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.
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 crore 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 business requirements. By eliminating operational overlaps and simplifying the corporate structure and also optimizing the cost, this consolidation is expected to reduce the administrative and compliance-related costs, enhance our operational coordination, improve resource utilization, and facilitate more efficient capital allocation. Talking about the data center opportunity.
The rapid advancement of AI and high-performance computing is transforming the entire global data center infrastructure, including in India as well. Higher computing requirements are driving increased rack densities and heat generation, which is accelerating the shift from conventional air cooling to advanced liquid cooling technologies. Hyperscalers, cloud service providers, and global technology companies are making huge investments in data centers, not only internationally, but also in India as well. This is creating a growing demand for reliable, leak-proof, and precision engineered flow control solutions.
Aeroflex is well-positioned to participate in this opportunity through its expertise in the flexible flow solutions in terms of engineered assemblies and also liquid cooling skid assemblies. Our SFN skid assemblies facilitate controlled coolant circulation and also support efficient data center cooling operations. We are also strengthening our capabilities in advanced flow control components and flexible connection solutions to address the ever-evolving requirements of the liquid cooling infrastructure. We aim to progressively strengthen our presence across the data center value chain, leveraging our manufacturing capabilities, our customized engineering solutions, and our diversified product portfolio.
Now talking about our capacity expansion. In this month, we have announced a capacity expansion which involves a total CapEx of INR 202 crore. It is aimed at from a long-term growth outlook and also to increase the demand visibility that we are seeing across both our sectors. In terms of the stainless steel flexible hose solutions, we have already completed the expansion of our manufacturing capacity to 20 million meters per annum, and we have planned a further expansion of 10 million meters per annum, which will take our total capacity to 30 million meters per annum, and it is estimated to be completed by March 2028.
It involves an investment of approximately INR 124 crore. This expansion program will comprise a mix of both greenfield expansion at the existing Taloja facility and also a proposed new manufacturing facility for hose assemblies. Now talking about the expansion plan for the skid assemblies. Our current capacity expansion plan of expansion to 15,000 units per annum is expected to be completed by December 2026. Out of that, we have already commissioned 12,000 units per annum. To add on top of that, we have planned the next phase of expansion, thereby raising our capacity from 15,000 units per annum to 30,000 skid assemblies per annum, and the same is expected to be completed by March 2028.
This will entail an additional investment of INR 78 crore. The overall investment of INR 202 crore will be funded primarily through a combination of internal accruals, bridge loan financing, and equity fundraise if required. At the peak of capacity utilization, these additional capacities are expected to generate incremental revenue potential of approximately INR 500 crore-INR 550 crore per year. The expansion will be implemented in a phased manner, strengthening our ability to execute larger customer programs and capitalize on opportunities across data centers and other high-growth industries.
To talk about our technology innovation and R&D, which remains central to our long-term growth strategy, and we continue to invest in new production capabilities, new product development, manufacturing process improvements, and enhancing our engineering capabilities. I am also glad to share that we have been granted a patent for our invention of developing a system and method for automatically generating a 3D computer-aided model for braided hose assemblies. This technology automates the generation of 3D CAD models of braided hose assemblies, enabling greater efficiency, consistency, and precision in product development.
Going forward, we will continue to focus on product innovation, process automation, and advanced manufacturing technologies to develop customized solutions for specialized and mission-critical applications. Looking ahead, we remain confident about our long-term growth prospects. Our strategy is focused on three key priorities. First is to strengthen our core metal flexible hoses and assemblies business through capacity expansion, automation, product innovation, and deeper market penetration. Second is to scale up our liquid cooling solutions business by expanding our manufacturing capability, capacity, strengthening our engineering capabilities, and also increasing the engagement with our customers across the data center ecosystem.
Thirdly, to continuously invest in technology, R&D, and advanced manufacturing to develop specialized solutions for these high-growth industries. The global transition towards AI and computing and liquid cooled data center infrastructure represents a multiyear opportunity for us, and our recently announced expansion program reflects our confidence in this opportunity and also our commitment to building these capabilities required to support the future growth.
