Aeroflex Industries liquid cooling skid ramp drives data centre growth

Investment View and Valuation

ICICI Securities’ July 28, 2026 result update identifies liquid-cooling solutions for AI-driven data centres as the next major structural growth driver for Aeroflex Industries. The company manufactures and supplies stainless-steel metallic flexible flow solutions. Exports accounted for about 69% of revenue in FY26, while domestic markets contributed about 31%.

The broker retains a BUY rating and values Aeroflex at 55 times FY28E EPS, arriving at a fair value of Rs 545, compared with a CMP of Rs 440.

Strong Q1 FY27 Financial Performance

Aeroflex reported strong Q1 FY27 performance, led by robust revenue growth and operating leverage. Consolidated revenue from operations increased 72.4% year on year to Rs 145.4 crore. EBITDA rose 116.4% year on year to Rs 33.5 crore, while EBITDA margin expanded by 468 basis points to 23.0%. PAT increased 162.2% year on year to Rs 18.8 crore, with PAT margin improving by 441 basis points to 12.9%.

The core stainless-steel flexible-hose business grew 40.5% year on year, while assemblies and other value-added products grew 33.6%. Exports contributed 58% of Q1 FY27 consolidated revenue.

Q1 FY27 Revenue Mix

Liquid-Cooling Skid Business Gains Momentum

The liquid-cooling skid business scaled rapidly in Q1 FY27, with revenue of Rs 32.4 crore compared with Rs 18.9 crore in Q4 FY26. Skid volumes increased sequentially to 1,040 units from 571 units, with average realisation of Rs 3.11 lakh per skid.

ICICI Securities expects skid assemblies to increase from 5% of revenue in FY26 to 37% over FY26 to FY28E. The report highlights demand from AI-led data-centre deployments, including India’s announced pipeline of more than 9 GW of data-centre development and global AI infrastructure spending. The global liquid-cooling market is expected to record a 33.2% CAGR between CY25 and CY32, while direct-to-chip cooling is expected to grow at a 35.0% CAGR over the same period.

Capacity Expansion and Product Development

Management has expanded skid-assembly capacity from 6,000 to 9,000 skids annually and remains on track to reach 15,000 skids annually by Q3 FY27. It expects around 80% utilisation in FY28 and anticipates international skid-assembly orders to begin during FY27.

Aeroflex continues discussions with customers in Europe and the US for customised skid solutions. Fire-hose assemblies for international data-centre customers are expected to be commercialised by the end of Q2 FY27 or early Q3 FY27.

The company is also increasing stainless-steel flexible-hose capacity from 17.5 million metres to 20 million metres by Q3 FY27. It has 58 products under development, including 16 for liquid-cooling applications.

Margin Outlook and Revenue Potential

Management reiterated its long-term EBITDA-margin objective of about 25%. The expected improvement is supported by a higher contribution from skid assemblies, bellows and other value-added assemblies, along with operating leverage.

Management estimates peak revenue potential of Rs 650 crore to Rs 675 crore for the flexible-hose business and Rs 300 crore to Rs 350 crore from liquid cooling by FY29.

ICICI Securities’ Financial Forecasts

Key Risks

• Global slowdown: Aeroflex has significant reliance on exports, which could expose the business to weaker global demand.
• Working capital: The business has high working-capital requirements.