Ladies and gentlemen, good day and welcome to the Aeroflex Industries Limited Q3 and nine months FY 2025 results conference call. As a reminder, all participant lines 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 the conference call, please signal an operator by pressing the star then zero on your touchtone phone. I now hand the conference over to Mr. Asad Daud, Managing Director, Aeroflex Industries Limited. Thank you, and over to you, sir.
Thank you so much, and good morning to everyone. I welcome you all to the Q3 earnings call of Aeroflex Industries Limited. Joining me today are our senior management team and representatives from SGA, our investor relations advisor. I hope that you have had the opportunity to review our financial results and the investor presentation, which is available on the stock exchange and our company's website. At Aeroflex, we prioritize innovation and flexibility to deliver high-value solutions for diverse range of industries. Leveraging our advanced technology and our team's expertise and skill set, we create exceptional products for our customers by ensuring sustainability and maintaining our reputation for reliability and commitment to excellence. I am pleased to share the highlights of our performance for the third quarter and for the nine months ended 31st of December , 2024.
I am happy to share that our total income for Q3 increased by 35% on a year-on-year basis. Our EBITDA margins improved by 48% on a year-on-year basis. The contribution of assembly business to our total sales for the nine-month period increased to 49%, which enabled us to reach our target almost a year ahead of schedule in terms of the contribution. We have successfully met our EBITDA margin targets for the year that we had promised at the start of the year, with an increase of 100 basis points in our EBITDA margins. This is due to the increase in sales from our assembly business. As a result, we will continue to focus on strengthening our EBITDA margins by focusing on more value-added products in the near future.
We are delighted with the growth that we have achieved in Q3 and the nine-month period, which is driven by our strategic efforts towards increasing the sales of the assembly business and also increase in the sales of project-based orders from the domestic market. We have witnessed a significant increase in sales of assembly, both in the domestic as well as in the international markets. This highlights our ability to cater to both the evolving needs of the Indian market as well as the global customer base, reinforcing the value that we deliver across the entire world. The demand from some of the key domestic players in the last quarter is also a testament to our growing presence and recognition in the local market as well. While at the same time, we continue to focus and to strengthen our export business.
Our oil and natural gas segment and our steel business has seen an uptick in this quarter, driven mostly by domestic and international demand. On the operation front, we have successfully completed our capacity expansion plan by increasing our production capacity to 16.5 million meters for stainless steel hose and braiding. Additionally, we have also started the production of our metal bellows division. I am happy to share that we are planning to expand into miniature metal bellows. These bellows are precision-engineered components which are similar to metal bellows, but these are smaller in sizes as compared to the larger metal bellows. They range in sizes from 10 mm - 50 mm in diameter and are used in advanced industrial applications.
The manufacturing capacity for these miniature bellows is projected to be 240,000 pieces annually, which is approximately 20,000 pieces a month, and is estimated to be completed by March of next year, which is March of 2026. In addition, we are also expanding our capacity of stainless steel hose and braiding from 16.5 million meters to 20 million meters. It is projected to be completed again by March 2026. This additional 3.5 million meters will be utilized to meet our increasing demand for stainless steel hose and braid and assemblies in the international as well as in the domestic market. We are also planning to increase our assembly stations from 40 currently to about 70 within the next one year.
Our subsidiary, which is Hyd-Air, which has its facility in Chakan, Pune, has undergone significant upgrades in terms of its infrastructure, which includes enhancements to the quality lab and to the R&D center. We are also pleased to announce the addition of advanced and new technology CNC machines, and we have also received a major order from the railway c oach factory, which has contributed to the growth of Hyd-Air in this quarter. We are also planning to install more such CNC machines in the near future as well. As part of our commitment to sustainability and for ESG compliance, we have taken significant steps to reduce our environmental impact, and I am happy to share that we have commissioned a 750 kW rooftop solar project, which will help us significantly reduce our reliance on non-renewable energy sources.
It will also help us to reduce our electricity costs and reduce our carbon footprint. As our company scales up, we believe that we need to further professionalize the management in order to achieve our long-term objectives of growth. Hence, I am delighted to share that we have appointed Mr. Kiran Kagalkar as the Chief Operating Officer of the company with effect from 1st of February, 2025. Mr. Kiran brings with him more than 37 years of experience in the engineering industry, and he has worked for more than 25 years at Parker Hannifin India, which is a subsidiary of Parker Hannifin U.S., which is a $20 billion global giant in the industrial engineering space.