Alongside our growth investments, we also remain focused on maintaining a strong balance sheet, healthy cash flows, and financial discipline. This will provide us with the financial flexibility to fund our future growth initiatives while also maintaining a strong financial position. Now talking about our financial performance for Q2 FY 2027. Our total income for the quarter stood at a record INR 207.68 crore, 87% on YoY basis. Our EBITDA stood at INR 50.34 crore, which is a growth of 74% on a YoY basis. Our EBITDA margin, 24.27% as compared to 20.34% last year. The profit after tax stood at INR 36.56 crore, which is a 157% on YoY basis. Our PAT margin for—
Sorry to interrupt you, Asad sir. We are losing your voice in between.
Okay. Am I audible now?
Yes, sir. Please continue.
Okay. Sorry. I will just repeat the last couple of lines. Profit after tax stood at INR 36.56 crore, which is a growth of 157% on a year-on-year basis. PAT margins stood at 17.6%. Talking about H1, the total income for the quarter stood at INR 353.66 crore, which is a growth of 81% on YoY basis. The EBITDA stood at INR 83.83 crore, which is a growth of 103% on YoY basis. EBITDA margins stood at 23.77% compared to 21.19% in H1 FY 2026. Profit after tax stood at INR 55.35 crore, and the PAT margin for the quarter was at 15.65%.
During the quarter, we changed our depreciation method from the WDV, which is the written-down value method, to the straight-line method, effective from April 1st, 2026, to better reflect the expected usage of the assets. This change resulted in a reduction in depreciation expense of INR 8.41 crore, both for Q2 and for H1. The change in the depreciation methodology was undertaken based on the advice of technical experts and also considering significant investments being undertaken on CapEx and an assessment of the pattern in which the future benefits of the assets are expected to be utilized.
This depreciation methodology was changed from WDV to SLM. Our financial performance during H1 FY 2027 has been extremely encouraging, and with the company already achieving financial numbers close to its entire FY 2026 performance within the first six months of FY 2027. This reflects strong business momentum that we are seeing, the robust growth that we are seeing across our segments, and increasing contribution from our liquid cooling solutions business, positioning us well for the remainder of the year. Lastly, I would like to thank our employees, our customers, suppliers, business partners, and our most important shareholders for their continuous trust and support. Thank you. With that, I would like to conclude my remarks, and we can now open the floor for questions.
Thank you very much. We will now begin with the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 Raman K.V. from Sequent Investments. Please go ahead.
Hello, sir. Can you hear me?
Yes, we can.
Yes, we can hear you.
Yeah. Sir, I have a few questions. One, with respect to the merger with Hyd-Air, how much cost savings are you expecting?
We do not have a specific number in terms of that, but we expect at least a couple of percentage margins to increase just on account of the cost. Plus, the whole idea behind the merger is to utilize the existing facilities of Hyd-Air for manufacturing of products which will be used by Aeroflex Industries. Hence, we felt that it was prudent to merge both the companies.
If you can you give a ballpark figure in margin expansion you are expecting? How much basis points, ballpark number?
It is difficult to say right now. I think probably once we complete the merger, I think that time it will be shared with you the exact numbers.
Okay, understood, sir. My second question, now that our liquid cooling skids contribute upwards of 30% of our total revenue, can you share the current order book and what is the execution period of those orders?
So typically, we see a pipeline of confirmed supply over the next three months. We already have a freeze pipeline for this quarter and the start of the next quarter. It will be difficult for me to give you a number on that due to confidentiality with the customer. But we typically get a horizon of minimum three months, and then obviously for the months after that, we get a ballpark estimate in terms of the requirements.
Can you also let us know what is the bid pipeline with respect to this liquid cooling skids? How much order are you bidding worth?
Actually, we are working with one customer exclusively for India for the liquid cooling business. We do not bid directly to the end user of the data centers. We are working with this very large U.S. multinational company for providing the liquid cooling solutions to them.
Okay. The particular solution which you provide for the India market, for the U.S. multinational company, which you have the exclusivity agreement with, what is the size of this market and who are the key players in the market?
The global size of the liquid cooling market, as of now, is about $4 billion-$5 billion, but it is growing at more than 30% on a year-on-year basis. The biggest player in this industry is Vertiv globally. They are also the biggest ones in India.
In India, what is the market size?
India market size, exactly the numbers are not available in terms of the market size in India.
Okay.
I do not have it right now at the top of my head, but I can share with you later.
