Aeroflex growth rests on value-added mix and data-centre liquid cooling capacity
Aeroflex Industries Ltd.
BUY
₹190
₹502.1
₹245
28.95%
Investment View
ICICI Securities’ February 16, 2026 report on Aeroflex Industries Limited maintains a BUY rating. Aeroflex manufactures and supplies stainless-steel metallic flexible flow solutions, with around 73 per cent of 9MFY26 revenue generated from exports and around 27 per cent from domestic markets.
The company’s consolidated revenue grew at around 27 per cent CAGR during FY21-FY25, while EBITDA and PAT increased at around 38 per cent and 72 per cent CAGR, respectively. The broker’s central investment thesis is based on a shift towards higher-margin value-added products and the emergence of data-centre liquid cooling as a medium-term growth opportunity.
Value-Added Product Mix and Margin Outlook
Aeroflex is increasing its focus on higher-margin value-added products, including assemblies, fittings, bellows and liquid-cooling skid systems. These products accounted for around 54 per cent of sales in 9MFY26 and are expected to contribute 70 per cent of revenue in the near term.
Management indicated that EBITDA margin can sustain in the 23-25 per cent range, supported by operating leverage from incremental capacity additions and a richer product mix. ICICI Securities views this mix change as a key driver of sustained margin expansion and future growth.
Data-Centre Liquid Cooling Opportunity
Data-centre liquid cooling is identified as a new medium-term growth vector. Aeroflex has entered the global liquid-cooling market for data centres and AI infrastructure. ICICI Securities estimates this market at US$3 billion currently and projects it to reach US$21 billion over the next six to seven years, implying a 33 per cent CAGR.
The company completed its first commercial dispatch in Q3FY26. Liquid-cooling skid assembly capacity is being ramped up to around 15,000 units a year by June 2026. At around 80 per cent utilisation, ICICI Securities estimates peak revenue potential of around Rs 300-350 crore from this capacity. This could create repeat-order potential and improve longer-term revenue visibility.
Identifying Businesses With Long-Term Growth Potential
Exceptional wealth creation often comes from businesses that compound over time. DSIJ's Multibagger Pick focuses on identifying growth-oriented companies through detailed fundamental research.
Financial Outlook
| Financial metric | FY25 | FY28E | Growth / change |
|---|---|---|---|
| Revenue | Rs 376 crore | Rs 679 crore | 21.8 per cent CAGR |
| EBITDA | Rs 79 crore | Rs 157 crore | Margin improves from 21.0 per cent to 23.1 per cent |
| PAT | Rs 53 crore | Rs 105 crore | 26.0 per cent CAGR |
| RoCE | 21.5 per cent | 26.9 per cent | Improvement expected |
ICICI Securities expects Aeroflex’s lean balance sheet and strong cash-flow generation to improve RoCE to 26.9 per cent in FY28E from 21.5 per cent in FY25. Reported H1FY26 total debt was Rs 0.33 crore, while cash and investments stood at Rs 151 crore.
Valuation and Key Risks
The broker values Aeroflex at 30 times FY28E EPS of Rs 8.1 to derive a fair value and target price of Rs 245.
The key risks identified by ICICI Securities are:
- Global slowdown: Aeroflex’s significant export dependence could make its growth outlook vulnerable to a global slowdown.
- High working-capital requirements: Elevated working-capital needs could weaken the growth, cash-flow and return-ratio assumptions supporting the investment case.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
