Summary
Aeroflex Industries Limited - Q3 FY 2026 Earnings Call Summary Thursday, January 29, 2026 11:00 a.m. IST
Event Participants
Executives 1 Asad Daud (Managing Director)
Analysts 8 Arjun (Longequity Partners), Ashar Kapadi (Front Wave Research), Nidhi Tiwary (Adroit Financial), Nikunj Bhanushali (Kosh Wealth), Pritesh (Lucky Investment), Raman KV (Sequent Investments), Singaraju Ram (Omvetri Holdings), Vansh (Nvest Analytical Advisors), Viraj Parekh (Carnelian)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Income | ₹121 crores | +21% YoY; Highest ever quarterly revenue driven by value-added products and data center applications. |
| EBITDA | ₹28.50 crores | +28% YoY; Highest ever quarterly EBITDA. |
| EBITDA Margin | 23.6% | +130 bps YoY; Scalability and improved product mix offset tariff-related headwinds in exports. |
| Net Profit (PAT) | ₹16.50 crores | +8% YoY; Highest ever quarterly PAT; Margin at 13.5%. |
| Cash PAT | ₹22.75 crores | Reflects strong cash generation and operating performance. |
| Value-Added Products Mix | 54% | Includes assemblies, fittings, bellows, and skid assemblies; rising as a portion of total sales. |
| Installed Capacity (Hoses) | 17.5 million meters | +1 million meters added this month; target 20 million meters by Q2 FY27. |
| Export Growth | 30% | Strong YoY growth despite US tariff headwinds; EU and USA contribute ~85% of exports. |
Geographic & Segment Commentary
- Domestic Market: Achieved significant growth driven by the steel industry, ports, and terminals. Management noted entry into new ports and increased wallet share with existing chemical and steel clients.
- Export Market (USA & EU): USA remains the largest market (55% of exports) despite 50% tariff headwinds slowing new customer onboarding. EU (30% of exports) showed strong growth and is expected to benefit from the recently signed Free Trade Agreement (FTA).
- Subsidiary - Hyd-Air: Generated ₹8.5 crores in Q3 vs ₹2.9 crores YoY. Growth is driven by the railway industry, with a target annual revenue run rate of ₹45-50 crores at 70% current utilization.
Company-Specific & Strategic Commentary
- Liquid Cooling for Data Centers: Entered high-performance cooling for AI infrastructure via an exclusive 5-year India agreement with a US partner. Completed first commercial dispatch and is expanding skid assembly capacity to 15,000 units by June 2026.
- Capex Rationalization: Reduced Miniature Metal Bellows project outlay from ₹23 crores to ₹10.5 crores (capacity revised from 240k to 50k pieces). Funds redeployed to higher-demand areas like liquid cooling to reduce gestation risk and accelerate payback.
- Production Automation: Investing in robotic welding stations and an annealing plant scheduled for completion by the end of the calendar year to penetrate mission-critical segments.
- New Facility: Setting up a supportive production unit at Chakan, Pune, to augment existing skid assembly capacity.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue (Consolidated) | ₹1,000+ crores (FY29) | Expected peak utilization of major projects including Bellows and Liquid Cooling over 3 years. |
| EBITDA Margin | 23.0% - 25.0% | Long-term target supported by higher-margin assemblies and operational efficiencies. |
| Skid Assembly Revenue | ₹300 - ₹350 crores (FY29) | Based on peak utilization of 15,000 units p.a. and US partner projections. |
| Bellows Revenue | ₹85 crores (FY29) | Currently at ₹12 crore run-rate; expected to reach ₹36 crore run-rate in few quarters. |
Risks & Constraints
| Risk | Context |
|---|---|
| Geopolitical/Tariff Risk | 50% tariffs in the US market are delaying new OEM onboarding and impacting demand timelines for bellows. |
| Concentration Risk | Liquid cooling project currently relies on an exclusive partnership with a single US-based multinational. |
| Implementation Delays | Bellows business is slightly behind schedule due to international market headwinds and tariff uncertainties. |
Q&A Highlights
Data Center Market Size
- Question: What is the total addressable market for liquid cooling? (Raman KV)
- Answer: Global liquid cooling market is ~$3B today, growing at 33% CAGR to ~$21B in 6-7 years. New data centers are 99% liquid-cooled due to higher chip power and lower recurring costs compared to air cooling (Asad Daud).
Margin Resilience
- Question: How are margins maintained despite 50% tariffs and 8% price discounts? (Arjun)
- Answer: Internal cost optimization through engineering, R&D, and supply chain negotiation. Management noted that if tariffs are removed, margins could see significant upside (Asad Daud).
Capital Allocation
- Question: Why was the Miniature Bellows capex curtailed? (Ashar Kapadi)
- Answer: Strategy shift to deploy capital where immediate demand visibility exists (Liquid Cooling) versus waiting 1-2 years for Bellows demand to mature; enables faster payback (Asad Daud).
Competitive Moat
- Question: What prevents others from replicating the liquid cooling skid design? (Arjun)
- Answer: Joint development with partner involves proprietary simulation software to predict flow damage and 15-20 years of flow-control expertise that is difficult to replicate (Asad Daud).
Key Takeaway
Aeroflex Industries delivered a record-breaking Q3 FY26, achieving its highest-ever quarterly revenue of ₹121 crores and EBITDA of ₹28.5 crores, driven by a strategic shift toward value-added assemblies and the first commercial dispatches of liquid cooling skids for data centers. While US export growth faces friction from 50% tariffs, the company successfully offset these pressures through a 30% jump in EU exports and strong domestic demand from the steel and port sectors. Management demonstrated disciplined capital allocation by rationalizing the Miniature Bellows project and redeploying funds to the high-growth data center segment, where they target ₹300-350 crores in peak revenue by FY29. Looking ahead, the company aims for 25% EBITDA margins as it scales to a ₹1,000 crore revenue run-rate over the next three years, contingent on the successful ramp-up of its Chakan facility and the implementation of the India-EU FTA.
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