Okay. Thank you, sir.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Nikhil Chowdhary from Toro Wealth Managers. Please go ahead.
Yeah, hi. Good morning, sir. Congratulations on a good set of numbers. I have just two questions. We have been attending many conferences, especially the recent one that you mentioned, the Tech Week Singapore. I just want to understand how is the export opportunity developing for the liquid cooling solutions of Aeroflex? Any new qualifications underway with global OEMs we are in talks? And second would be. Yeah, sorry. Go ahead, sir.
Yeah. We have already speaking to a couple of players internationally also for the supply of liquid cooling solutions. The progress is going quite well. Obviously, once something is finalized, only then we will be able to share more details on that. But yes, we are already looking at international expansion.
Got it. And also the incremental 15,000 skid that we have announced, taking it to 30,000. Now that export opportunity can probably kick in if it does. Won't this also be not meeting our requirements, or we will decide which quarters gone by, on the incremental skid capacities? Because another 15,000—
You are talking about the additional capacity that we plan, right?
Yeah.
We will be utilizing this additional capacity both for the India market as well as have earmarked certain capacity for international market as well. This expansion is considering both the opportunities.
Got it. But I guess incremental capacities would be taking care of only just probably 250 MW, 300 MW. I am just thinking the expansion that we are seeing in India itself, in next three, four years should be significantly large. And considering you are working with a leading player, won't the incremental capacities also fall short, in your opinion?
Yeah. Like I said, in India, there is a lot of projects have been announced. Obviously, the projects will be commissioned over a period of time, and I think we will be increasing our capacity based on the requirements that we see coming in from the market. If you see right now also, in the past almost one and a half year, we have doubled our capacity or planned to double our capacity twice. From 2 MW- 15 MW, that's almost seven times. But from now 15 MW- 30 MW. That's based on the increased demand that we are seeing coming in from across the verticals, especially in India. And in the future also, we would be expanding based on the requirements that we see coming in.
Got it. Considering that we have very negligible leverage on the balance sheet, you have already told that you will be discussing equity raise if needed, but the—
Yeah, that is only if needed.
Yeah. Got it. Understood.
Yeah.
That should be sufficing the CapEx as well as the growth.
Yeah. The first would be internal accruals, any kind of bridge financing for an interim period or any kind of long-term financing, then equity would be the next stage.
Got it. Thank you so much, sir. I'll come back in the queue.
Thank you.
All the best.
Thank you.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Tej Patel from Niveshaay. Please go ahead.
Hello, sir. Am I audible?
Yes, you are.
You are audible.
Perfect. Thank you so much. First of all, congratulations for the result and it is very commendable that you guys entered the D.C. business and now quite scaling up. Congratulations on that as well.
Thank you.
My question is, taking from the previous participant, you said that incremental capacity would be for both domestic and international, right? Is it right to assume that the incremental capacity is not exclusively for the customer that we already had an agreement for the older capacity? Is it right to say that?
Yeah. The exclusivity remains intact for the Indian market. Internationally, like I've said previously also, there is no exclusivity. This capacity expansion would be undertaken both at our existing facility and also at a new facility. The exclusivity will not be an issue in this case.
So you are saying the newer plant would probably cater to the international OEM. In that there would be no exclusivity, but the capacity expansion on the brownfield for incremental capacity would still be under exclusive agreements, right?
Well, not exactly like that. We don't do it based on plant to plant.
Okay. Sorry.
But so we do not do like, this plant is exclusive, this plant is not exclusive. Yes. We have earmarked certain capacity to be devoted to our customers. So that capacity would be dedicated to them irrespective of in whichever plant unit is being manufactured.
Perfect. So just to conclude, you are saying there is some incremental capacity. From this, there is some capacity which is exclusive to your earlier customer.
Yes.
But there is a little bit of capacity which you can probably sell to any other customers, right?
Yes. Internationally.
Perfect. Great. Sir, again, a question on Hyd-Air. Just one more. Of course, you told the rationale for consolidating it. But let's say, once you consolidate Hyd-Air into Aeroflex, does this probably automatically get you the certificates from your already existing customer for selling, let's say, Hyd-Air product to them also. Does that benefit also come in because you're already certified from one, are already the vendor, but I think Hyd-Air was not certified, right? But does that advantage also comes in with this consolidation?