He was the General Manager at Parker Hannifin India, and he was in charge of the entire P&L of the Motion Systems division, which he helped scale to an annual turnover of more than INR 600 crore with a 25% margin. I am sure that Mr. Kagalkar will be a catalyst in helping us achieve our long-term objectives and goals. As we look ahead, we are focused on strengthening our team as well as our sales in both the assembly and the fittings business. We are also excited about the upcoming automization project of our assembly section, which will start from this quarter, which is Q4, which we believe will have a significant impact on our revenue starting from the next financial year. In line with our goals, we are also looking for ways to grow both organically and through new opportunities to keep our momentum going.
We will be focusing on new product development, capacity expansion, and growing the domestic and international project-based sales, which will help us to create long-term value for our shareholders. This has been a transformative time for our company, and with the consistent growth in income margins and in operations, we are confident that our focus on innovation and strategic initiatives will help us to grow sustainably in the years ahead. Now, talking about some of the financial metrics in terms of our Q3 highlights. I am happy to share that for the first time in the history of the company, our Q3 total income stood at INR 100 crore, which is a growth of 35% on a year-on-year basis. Our EBITDA stood at INR 22 crore, which is a growth of 48% on a year-on-year basis, and our EBITDA margins were at 22%.
Our PAT for this quarter stood at INR 15 crore, which is a growth of 68% on a year-on-year basis, and our PAT margins for this quarter were at 15%. Talking about the nine-month highlights, our total income for the nine months stood at INR 287 crore, which is a growth of almost 18%. Our EBITDA stood at INR 62 crore, which is a growth of 25%, and our EBITDA margins for the entire nine months is at 22%. Our profit after tax for the nine months stood at INR 41 crore, which is a growth of 30% on a year-on-year basis. With this, I would like to conclude my speech and open the floor for Q&A. Thank you so much, everyone, for joining the call.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Surabhi from NV Alpha. Please go ahead.
Hi. Congrats on a very good set of numbers. I have a couple of questions. The first one would be: What kind of CapEx are you going to put for the miniature metal bellows, which is, I think, the capacity is 240,000 . Additionally, apart from that, what kind of CapEx is going to be in the subsidiary and also for the 35 lakh meters expansion that you are doing in hoses?
Yeah. In terms of the CapEx for the miniature metal bellows, we have planned a CapEx of approximately INR 23 crore. For increasing our capacity in the stainless steel hose and braiding from 16.5 million meters to 20 million meters and also adding the assembly station from 40 to 70, plus also robotizing and automizing a lot of the welding process. The entire CapEx for this particular stainless steel hose division would be about INR 54 crore. In Hyd-Air, we had budgeted a CapEx of INR 18 crore two quarters back. Out of that, we have spent approximately INR 6.5 crore, and the remaining INR 11.5 crore would be spent over the next one year to upgrade the facility of Hyd-Air, plus also for adding new machines and new equipments that will be utilized in Hyd-Air. So that is the overall CapEx plan from now up until March 2026.
Got it. Another question, how is the margin profile different in the miniature metal bellows from the regular ones? Between assemblies and just the hoses, what is the margin differential currently?
In terms of miniature metal bellows, these are similar to metal bellows in terms of the design aspect, but it is just that they are smaller in size with more higher precision. The margins in this particular bellows, which is of smaller size, tends to range anywhere between 30%-35% on an average. In terms of the hose and the assembly, the margins in the hose business ranges anywhere from 15%-19%, and in the assemblies, it ranges from 22%-25%.
Got it. That's all from my side. Thank you.
Thank you so much.
The next question is from the line of Aman Agrawal from Carnelian Capital. Please go ahead.
Sir, thank you for the opportunity and congrats on a good set of numbers and the CapEx plans.
Thank you.
The first question was on the metal bellows project, which we have recently commenced. Is the plant going as per our expectation or are we facing any issues, and have we started trial production and approvals with customers? If you can highlight a bit on that.
Okay. We have already started the production at our metal bellows plant. We have already applied for the certifications, and we have sent a lot of samples to our customers for the approval. We have already started to receive orders from the domestic market and we have already begun the dispatch of the same. We are in talks with a few customers for the orders from the export market, and we are expecting to receive the same in this month. So far, the project is on track. Obviously, since it is a highly technical product, there will be an initial gestation period to scale up or to ramp up the production because it is directly linked to the orders from the customer. We will expect that in the next couple of quarters, we can see slowly and steadily the growth in the metal bellows division.
Also the miniature metal bellows will also act over a period of the next three or four quarters. It will also act as a product basket, which we can offer to our customers.
On the metal bellows, how do we see capacity utilization basically by end of this year? Where do you expect to reach and when do you expect to fully utilize it? Any time period you are looking at or any internal targets?
