Aeroflex Industries Limited (AEROFLEX) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Aeroflex Industries Limited Q2 FY27 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 touch-tone phone. Please note that this conference is being recorded. Thank you.

I welcome you all to Aeroflex Industries Limited Q2FI27 Earnings Call. Joining us today are members of our senior management team along with representatives from strategic growth advisors, our investigation 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 that our best-ever results with quarterly revenue crossing 200 crores 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-FI27, our metal flexible host 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 product business also registered a growth of about 4% on a year-on-year basis, which reflects increased demand for high-precision engineer 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 and FI27, which makes a significant milestone in our evolution from being just a flexible voice provider to an integrated provider of advanced flow control and liquid cooling solutions. We have also announced the merger of FIDAIR Engineering, which is our only on subsidiary with Aeroflex. This is aimed at strategically integrating operations of FIDAIR 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 costs, enhance our operational coordination, improve resource utilization, and facilitate more and efficient capital allocation. Now, 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. And 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 control to 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-coding 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 total capital expenditure of 202 crores. It is aimed at some of the long-term growth outlook and also the increase the demand visibility that we are seeing across both our sectors. In terms of the stainless steel flexible flow 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. And it involves an investment of approximately 124 crores. This expansion program will comprise a mix of both brownfield expansion at the existing Theroja facility, and also a proposed new manufacturing facility for hose assemblies. Now, talking about the expansion plan for the skill 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. And 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 street assemblies per annum. And the same is expected to be completed by March, 2028. And this will entail an additional investment of Rs. 78 crores. The overall investment of Rs. 102 crores will be funded primarily through a combination of internal approvals, bridge loan financing, and equity fundraisers if required. At the peak of capacity utilization, these additional capacities are expected to generate incremental revenue potential of approximately, which is 500 to 550 crores 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 goal strategy, and we continue to invest in new production capabilities, new product development, manufacturing process improvements, and enhancing our engineering capabilities. I'm 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 a red-house assemblies. This technology automates the generation of 3D CAD models of bedded 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 coating solution business by expanding our manufacturing capabilities, capacity, strengthening our engineering capabilities, and also increasing the engagement with our customers across the data center ecosystem. And 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 multi-year 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 the financial flexibility to fund our future growth initiatives while also maintaining a strong financial position. Now, talking about our financial performance for Q2 FI 27, Our total income for the quarter stood at a record 207.68 crores, 87% on a buying buy basis. A rebita stood at 50.34 crores, which is a growth of 74% on a buying buy basis. A rebita margin 24.27% as compared to 23.34 last year. So, the profit after tax stood at 36.56 crores, which is 150, and at 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. So, I'll just repeat the last couple of lines. Profit after tax stood at 36.56 crores, which is a growth of 157% on a year-on-year basis. Act margins stood at 17.6%. Talking about H1, the total income for the quarter stood at 353.66 crores, which is a growth of 81% on a buy-in-write basis. The EBITDA stood at 83.83 crores, which is a growth of 103% on a buy-in-write basis. EBITDA margins stood at 23.7% compared to 21.19% in H1FI26. Profit after tax stood at 55.35 crores, and the path 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, If it came from 1st April 2026, to better reflect the expected usage of the assets. This change resulted in a reduction in depreciation expense of Rs. 8.41 crores, 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 in the capital on CapEx and an assessment of the pattern in which the future benefits of the assets are expected to be utilized. This deposition methodology was changed from WDB to SLM. Our financial performance during H1-FI27 has been extremely encouraging and with the company already achieving financial numbers close to its entire FI26 performance within the first six months of FI27. 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 continued trust and support. Thank you, and 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 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Yes. The first question is from the line of Raman KV from Sequent Investments. Please go ahead.

Hello, sir. Can you hear me?

Yes, we can.

Yeah, sir, I have a few questions. One with respect to the merger with Hyder, how much cost savings are you expecting?

So, we don't 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 call. And plus, the whole idea behind the merger is to utilize the existing facilities of Hyder for manufacturing of products which will be used by Aeroflakes Industries. And we felt that it was prudent to merge both the companies.

If you can, can you give a ballpark figure in margin expansion you are expecting? How much bips, like, ballpark number?

It's difficult to say right now. I think probably, you know, once we, you know, once we complete the merger, I think that time we'll have a much, you know, I'll be able to share with you the, you know, the exact numbers.

Okay, understood, sir. So now that our, my second question, now that our liquid tooling states 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. So, 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 customers. 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.

And so, can you also let us know what's the bid pipeline with respect to this liquid cooling sketch? How much order are you bidding worth?

So, actually, we are working with, you know, with one customer exclusively for India for the liquid cooling business, and we don't bid And directly to the end user of the data centers, we are working with this very large U.S. multinational company for providing the liquid-coding solutions to them.