Yes. So that is also one of the reasons where we already have certain customers who are buying from Aeroflex, and when Hyd-Air is subsumed under Aeroflex, it would help us to increase the fittings supplied to Aeroflex's customers. That's one of the criteria for merger, but also one of the important criteria for merger that we had was that a lot of the capacities of Hyd-Air are now being utilized to manufacture products for Aeroflex Industries. So it is almost like a backward integration. So hence we felt it would be prudent to have it in one company as compared to have two separate companies. Ultimately, one is supplying to the other.
Superb. Got it. Sir, your base business has done quite well this quarter. It's surprisingly done really well. So just wanted to understand, in last concall, you were speaking about some shipment delays. Is there some lag of, let's say, Q1- Q2? Is there some revenue booking here as well from Q1- Q2 because of let's say, shipment delays in Q1 now probably might have got booked in Q2?
Well, not in this case. Also what we have seen is, yes, well, the core business has grown not to our surprise, because we have been working on this since the past last year. So the real work behind the growth in this year is a result of all the work that we have been doing over the past six to nine months. There is no offtake from Q1 to Q2—
Got it.
—because we are seeing the shipments go. The only one concern is that the cost of the shipments have increased significantly. If you see, in terms of expenses, also one of the major expenses that has increased is the freight and forwarding because we are aware of the issues internationally of the—
Right.
—increase in the shipping cost.
Right. Got it. Perfect. And sir, this international customer you are saying with whom you are engaging, is it the same customer with whom we are dealing in domestic? And if not—
Yes.
—which geography is this customer? Is it the same customer?
Same customer.
Okay. Superb. Sir, in the previous concall also, we evaluated to probably look beyond SFN as well, right? If you could provide some elaborative answer on this, what kind of products are we looking at? What stage are we in? Are we looking to make some inorganic acquisition, probably to expand beyond SFN? If you can throw some light on this, that would be very much helpful.
Sure. We are looking at developing products which are adjacent to SFN and which are used in the liquid cooling space itself. It will be difficult for me to comment on what is the product that we are building until and unless we have developed it and we've got the approvals for it. But yes, we are developing certain products which will be used in the liquid cooling infrastructure and which will be a complementary product to the SFN. The development is still ongoing in terms of product design and then sampling of the product and then testing and then obviously the commercial. I would be able to give more clarity on that once the approvals are done for those products.
Superb. So sir, is it like more of a backward integration product? Is it part of SFN or is it like something else only, and it is not a part of SFN?
It is not exactly a part of SFN, but it is used in the liquid cooling space itself. It is not SFN, it is complementary to SFN. That is the only thing I can say right now. Yeah.
No problem, sir. No problem. Sir, last question from my end. Last question from my end. Sir, what would be the bellows revenue in this quarter? What contribution came in from bellows this quarter?
INR 6 crore.
INR 6 crore?
Yeah.
Superb.
Last year—
Perfect.
Sorry.
Yeah, sorry.
Last quarter was INR 3 crore. We are seeing also the bellows business increase.
Got it. And sir, are these bellows more standalone sold or is it a part of assemblies?
No, bellows are sold as both a bellow and also as an expansion joint. So when we sell it as an expansion joint, it is something similar to how we sell hose assemblies. Yeah. Okay.
Superb. Sir, I have a couple of more questions. I will join back in the queue. Thank you so much.
Yeah, sure. Thank you.
Thank you. The next question is from the line of Alisha Mahawla from TRUST Mutual Fund. Please go ahead.
Hi, sir. Good morning. Thank you for the opportunity.
Yeah.
Sir, first question is, we obviously increased our capacity ramp-up has been quite strong between Q1- Q2. Also the growth has been strong. Any thoughts on what will be our capacity utilization by the end of the year? Because I believe when we started, we were being very conservative and saying it will probably be 30%-35%. Will we be able to use 50% or more of this capacity in the first year only?
Well, yeah, as per the plan that we have, the business, like I said, and this industry is evolving every month, right? Even we are learning a lot of new things about this industry every month, right? That is why we have to, I would say, revise our projections almost on a monthly or maximum on a quarterly basis. Yeah, I think we are expecting that for this financial year, we would be reaching closer to anywhere between 40%- 50% of our total capacity utilization.