Ideally, I think we can expect the optimum utilization for the metal bellows in the financial year of 2026-2027, because right now we have just started. FY 2025-2026 would ideally be the first full year for that particular business. In terms of peak utilization or optimum utilization, we can look at FY 2026-2027 would be the year that we will reach the optimum utilization for bellows.
And sir, when do we break even in this new plant? We've spent INR 40 crore for this project. At what level of utilization do we break even and anything on that front? Do we achieve that in financial year 2026 itself or would that basically track down to FY 2027?
In terms of profitability and breaking even, we would definitely be profitable from the metal bellows business, starting from the next quarter, which is Q1 of FY 2026 in itself. Obviously, in terms of the return on the, or the ROI on the investment, I think that would be generated in the financial year of FY 2026-2027. Because in terms of the CapEx that we have done, we have also purchased a lot of quality control machines, which will be a part of both phase 1 and phase 2. Some of the CapEx for phase 2 in terms of the equipments, in terms of the quality control, and in terms of certain testing equipment side, we have already purchased for both the phases. Hence, the ROI on this investment would be achieved in FY 2026-20 27.
Understood, sir. Sir, what milestones will we be waiting for before going ahead with the phase 2? What level of utilization we want to reach, or how much order book we want before we go ahead with the phase 2 for metal bellows?
In terms of that, there will be a couple of factors that will depend in terms of our expansion in phase 2. One is, as I mentioned, even in metal bellows, there are various sizes that are being produced. Right from 50 mm to all the way up to 3,000 mm. We will be doing the expansion of the phase 2, in terms of a phase manner, depending on what sizes that we are getting the most orders from. Say, for example, if we get a lot of orders, say, in terms of the 500 mm size, and if our machines for the 500 mm are being fully utilized, then we would spend on getting the machines which can produce 500 mm of bellows.
In that manner, the phase 2 of metal bellows, it would be a project which would also depend on the results of the phase 1 in terms of what kind of machines and what sizes of the machines that we want to order for phase 2.
Perfect, sir. Sir, a question on the miniature metal bellows. Sorry-
Sorry to interrupt. Mr. Aman, could you please come back in the queue for further questions?
Sure. Thank you.
Thanks a lot.
Ladies and gentlemen, in order to ensure that the management is able to answer questions from all participants, please limit your questions to two per participant as there are several participants waiting for their turn. The next question is from the line of Deep Gandhi from ithought PMS. Please go ahead.
Yeah. Hi, sir. Good morning. Congratulations on very good set of numbers. My first question is regarding exports. If you can talk about the reason for slower growth in exports for the last nine months. What is the outlook for the export business growth in FY 2026?
If you see in terms of the growth on a year-on-year basis, right? As compared to Q3 of FY 2024, our exports have increased. Obviously, our domestic sales has increased in a much higher ratio as compared to our export, but there is also a growth in the exports business. In the domestic business, we have seen some two, three large project orders from the oil and gas and from the steel industry, which is the reason for the uptick in the domestic sales. Also, if you see that in terms of a lot of the project orders that we got in Q3, we have been working on these project orders for the past almost six months. The results of it actually came in Q3.
Hence, even now that we have been working on certain orders and certain projects whose results may come in Q4 or maybe in Q1 of the next financial year. There is no degrowth in exports. It is just that domestic has grown slightly higher as compared to exports.
Yeah. Just two follow-ups on this. First, if you can talk about what is the life cycle of those new projects which you have got in the domestic. Are those long-term two to fivey ear projects, or is it one-time supply and then you will keep supplying the replacement demand? That is the first one. Yeah, sure. Please go ahead.
Yeah, please continue with your question.
Yeah, sure. The second follow-up was on the margins, because in the past, I think you've explained that the margins in the export business are higher as compared to the domestic. If the domestic business keeps growing faster, how should we think about the margins going ahead?
Yeah. In terms of the project orders, these orders are for a specific project, and once executed, the replacement demand for the same would probably come in the next financial year or within the next one and a half years in terms of the replacement demand. Because the replacement demand would come when the project is completed and it starts to run, and then obviously there will be repairs and maintenance required for that particular project. It's not that the projects only come in a certain quarter. We have projects throughout the year. It's sometimes that some of the projects can come in one particular quarter, and then in some quarter you will have lesser projects. So, if you see from an annual basis, we get a lot of projects throughout the year. Sorry, what was your second question? I missed out.
Yeah. Sir, outlook on the margins, because exports is usually higher margins. If domestic keeps growing faster. Yeah.
