margin undisclosed: Management declined to share specific EBITDA margins for skid assemblies, citing the sensitivity of working with a single customer.

Capital Allocation & Inorganic Opportunities

• Capex redeployed to liquid cooling: Capital previously allocated to miniature metal bellows has been shifted to the liquid cooling vertical; no major bellows capex is expected this financial year.
• Hyd-Air integration underway: The subsidiary will be used for internal consumption, manufacturing specific high-end fittings and connectors for hose assemblies, HVAC, and data center applications, subject to certifications and customer audits.
• Acquisition appetite is real but early: Management is open to acquisitions for new capabilities in the data center space, noting that India has few opportunities while international markets may offer some; nothing is finalized.
• Income tax demand of ~INR40 cr: Relates to a legacy bank interest waiver from FY17–18 when the company was taken over as a stressed asset; management is "extremely confident" the demand will be reversed in appeals.

Asad Daud: "as per our advisers and our lawyers, we are extremely confident that these things is going to be reversed in the appeals that we're going to file."

Guidance & Commitments

Key Metrics