For the skid business?
Yeah, for the skid also.
Yeah. That is great. Sir, second question was that, obviously, since we are ramping up so well with our customer in India, any reason why the customer is not very keen to also start giving us orders in other markets? We have been in discussion with them, but now we have demonstrated also. So what is the timeline looking like over there?
We are now in advanced stage of sampling and pricing, so the discussion with our customers for international supply started about a couple of months back. The progress is going quite good. We are already in the next level of discussion. We are hoping that this should be closed soon. It is difficult to give any timeline on that because with international supply, there are a lot of controls, measures, checks, and audits required which may take some time. But yes, the discussions are going at a very advanced stage.
But the designing and the qualification would be the same, right? This is simply—
No.
—and they have the confidence of the customer.
No. I would just like to clarify that the design of SFN internationally and the design of SFN in India is different. That is the reason why it takes some time, because the SFN which has been designed for India, it has been designed keeping Indian conditions and Indian environment in mind as compared to the design internationally, which takes into consideration their requirements, their installation capabilities, and the geography of that particular country, the topography of that particular country. The design actually is completely different. Also, like I said in the previous calls also, even in India, the design for each data center is very different. Hence, the design for every data center that we provide this SFN for also changes.
Understood. How different would the realizations be? How much more would the realizations be in international markets versus the domestic market?
Difficult to comment right now on the realization until and unless we have started the first supply. We expect the realization to be definitely higher than the India market, but it will be too early for me to comment on that.
Understood. What about discussions with customers in international markets X of this new customer? What is the status of progress on that?
Yeah. These customers, apart from the one who we are dealing with, the other customers, the discussion is at an early stage right now. We expect also these customers to convert into customers soon, but difficult to give any timelines for those. They are in a much earlier stage.
Understood. Last bookkeeping question. In H1, how much is the revenue from metal bellows and Hyd-Air?
Metal bellows I mentioned is INR 6 crore.
H1.
H1, sorry, INR 9 crore.
I thought that was for Q2 when you said.
No, I said INR 6 crore for Q2 and INR 3 crore for Q1. So total INR 9 crore for bellows in H1.
Okay. And Hyd-Air?
Hyd-Air, the total is INR 11.5 crore. That includes the sales from. Sorry, go ahead.
No, no. Okay, great. Thank you.
INR 11.5 crore, yeah. Thank you.
Thanks. Thank you. The next question is from the line of Prem Luniya from Astute Investment Management. Please go ahead.
Hello.
Hello.
Yes. Are you audible?
Yes, sir. Congratulations on these set of numbers. I just wanted an understanding on the split of the base business revenue. We used to provide this oil and gas and new energy in new divisions. What is the split currently for this quarter and H1?
Data center obviously is now contributing a significant portion of the business in terms of the overall business. In terms of the next, I think ports and terminals is becoming a very big business for us, where we are seeing a lot of demand and traction come in. Then obviously, oil and gas and steel convert the next vertical. Data center now has become obviously the highest vertical on account of obviously the sales of liquid cooling business and also we are getting a lot of demand of hose assemblies from the data center business as well. These verticals combined are now contributing almost close to 26%-27% of the business. Then obviously firefighting remains one of the verticals. Oil and gas, which contributes combined about 30%, and then remaining the other industries.
Sure, sir. Sir, the expansion we are doing in the hoses from 20%- 30%. You see major of it being utilized domestically or internationally, and what industries you are seeing major growth?
For the hose assemblies, the major business would come from internationally. Because internationally, that is a market for our hose assemblies, where international is the biggest market for us, and that is where we will be seeing the greatest traction coming for the hose assemblies.
The industries would be?
Industries, one would be data center because they also have a requirement for hoses. Firefighting, which continues to be one of the high-growth industries internationally. Third being ports and terminals, which we are seeing significant demand of our products coming in from there. These three will be the major growth drivers for the company for the near future.
Sure. Thank you.
Thank you.
Thank you. The next question is from the line of Shreyansh Talesara from Equentis Wealth Advisors. Please go ahead.
Hello, am I audible?
Yes, sir.
Congratulations on great set of numbers and doing the exemplary execution that you guys have done. Again, the clarificatory question. Somebody asked on the international skid assembly side, is it for the same customer that we have, we are going to start with international, is my understanding correct?
