Earnings call transcript: Aeroflex Industries jumps on record Q2 2026 growth

Aeroflex Industries reported record quarterly results for Q2 FY 2027, with total income rising 87% year on year to INR 207.68 crores and profit after tax climbing 157% to INR 36.56 crores. EBITDA increased 74% to INR 50.34 crores, while the EBITDA margin expanded to 24.27% from 20.34% a year earlier. The stock rose 16.81% to $575 from the previous close of $492.25, putting it close to its 52-week high of $613.7 as investors reacted to the company’s growth momentum, margin gains and rising contribution from liquid cooling solutions.

Aeroflex said the quarter reflected broad-based growth across its core hose, assembly and liquid cooling businesses. H1 FY 2027 total income reached INR 353.66 crores, up 81% from a year earlier and nearly equal to the company’s full-year FY 2026 revenue base. Management described the period as its strongest half-year performance to date.

The company said demand remained healthy in metal flexible hoses, assemblies and value-added products, while liquid cooling emerged as a key growth driver. The vertical is tied to the build-out of data centers and high-performance computing infrastructure, where heat management is becoming more important. Aeroflex said the business is evolving from a flexible hose supplier into a broader flow-control and liquid cooling solutions provider.

The company also said trade receivables grew more slowly than sales, suggesting better cash collection and working capital control. That is important for a company growing as quickly as Aeroflex, because rapid expansion can often strain balance sheets.

No consensus EPS or revenue forecast was provided for the quarter, so a direct beat-or-miss comparison is not available. Even so, the reported numbers point to a strong performance. Revenue growth of 87% and PAT growth of 157% suggest the company delivered well above a normal growth quarter.

The scale of the improvement also stands out against Aeroflex’s recent history. Management said H1 FY 2027 revenue was already close to the company’s full-year FY 2026 performance, which indicates the business has moved into a much faster growth phase. The quarter also showed margin expansion, which is important because rapid revenue growth does not always translate into higher profits.

A separate accounting change also helped reported profit. Aeroflex switched depreciation from the written-down value method to the straight-line method effective April 1, 2026, reducing depreciation expense by INR 8.41 crores in both Q2 and H1. That supported earnings, although the company said the change was based on technical advice and asset-use patterns.

Aeroflex shares rose 16.81% to $575 from $492.25, a gain of $82.75 per share. The stock is now trading only about 6.3% below its 52-week high of $613.7 and far above its 52-week low of $158.

The move suggests investors responded positively to the company’s growth rate, margin expansion and long-term opportunity in liquid cooling. The stock’s sharp rise also indicates that the market viewed the quarter as more than just a one-off revenue spike. Instead, investors appear to be pricing in a stronger earnings trajectory and a larger addressable market.

No volume data was provided, so it is not possible to confirm whether the move came with unusually heavy trading. Still, the size of the gain points to a strong bullish reaction.

Management said it expects overall revenue growth of about 60% for FY 2027, with full-year revenue of INR 715-725 crores. The company also raised its skid assembly target for FY 2027 to INR 150-200 crores, up from an earlier goal of INR 125 crores that management said would already be achieved in Q2.

Looking further ahead, Aeroflex said it expects FY 2030 revenue of about INR 1,500 crores, up from a previous FY 2029 target of INR 1,000 crores. Management said margins should be around 25% and slightly higher by FY 2030, balancing scale benefits against pricing pressure.

The company also announced a INR 202 crores capital spending program. Of that, INR 124 crores will go toward hose expansion and INR 78 crores toward skid assembly expansion. The plan is to lift stainless steel flexible hose capacity from 20 million meters to 30 million meters per year and skid capacity from 15,000 to 30,000 units per year by March 2028.

Management said the expansion should support incremental annual revenue of INR 500-550 crores at peak utilization. It also said skid utilization should reach 40%-50% by the end of FY 2027, with peak use expected in FY 2028.

Managing Director Asad Daud said the quarter was the company’s best ever. “We are pleased to report our best ever results with quarterly revenue crossing INR 200 crores milestone for the first time ever,” he said, adding that the result reflected “sustained growth momentum across all our verticals” and stronger traction in liquid cooling.

Daud also highlighted the strategic importance of the new business line. “The liquid cooling vertical continues to gain significant traction,” he said, noting that it contributed 24% of H1 revenue and marked “a significant milestone” in the company’s shift toward advanced flow-control and liquid cooling solutions.

On the long-term opportunity, Daud said the global transition toward AI and computing infrastructure “represents a multiyear opportunity” and supports the company’s expansion plans. He also said Aeroflex remains focused on “maintaining a strong balance sheet, healthy cash flows, and financial discipline.”

Analysts focused heavily on liquid cooling, capacity expansion and the Hyd-Air merger. One key question was how much cost savings the merger could deliver. Management said it expects “at least a couple of percentage” points of margin expansion, though it did not give a precise estimate.

Questions also centered on the liquid cooling order pipeline and international expansion. Management said it could not disclose the order book, but noted it typically has a confirmed supply pipeline of at least three months. It also said discussions with international customers are progressing, though timelines remain uncertain because of qualification requirements.

Another area of interest was capacity use. Management said the current skid capacity of 15,000 units is expected to reach 40%-50% utilization by the end of FY 2027, with peak use likely in FY 2028. Analysts also asked about the long-term outlook, and management responded that FY 2030 revenue could reach about INR 1,500 crores with margins around 25% and slightly higher.

The company also clarified that exclusivity applies only to the Indian market. Internationally, Aeroflex said there is no exclusivity, which leaves room for broader customer expansion.

Conference Moderator: Ladies and gentlemen, good day and welcome to the Aeroflex Industries Limited Q2 FY 2027 earnings conference call. As a reminder, all participants’ line will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Before we begin, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Asad Daud, managing director. Thank you, and over to you, sir.

Asad Daud, Managing Director, Aeroflex Industries Limited: Thank you so much. Good morning, everyone. I welcome you all to Aeroflex Industries Limited Q2 FY 2027 earnings call. Joining us today are members of our senior management team, along with representatives from Strategic Growth Advisors, our investor relations partner. I hope you had the opportunity to review our financial results and investor presentation, which are available both on the stock exchange and also on our company’s website. We are pleased to report our best ever results with quarterly revenue crossing INR 200 crores milestone for the first time ever. This achievement reflects sustained growth momentum across all our verticals and supported by strong demand for our core products and increasing traction that we are witnessing in the liquid cooling vertical. It also highlights the strength of our diversified business model, a growing contribution from value-added products, and our strategic positioning in high-growth segments, especially the high-performance data center infrastructure.

During H1 FY 2027, our metal flexible hose business delivered strong growth, with revenues increasing by 40% on a year-on-year basis, supported by demand across various end user industries and across our established international customer base. The assemblies and other value-added products business also registered a growth of 44% on a year-on-year basis, which reflects increased demand for high-precision engineered flow solutions. The liquid cooling vertical continues to gain significant traction, driven by the growing adoption of advanced cooling technologies in high-performance data centers. This vertical contributed 24% to our revenue in H1 FY 2027, which makes a significant milestone in our evolution from being just a flexible hose provider to an integrated provider of advanced flow control and liquid cooling solutions. We have also announced the merger of Hyd-Air Engineering, which is our wholly owned subsidiary, with Aeroflex.

This is aimed at strategically integrating operations of Hyd-Air into Aeroflex and to create a more streamlined and efficient business structure. The merger is also expected to leverage existing infrastructure. It will help to optimize the resource allocation and also strengthen the company’s ability to scale in-house capabilities in line with our busine