Yeah. In terms of our assembly, if you talk about both the domestic as well as the export business, right? In both the businesses, we have seen a significant growth of the assembly business. And when I talk about the assembly business, the assembly business has definitely much better margins as compared to our hose and braid business. Right? Agree that export has a higher margin as compared to the domestic, but the margin variation in the assembly, when compared to export and domestic, there is not much of a difference. Yes, there might be a slightly a few percentage points of difference. That's natural. But it is not an extremely significant difference, which would have a very negative impact for us.
As long as our sales of assembly business increases, whether it is in the domestic or if it is in the export business, you will see that the company getting good margins in the near future.
Sure. sir and just last follow-up, you mentioned that you are working on some other project business in the domestic side. So if you can maybe quantify the amount of opportunity for which you are bidding for the few projects which you are expecting in future.
Yeah. It's slightly difficult to do that because in terms of there are a lot of projects where we bid. Sometimes we get the order, sometimes we don't get the order also. So it will be slightly difficult to comment on that. So I'm afraid I'll not be able to comment much on that.
No problem. Thanks for answering.
Thank you.
The next question is from the line of Praveen Motwani from Bank of India Mutual Funds. Please go ahead.
Hi. Sir, thanks for the opportunity and congrats on the good set of numbers. Just two questions from my end. Sir, what was the volume in Q3 and what was our utilization rate?
Generally, we measure our sales in terms of the value because, like mentioned, because in terms of the volume, the more the sales of the assembly business that we have, the better the margin for us. In terms of, I can show you that in this quarter, in the last quarter, which is Q3, we received a lot of the orders from the assembly's business of higher sizes. There was a higher production of bigger sizes of assembly. When I talk about the bigger sizes, I am talking about starting all the way from 3 inches all the way up to 14 inches. We saw a significant demand of the higher diameter of assemblies.
Hence, obviously, when we have a higher demand of the assemblies, we saw the same in both in the domestic business as well, as well as in the international business. In terms of our expectation, also, we are also focused on reducing our inventory. If you go through the P&L, you will see that we are focused on reducing our inventory, and that will be the focus of the company also in the near quarters to optimize our inventory so that we have a better working capital cycle.
Okay. Understood. The second question is, sir, what was the revenue of Hyd-Air Engineering in this quarter?
Revenue for Hyd-Air Engineering in this quarter was INR 3 crore, and the profit was INR 36 lakh approximately. Although the profit, I am talking about net profit. The profit percentage is approximately 12%, but currently the scale of Hyd-Air is still extremely small, and I think once our entire expansion plan is completed and once the entire facility is running at its optimum, I think we can see a profit in Hyd-Air of close to 15% odd net profit, 15%-20% odd.
Understood. And sir, in Q3, we have reported 36% top-line growth.
Yes
Which is higher than the last four, five quarters. How confident are you sustaining this number for coming two years, or this number is one-off because there was a higher offtake in the domestic market, or this number is having sustainable thing to see in the next couple of years?
Obviously, this quarter has seen a significant growth. Obviously, it's the combined effort of the entire team, right? A lot of the projects were materialized in this quarter. I would look at our company not from one quarter perspective. I would look at us over the period of the next two, three years, because in our kind of a business, if we get a lot of project orders in one quarter, we'll obviously have very good number. There might be like, for example, a couple of quarters back, our numbers were not good because in that particular quarter, there was not a lot of project orders and higher value orders.
I would recommend that the community sees us more from an annual and obviously over a period of two, three years, because over a period of that time, everything tends to average out in terms of whether it's growth in the top line, bottom line, whether it's a bad quarter or a very good quarter. I would not like to comment specifically on the growth of this quarter. I would suggest that you look at the company over one year and obviously over two, three years to understand the growth pattern of the business. Like I mentioned, that we are doing a lot of investments in terms of new projects, new developments, new products, new initiatives, new product segment, new market, building our team as well. We are looking at our company over the next two, three years to plan.
Hope I was able to answer your question.
Yes, sir. The current participant has been disconnected.
Oh, okay. Sorry.
We will go to the next question. It's on the line of Chirag Shah from ICICI Securities. Please go ahead.
Yeah. Good morning, sir, and congratulations for the great set of numbers. Sir, though you mentioned about exports, can you throw some more color on how the demand in the export market is, and probably which geography is looking most stronger to you and which segments? I think mainly we supply mostly to U.S. market, and probably we have not scratched the surface of the kind of opportunities that market has shown for us. Can you just throw some color on the export markets?