For the international, yes, the discussion is in the advanced stage with the same customer, but also preliminarily discussions have also started with the other customers as well for other regions.
We will be doing from the same plant but for multiple customers, maybe for international. Only the restriction of exclusivity is only for the domestic side, right?
So like I mentioned earlier also, the whole idea for exclusivity is for the India market and we have dedicated certain capacity for the customer for the India market. The remaining additional capacity we are open to explore either internationally or sell to the same customer in India as well. That is more of fungible. So we will be utilizing that for any kind of exports that we do. So to one plant related, it is more of capacity and based on the demand.
Got it. Clear. You provided guidance for FY 2027, but you had a broader guidance for FY 2029 as well, something around INR 1,000 crore of top line with 25% operating margins.
Yes.
What would those numbers look like now given that we have upgraded our baseline FY 2027 guidance?
Yeah. Obviously, the target for FY 2029 INR 1,000, we would now definitely be achieving much more than that. Based on the expansion that we are doing now, which will be completed by March of 2028, and we expect this capacity to be at peak utilization in FY 2030. We expect the top line to be close to about INR 1,500 for FY 2030.
FY 2030. And margin trajectory, if you can guide any sort of number.
I think we would maintain at about 25%. That's what we believe. Obviously, there will be certain benefits from economies of scale, but also certain pressures in terms of the pricing, as we scale up in our vertical. Considering both, we expect margins to be 25% and slightly upwards.
Because I am also factoring in that you will integrate this subsidiary and there could be some sort of benefits from operating there as well. Plus, I think from your guidance that you spoke, that 70% EBITDA margin and 60% revenue growth by 2027. That already implies that 24% sort of margin for 2027. So I thought maybe it would be easily crossing 25%+. Or maybe you want to be conservative and over-deliver. Just wanted to get your thoughts around that.
I think you answered my question. Also with regards to this subsidiary, the subsidiary's turnover as compared to the quarterly turnover of Aeroflex is about 3%. Furthermore, the margin impact on the overall business would be quite minuscule from that angle, if you see. The whole idea is that. In terms of the future idea, see, obviously our internal targets will always be much higher, but what we expect, like I said, that margins to be at 25% and with the top line of close to INR 1,500 by FY 2030.
Got it. Very clear. All the best, and thank you very much, sir.
Thank you.
Thank you. The next question is from the line of Jainam Doshi from KRIIS PMS. Please go ahead.
Hi, sir. Good morning. Thank you for providing the opportunity. Congratulations on a great set of numbers. Two questions. One is, are our current skid assemblies compatible with Vertiv's planned 800 VDC data centers, or will the design need any modification? Whether this move towards 800 VDC will change the coolant flow rate, pressure, or the number of skids which will be required per megawatt of IT loads.
Okay. Our designs of SFN is quite fungible. Like I mentioned, it changes from data center to data center also. With regards to their team, the design team of Vertiv includes connection with our design team to develop the SFN design and then ultimately develop the product. It's more of a collaborative work that we do. Our products will be in accordance to what is the requirement by Vertiv.
Understood. Secondly, the average realizations per skid have improved to INR 3.39 lakh per skid in the current quarter. Going ahead, do we see these realizations improving as the mix improves, or would this be in a similar range?
The realization per skid can vary significantly. We have sold skids at a value of INR 1.5 lakh also, and we have sold skids at value of INR 5 lakh, depending on the complexity of the skid. The numbers that you're seeing is an average. This average can fluctuate depending on the data center project that takes place in that particular quarter. It is just an average metric. It doesn't show whether it's improving or it's declining. It's just an average of what we have supplied in the entire quarter.
Understood. Fair enough, sir. These were my questions. Thank you for the opportunity.
Thank you.
Thank you. The next question is from the line of Deepak Pandey from Sagun Capital. Please go ahead.
Sir, just a question on your parent company's acquisition. You have some sort of acquired valves company that caters to data center. What are the plans there? Any plans for backward integration, and will this act as a supplier to Aeroflex?
I think the parent company acquired them mostly into sanitary valves. It will be difficult for me to comment on this call with regards to that. We at Aeroflex are already working on certain potential acquisitions and, yes, once anything is finalized, we will let you know. But difficult to comment on the parent company's acquisition.
