Unimech Aerospace Q4 EBITDA beat supports FY27 tooling and PCA growth outlook

Investment View and Core Thesis

Anand Rathi Research maintained its BUY rating on Unimech Aerospace following a Q4 FY26 performance that exceeded its estimates across revenue, EBITDA and adjusted PAT. The broker believes the company is positioned to benefit from multi-year opportunities in aerospace and defence, energy and semiconductor equipment.

The central investment thesis rests on an aero-tooling recovery following tariff moderation, accelerating precision components and assemblies (PCA) revenue, nuclear-order execution and contributions from the Hobel Bellows acquisition.

Q4 FY26 Financial Performance

Unimech Aerospace reported its highest-ever quarterly revenue of Rs818 million in Q4 FY26, representing year-on-year growth of 19.6 per cent and exceeding Anand Rathi's estimate by 1.9 per cent. Gross margin expanded by 606 basis points year on year to 73.4 per cent, supported by a better product mix.

Adjusted PAT declined 10 per cent year on year because depreciation increased by 81.7 per cent and finance costs rose by 971 per cent. Finance costs included approximately Rs96 million of foreign-exchange losses resulting from sharp currency depreciation.

Aero-Tooling and Order-Book Outlook

Management indicated that growth should be led by normalisation in aero-tooling demand, a recovery in customer ordering, PCA ramp-up, nuclear-order execution in H2 FY27 and contributions from Hobel Bellows.

The core order book stood at Rs2,070 million, while Hobel Bellows added another Rs1,070 million. Aero-tooling represented approximately 90 per cent of Q4 FY26 and FY26 revenue, highlighting the company's aerospace concentration. Its aero-tooling order book exceeded Rs1,000 million, providing four to six months of execution visibility.

Unimech serves 18 aerospace customers and has specialised tooling capabilities for LEAP, Pratt & Whitney and Rolls-Royce engine programmes. Management expects to continue absorbing approximately 5 per cent tariff-sharing on tooling and parts sold into the US market.

The FTWZ has received regulatory approvals and is nearing operationalisation. Management expects the facility to support customer stickiness, inventory stocking closer to end markets and faster fulfilment outside the US.

PCA and Nuclear Opportunities

PCA contributed approximately 10 per cent of FY26 revenue, or around Rs240 million. Unimech completed more than 200 First Article Approvals in FY26, and management aims to double additions in FY27, supporting future PCA growth.

The company has qualified more than 10 nuclear subsystems and sub-assemblies and secured an Rs866 million EMMCR nuclear order, principally for the Tarapur and Madras reactor projects. The order is expected to be executed over 12 to 18 months. Anand Rathi forecasts PCA revenue to record a CAGR of 151 per cent from FY26 to FY28E.

The qualified portfolio comprises 4,718 tooling and precision-subassembly SKUs and 1,205 precision-machined-part SKUs. Plant utilisation is approximately 50 per cent, leaving scope for productivity gains over the next 30 to 36 months. Working-capital days are expected to increase from approximately 120 to 125 days in March 2026 to 150 to 160 days as the business scales.

Acquisitions, Joint Ventures and New Initiatives

Hobel Bellows

Hobel Bellows was acquired in April 2026. The acquisition adds metallic bellows, flexible tubing and engineered assemblies and moves Unimech towards integrated assemblies and sub-systems. AS9100 certification is expected to take six to nine months, while aerospace qualification is expected to take a further two to three years after certification.

Kanoo Joint Venture and Dheya Engineering

The Kanoo joint venture has received Saudi investment approval and is progressing with facility development, machinery procurement and leadership hiring.

Dheya Engineering's DET-500 micro gas turbine has completed validation at approximately 90 per cent load. It has an initial two-engine order from a Tier-I defence supplier, with potential scale-up to approximately 200 engines subject to qualification.

Earnings Estimates and Valuation

Anand Rathi kept its FY27E and FY28E estimates largely unchanged. It forecasts FY26 to FY28E revenue, EBITDA and PAT CAGRs of 75.2 per cent, 83.4 per cent and 51.8 per cent, respectively.

The broker values Unimech at 50 times FY28E EPS and has a revised target price of Rs1,435. The valuation is supported by healthy margins, superior asset turns and leaner working capital compared with aerospace peers.

Key Risks

• High dependence on the top 10 clients.
• Delays in nuclear offtake, which could weaken FY27E and FY28E growth.