Yeah. In terms of our export market, U.S. is by far our biggest market now in the export, followed by the European region. We have seen a significant uptake from the U.S. market. Europe, obviously, we all know, is going through a little bit of a rough patch right now. Although we have not seen a significant downfall in the European business, in terms of the demand that we had expected to come from the European region, the growth in Europe is not as much as compared to the U.S. market. I am sure that if, hopefully, with the new policies that will come up in the U.S., I think the demand in the U.S. is definitely going to grow.
Because if industrialization becomes a big point in the U.S., our products definitely would be the ones that will be utilized, or there will be a higher demand for our products in the U.S. market. We are also tapping into the untapped markets right now, which is the Middle East and Africa. Although the base is very low right now to comment on much, I am sure that over the next, I think, three to four years, you will see that even the Middle East and the Africa market would be a significant contributor to our export business.
Sir, my second question pertains to your EBITDA margin guidance for FY 2027. So it is my calculation, right, that if all your new product development starts flowing in terms of revenues, plus your share of assembly business rising the way it is right now, way beyond expectation or earlier than expectation, then probably a 25% kind of a margin is doable by FY 2027. Because the rate at which our product mix is changing in our favor, for the positive, probably is 25% a doable number for FY 2027 in terms of margins?
Last year, we had set out a target of increasing our EBITDA margins by approximately 100 basis points every year. I think for this financial year, we are in line with achieving our target of the EBITDA margin increasing by about 100 basis points. If you take that average, I think by FY 2027, we should be close to about a 24%-25% range. Obviously, hard to pinpoint on an exact margin number. But yes, in the next two to three years, we are expecting about 200 to 300 basis points of growth in our EBITDA margins. Also similar pattern for our profit margins as well, our profit after tax margin as well.
No, because sir, I am coming from the point that metal bellows is still not in our product portfolio in terms of revenues. If that number starts flowing in from FY 2026 and 2027, where margins are 30% + on an average, both taking the normal bellows and the miniature bellows, then probably 25%, quite doable number in terms of mathematics. Obviously, there are a lot of variations on the ground in terms of reality. But again, mathematically, I think 25% can be a doable number for you.
Yes. Ideally, we would want to have 24%, 25% even, for example, margin in the next year itself, right? But being on a conservative number, I think your point is correct that by FY 2027, we should be in the range of 24%-25% EBITDA margins on a conservative level. Our internal aim is to definitely achieve it much before that. But, being on the conservative side, I think FY 2027, yes, we can try to achieve our margins.
Sir, my last question pertains to the resolution that we have passed in terms of raising funds via QIP or equity issuance.
Yes.
If I get your CapEx plans, they are mostly funded by internal accruals. Is my assessment right that you guys are looking at some inorganic opportunities? If yes, then what would be the area of acquisition and whether it will be an international acquisition or not? Because U.S. as a market can be an easy cakewalk for you to have some facilities out there.
Yeah. First of all, nothing would be an easy cakewalk speaking with the market is tough and even the U.S. market, which has a lot of potential, right? The market is tough to penetrate. But yes, in terms of inorganic acquisitions, as you mentioned that we have already done one inorganic acquisition in this year itself, which we have planned to expand into the fittings business. There are obviously a couple of discussions ongoing in terms of inorganic acquisitions. Unfortunately, until and unless anything materializes and is approved, I will not be able to comment much on that. But in terms of the QIP, our CapEx is not linked to the fundraise that we are planning from the QIP. Our CapEx will be funded mostly by internal accruals. We have obviously obtained the approval from our shareholders in terms of raising the funds from the QIP.
The exact amount and the utilization of the receipts of the QIP can only be discussed once it is approved by the management and the board. So it will be difficult for me to comment specifically on the use of the funds for QIP. But yes, as a company, we are always looking out for opportunities for inorganic acquisitions, both in India and in the international market. In the international market, I think specifically the two markets of U.S.A. and Europe are the regions that we are actively looking at opportunities. Obviously, if I talk about the international market, it will definitely be in the forward integration, where we will be acquiring a company which has its base income in the U.S. or in Europe.
If it is in India, mostly it will be an acquisition in terms of a backward or into some products which are adjacent to our business. Beyond that, I will not be able to comment much on that, I am afraid.
Okay, sir. That was quite helpful and that is all from my side. All the best for the future.
Okay. Thank you so much.
The next question is from the line of Saurav Bhutra from IIFL. Please go ahead.
Thanks. Thank you for giving me the opportunity, first of all, and congratulations for your good set of numbers. Almost all the questions have been asked. I just wanted to ask on your color on what is the demand outlook you are having in the U.S. market. Can you throw me the color on that after Donald Trump coming into the U.S. election, which they have come?