Broadly, the DC basket remains in Aeroflex Industries, right?
Yeah, the liquid cooling vertical is under Aeroflex Industries itself.
Thank you, sir.
Thank you. The next question is from the line of Disha from Sapphire Capital. Please go ahead.
Hello. Am I audible?
Yes, you are audible. Yes.
Yes, you are audible.
Thank you so much, sir, for this opportunity, and congratulations for the stellar set of results. Couple of questions, sir. Firstly, our skid assembly business has done very well, but even our base business, the growth has been stellar. Do you see this momentum continuing in the second half as well? What sort of growth should we target for both the flexible hose business and the assembly business for this year?
So our core business is growing at a very healthy pace in this year. We expect the same to continue for the remainder of the year as well. In terms of the overall growth, we expect that this year, the sales on an overall basis to achieve a growth of almost 60% for the entire company for the entire year. We expect this year to close somewhere about INR 715 crore- INR 725 crore at the least.
Right. For the skid assembly business, given the run rate we are at, would it be fair to assume that we can do around INR 200 crore from this business for this year?
Well, the initial target for this year was somewhere close to INR 125 crore. Obviously, that will be achieved in this quarter itself. So, the target for this year is to achieve anywhere between INR 150 crore- INR 200 crore.
Right. For the SS hose business, what's the capacity utilization currently? Post the expansion to 30 million meters, what sort of peak revenue do we see from this segment?
The peak revenue that we see from this particular segment would go closer to about INR 850 crore- INR 900 crore on the peak utilization, and assuming about 70%- 75% of the capacity is utilized for making the hose assemblies.
And—
In terms of the, yeah, sorry.
Yes, please go ahead. Sorry.
Yeah. In terms of the capacity utilization on an overall basis, right now we are at about an 80% utilization.
Okay. Currently, we are at 80%.
Yeah.
Okay. Sir, just if I heard it correct, the CapEx number that you mentioned, 178 INR crore will be for the skid assemblies and the remaining will be for the hose assembly business, right?
Yeah. INR 124 crore for the hose assembly.
Right. For this 15,000 sort of capacity, those skid assemblies that we have, for next year, it will be fair to assume 80% utilization, right?
For this year, 15,000, right?
For this—
For the one which is already commissioned, yeah.
Yeah, the one that is already commissioned. Yeah.
Yeah. Our target is to reach the peak utilization by next year.
Right. Okay. That is it.
Between the second half.
Yes.
Sorry.
That is it from—
Second year. Sorry.
Yeah. That is it from my side. Thank you so much, and all the best.
Thank you.
Thank you. The next question is from the line of Swaraj Mehta from Perpetual Capital Advisors. Please go ahead.
Thank you. Congratulations on a great set of numbers. My question was first on the receivables. What was the reason for the increase in receivables this quarter, and what would be a sustainable number going forward? How do we see it going forward?
If you see, the receivables has grown in line with our growth in the sales. But if you analyze the numbers in greater detail, our receivables has grown at a slower pace as compared to our sales, which means that we are recovering the money faster from our customers. Our receivables, our trade, working capital, trade receivables days have also reduced, in this particular quarter, and also in this first half of the year as compared to the first half of last year.
The welding automation, two lines that we have, can we add 0.5%-1% improvement in margins, or this would be the max that improvement is there?
It is hard to directly allocate welding automation to exact increase in percentage of margin. The whole idea for us to automate welding is for a couple of reasons. One, obviously, to reduce our dependency on manual work. Second, it helps us to increase our production capacities. I think third, which is the most important, is I think it helps in a better quality product, because a product which is made by machine has fewer rejections as compared to the one which is made manually. These are the three most critical factors for us. Obviously, as a result of all of these three, it helps in improving the top line as well as the bottom line, but difficult to give an exact number for the impact on the margins.
Okay, got it. Thank you so much.
Yeah. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that will be the last question. I would now like to hand the conference over to the management for closing comments.
Thank you so much everyone for joining today's call. If we are not able to answer anyone's questions, if anyone has any other questions, you can please get in touch with SGA, who is our investor relations partner. Anything else, you can also contact our investor relations team. Thank you so much everyone for joining today's call. Have a great day.
Thank you. On behalf of Aeroflex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.