I think for us, say for example, if Mr. Trump does not do anything as well, still the demand for our product is strong. There is a strong demand for our products in the U.S. market. If everybody is expecting that Mr. Trump would focus on Made in America products, right? In that case, also, if there is higher industrialization in the U.S., which would also mean there will be a higher demand for our products. That is why we are also seeing that over the next few years, the U.S. would continue to be the biggest market for us by far. Obviously, our efforts, our directions have been towards increasing our presence in the U.S. and in the future, definitely, we will have certain base in the U.S. Now, whether it is through organic or through inorganic, that only time will tell.
Okay. Can you tell me what is the current debt right now in your book?
Zero.
Zero.
We are debt free.
Okay. Thank you.
Thank you.
The next question is from the line of Prathamesh Dhiwar from Tiger Assets. Please go ahead.
Yeah, sir, just a couple of questions. If I missed it earlier, what was our capacity utilization on, I think, 16.5 million capacity?
Yeah. We completed about 16.5 million capacity by the end of the last quarter. So in this quarter, sorry, in Q3, the capacity was approximately 15 million meters only. Because the additional 1.5 million meters capacity was commissioned almost towards the end of the quarter. And if you look at our utilization, so our utilization is ranging in the range of around 82%-85% in this year.
Okay. Sir, if I just wanted to know on the revenue mix side. From which all different segments or from which all different industry do we get maximum revenue out of?
There are three, four major industries that we get the bulk of our revenues from, right? It includes your traditional industries, which is oil and gas, chemical, petrochemical, steel industries, and then the new- age industries, which includes firefighting equipment, solar. We have also supplied some of our products to one of our customers based in the Netherlands who has then supplied our products to the machine manufacturers who manufacture machines for the semiconductor industry as well. We have also started to penetrate into the automotive segment, wherein we have supplied some products to the construction machinery industry. So there are sectors that we are penetrating now in the near future. And obviously there are some sectors which are the core for the company, which have been the backbone of the company over the last five to six years.
Okay. Sir, as of now, if I wanted to know in terms of percentage, which sector contributes the most? If you can talk in terms of percentage, it will be really helpful, sir.
Exact percentage, I think, the new age of the sprinklers business, it contributes about 26%. And very close to that is the steel, which is about 24.2%- 25%.
Got it, sir. Sir, just last question. After doing the expansion, how much time does it take to ramp up the utilization or take the utilization to peak levels?
So ideally it takes. Once the machinery is commissioned and once it is into the production, ideally it takes anywhere between three to four months in an ideal scenario for the capacity to be up and running at optimum level. It may vary depending on the size of the machine. For example, generally, if a machine is producing smaller diameter, it tends to be in operation and at optimum utilization faster. But if the machine produces a higher diameter of hose, then obviously the utilization at a peak level tends to take some time because the orders for the larger the sizes, they tend to be in smaller quantities.
Okay, got it, sir. Thank you. Thank you so much.
Thank you so much.
The next question is from the line of Lokesh Maru from Nippon India Mutual Funds. Please go ahead.
Thank you. Congratulations, sir, on excellent set of results this quarter. Two questions from my side. Obviously, there's a lot of CapEx, right, expected in the next two, three years. If you could help in just number in, if you could put a number to the CapEx in terms of FY 2026, FY 2027, or whatever, what is the combined CapEx amount that you are looking to spend in the next three years? Today, for reference, today we have a gross block, I think of INR 160 crore . So this gross block will turn into what number in next two, three years?
Okay. It will be difficult to give a number on terms of how much will the gross block increase, but I can share with you a few numbers which might be helpful for you. The last CapEx that we had planned and before this CapEx was approximately INR 482 crore , which included expansion of the capacity from 11.5 million meters to 16.5 million meters, also included additions of assembly stations for composite hoses, for metal bellows, and basically CapEx of the entire company, which also includes the solar project that we have commissioned and so on and so forth.
I am happy to share with everybody that out of the budgeted CapEx of INR 82 crore, we have completed all the projects as planned over there at a total CapEx of INR 75.5 crore , which means that we have had a savings of about INR 6.5 crore . So the entire CapEx up to 31st of December 2024 was completed and your company had a saving of approximately INR 6.5 crore on that CapEx. Now, in terms of the CapEx from now on till March of 2026, like I mentioned, there will be approximately INR 54 crore spent for increasing the capacity from 16.5 million meters to 20 million meters.
Along with that, increasing the assembly stations from 40 to 70 and also the installation of the automized welding station, which would start from this quarter. Once we get a few machines up and running, our aim is to build up the automized line as soon as possible. Then the miniature metal bellows, it will involve a CapEx of about INR 23 crore, which will be used for the machineries and for the other equipment that will be utilized for manufacturing of these miniature bellows and also ultimately for converting the bellows into an end assembly product. Also, like I mentioned earlier on in the call that we had projected a CapEx of about INR 18 crore for Hyd-Air. Out of that, we have spent approximately INR 6.5 crore so far, and the remaining will be spent in the next year and a half approximately.
Sir-
And-
Yes, sir.
Yes, sir. Sorry, for the financial year FY 2027 and beyond, unfortunately, since our board has not yet approved it will be difficult to give a number to everyone right now.
Correct, sir. So if my understanding is correct, this year we have done INR 75 crore already, since March till December, right? We are on track to do INR 54 crore. This is on top of our INR 150 crore.
Yeah, this financial year, we have done approximately INR 67 crore, remaining about INR 7 crore. So the difference between INR 75 crore and INR 67 crore was done in January to March of last year. So when I talk about the total INR 75 crore, it is right from the day we planned the CapEx. So it includes a few quarters of the last financial year as well.
Understood. We are yet to do INR 54 crore and INR 23 crore and INR 18 crore. That is it, right?
Yeah. That is for the next year.
This is supposedly done within next one year.
Yeah, till March 2026. Yes.
Okay. Understood. Thanks a lot for this. Lastly, on exports, since export has been, let's say, a growth of 10% odd. That is one. Another is even the kind of CapEx that we are planning and that we have done, are we confident of achieving around about, let's say, a 20% growth in terms of volume or value for the next two, three years?
In terms of our growth, if you see that our focus always, if you see in my previous commentary as well, our focus always has been on the margins because we are in an industry which is more of providing highly technical products. Hence our focus always has been how we can improve our bottom line. Because in terms of the top line, our aim obviously is to grow our top line. But the focus of the company over the past four to five years has been to not only increase the top line, but with a more significant focus on increasing the bottom line. That happens through value-added products, new product segment, and obviously in terms of the new product segment that we are entering.
If you see that in terms of our profit growth also, our EBITDA margins have grown by 25% in this year on a nine-month basis. If you see our PAT margins, they have grown by 30%. Our aim is that over the next three to four years to grow in terms of our EBITDA and in terms of our PAT margins. With that, simultaneously, you will see a growth in the top line as well.
Understood. EBITDA growth is something that we should be focused on.
Yeah.
Okay.
Yes.
Okay, sir. Thank you.
Thank you.
Thank you. Ladies and gentlemen, this will be the last question for today's conference call. It is from the line of Prem Luniya from Astute Investment Management. Please go ahead.
Hello. Yes, sir. It was great that y ou had such great numbers. Congratulations on that and also on the-
Thank you.
Project orders and the Hyd-Air order. Most of the questions have been asked. I just wanted a picture on how much can be the revenue contribution from the metal bellows, because it is considerably the miniature metal bellows, which is around 5% more EBITDA margin compared to the normal bellows, which we are doing now. So what can be the revenue which this can clock, let's say, at the peak whenever the utilization comes in?
Yeah. So right now with this expansion of the metal bellows, sorry, miniature metal bellows as we call it, project. So we are expecting a revenue of approximately INR 25 crore-INR 30 crore at its optimum capacity in terms of the revenue on an annual basis.
Okay. For the miniature metal bellows and for the metal bellows we already have around INR 80 crore-INR 90 crore of-
Yeah, INR 80 crore-INR 90 crore. Yes.
Also on Hyd-Air front, I wanted to understand what can be the guidance on their front in the revenue numbers.
This is the first year of the operations of our Hyd-Air. In terms of the potential, I think next year we would see the real growth of Hyd-Air. We expect that over the next couple of years, the top line of Hyd-Air would grow to about INR 40 crore- INR 50 crore over the next couple of years in terms of the top line.
Yeah. I also wanted to understand this, that last time you gave the guidance of 16.5 million meters. If there is a best case scenario of 50%+ of assembly business, which we are currently reaching, that would result into almost INR 500 crore of number. Because in this business we can't quantify it in number of units or meters, so it is the revenue which we have to look at. On 20 million meters, what would be the optimum sales in the optimal scenario?
If you talk about 20 million meters, and if you talk about, I'd say, currently our aim is that over the next couple of years to have a higher portion of the business coming from assembly. Say for example, if I assume that if I get 70% of my sales from assembly over the next couple of years, sorry, after two years, then we are looking at a revenue potential of anywhere from INR 650 crore to over INR 675 crore at peak utilization.
Right. I also wanted to get an idea of the steel which we use. Also, on the price, what is fluctuating? Also, how much of the steel which we use is being imported or mostly is it within India?
We use stainless steel. Obviously, there are different grades of stainless steel that we use, wide range of grades of stainless steel. There has been a minor price fluctuation in the prices of the stainless steel raw material in the last quarter, maybe a few percentage points, which is not of extreme significance. What we are doing is, right now we are still predominantly importing the stainless steel coil, while the stainless steel wire we are buying 100% locally from India. In terms of the last quarter, Q3, we slightly increased our procurement from the domestic sector, especially of the sizes wherein we had to produce a larger diameter of hose. Hence, in those particular segments, we had to rely on the domestic procurement because of the delay in the supply chain from the international market.
Hence, for the higher sizes, we procured slightly more from the local market. But overall, still, import, in terms of the stainless steel coil, import is by far the biggest contributor in terms of raw materials.
Right. Most of this would be from China?
Yeah, most of it is from China, but it is actually an American company which has its joint venture in China.
Okay. Right.
Yeah.
Also, on the metal bellows, last question. We had a capacity which we were going to do of 25 mm - 600 mm, which was guided. Now what we are seeing is that the normal ones would be 50 mm - 3,000 millimeter and miniature would be 10 mm - 50 mm.
Yes. 10 mm - 50 mm, yeah.
Are we seeing a growth in the size of the thing as well and also in the miniature? In the normal bellows, are we seeing that there will be orders of larger diameter ones where we can have better margins, let's say, the upper guidance of 25%-30% in the bellows?
Generally, when I just talk about the metal bellows as a product, metal bellows as a product generally actually goes in high diameter. Miniature metal bellows is a specific category of bellows where it is used for applications where the precision components are required. All right? In terms of our, obviously, the miniature ones would come in this calendar year, say, by the end of this calendar year or by the next quarter, by Q4 of FY 2026. Right now, our focus would be on selling of the metal bellows, which is of the larger sizes, like ranging from approximately 50 mm all the way up to 3,000 mm. That will be the focus right now, because miniature would take time to come in.
It will not be something that we will start in this quarter, because once we get the machines and once we get the unit systems of that particular product, only then we will be able to start the phase of that particular product.
All right. You can give some idea about the application industries of both the things so that we can get some idea.
In terms of metal bellows are used. Normally, we talk about miniature or metal. I will talk to you about the application industry for the entire bellows-based procurement. The power sector is a big buyer of metal bellows. The steel industries, the steel plant, petrochemical industry also buys metal bellows. Then the turbine industry and the shipbuilding industry, they buy bellows for their ships and for their turbines. Metal bellows is actually also used as an exhaust system in the automobile industry, where it is used for the exhaust gas systems. The miniature ones are used in certain precision industries as well, which is your laboratory equipment, your robotic industry, where they require very small-sized bellows. Some of the electronic manufacturing industry buys bellows. Then obviously, space and the aviation industry is the one where there is a requirement of bellows.
Obviously, our plan is that in the future, we would look to tap into these, I would say, the new age or the future industries of the world. The bellows are also used in the semiconductor machines. The machines which manufacture the semiconductor equipment. The bellows are used in those machines as well. There is a wide range and a wide application of metal bellows.
Sure. Thank you so much. These were the questions and if there is any, I will connect with you.
Thank you.
Yeah. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today's conference call. I now hand the conference over to the management for their closing comments.
Thank you so much everyone for joining the call today. I would just like to also update on one point where there was a question with regards to our QIP as well. In terms of the aim of the company and the management itself is obviously we are planning to do a fundraise of the details of which, once finalized by management and the board, will be shared with the investors. But before that also, as I already highlighted in my speech also, I would also like to highlight that as a company, we are looking to grow not only in terms of our product segments or our manufacturing capacity, but also in terms of our manpower. And when I talk about manpower, I'm talking especially about the top-level management of the company.
We feel that for us to grow to the next level and to reach that scale that we are looking at, we have to deploy more professionals on board. Hence, we have appointed Mr. Kiran, whose main responsibility would be to make Aeroflex from an Indian company to a multinational company with presence across the globe. He brings with himself a huge experience of more than 37 years in working specifically with MNCs. I am confident that with him coming on board and with more people that we have planned to hire over the next one year, I think the entire team will be able to take this company to the next level and truly be a multinational company based out of India. I just wanted to highlight that to everyone. Lastly, again, thank you so much everyone for joining the call today.
If I have not been able to answer any questions from anybody, you can get in touch with us or you can get in touch with SGA, who is our investor relation advisors. Thank you so much everyone, and hope you have a great week ahead.
On behalf of Aeroflex Industries Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Thank you so much.