Okay, the particular solution which you provide for the India market for the U.S. multinational company which you are bidding, which you have the exclusivity agreement with, what's the size of this market and who are the key players in the market?

The global size of the data of the liquid cooling market is upwards of, as of now, it's about $4-5 billion, but it's growing at about more than 30% on a year-on-year basis, and the biggest player in this industry is what is energy globally, and they are also the biggest ones in India.

And in India, what's the market size?

India market size, exactly the numbers are not, you know, not available in terms of the market size in India. I don't have it right now on 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 Chaudhary from Toro Wealth Manager. Please go ahead.

Yeah, hi. Good morning, sir. Congratulations on a good set of numbers. I have just two questions. We've been attending many conferences, especially the recent one that you mentioned, Tech Week Singapore. I just want to understand, how is the export opportunity developing for the liquid cooling solutions of Aeroflakes? Any new qualifications underway with global AVMs? We are in talks. And second would be, yeah, sorry, yeah, go ahead.

Yeah, so we have already, you know, 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'll be able to share more details on that. But yes, we are already, you know, looking at international expansion.

Got it, got it. And also, this, the incremental 15,000 skids that we have announced, taking it to 30,000, now that export opportunity can probably kick in if it does, won't it, won't this also be, like, not meeting our requirements, or we are, like, we will decide which quarters gone by, like, on the incremental skid capacities.

You're talking about the additional capacity that we planned, right? Yeah, so we have, you know, most of the, so we'll be utilizing this additional capacity both for the India market as well as have earmarked certain capacity for international market as well. Uh, so that this expansion is, you know, considering both the opportunities.

Got it. Got it. But I guess incremental capacities would be taking care of, uh, only just like probably 250, 300 megawatts. So I'm just thinking the expansion that we are seeing in India itself is, uh, like would the next three, four years should be, uh, significantly larger than considering you are working with a leading player. Uh, won't the current capacities, the Incremental capacity will also fall short, in your opinion?

Yeah, so the, you know, like I said, in India, there are a lot of projects have been announced. Obviously, they will be, the projects will be commissioned over a period of time. And I think we will be, you know, we will be increasing our capacity based on the requirements that we see coming in from the market. So, 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, right? From 2 to 15, that's, you know, that's almost seven times, but from now 15 to 30. So, that's based on the increased demand that we are, you know, seeing coming in from, you know, across the verticals, especially in India. And in the future also, we would be expanding, you know, based on the requirements that we see coming in.

Got it, got it. And 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 like the...

That is only if needed.

Yeah, yeah, got it, got it, understood. So, debt It should be sufficing the effect as well as the growth.

Yeah, the first would be internal accrual, you know, any kind of bridge financing for an interim period or any kind of long-term, you know, financing, and then equity would be the next stage.

Got it, got it, got it. Thank you so much, sir. I'll come back in. And all the best.

Thank you. Participants who wish to ask a question may press star and 1. The next question is from the line of Tej Patel from Nivishaya. Please go ahead.

Hello, sir. Am I audible?

Yes, you are.

Yeah, you are audible.

Yeah, personally, thank you so much. And first of all, congratulations for the result. And it's very commendable that you guys, you know, entered the DC business and now quite scaling up. So congratulations on that as well. So, my question is, taking from the previous participant, you said that incremental capacity would be for both domestic and international, right? So, 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, so, you know, the exclusivity remains, you know, intact, you know, for the Indian market. Internationally, like I have said previously also, there is no exclusivity. So, this capacity expansion would be undertaken both at our existing facility and also at a new facility. So, you know, so the exclusivity would not be, you know, would not be an issue in this case.

So, you are saying the newer plant would probably cater to the international OEM. In that, there will be no exclusivity, but the capacity expansion on the brownfield for incremental capacity would still be under exclusive agreements, right?

Well, not, you know, exactly like that. So, we don't go it based on plant to plant. Yeah, so we don't do like this plant is exclusive, this plant is not exclusive. Yes, you know, we are not 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, but there is a little bit of capacity which you can probably sell it to any other customer, right?

Yes, internationally.

Perfect. Perfect. Great. Great. And, sir, again, a question on Hyder. I mean, just one more. Of course, you told the rationale for, you know, consolidating it. But let's say once you consolidate Hyder into Aeroflex, does this probably, you know, automatically, let's say, let you, I mean, get you the certificates from, let's say, your already existing customer for selling, let's say, Hyder product to them also. Does that benefit also come in because you are already, let's say, certified from one, are already the vendor, but I think Hyder 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, you know, customers who are buying from from Aeroflex and when the Hyder is subsumed under Aeroflex, it would help us to increase the fittings supplied to Aeroflex's customers. That's one of the number of the criteria for merger, but also one of the important criteria for mergers that we had, was that a lot of the capacities of Hyden are now being utilized to manufacture products for Aerospace Industries. So, it is almost like a backward integration. So, hence, we felt it is, it would be prudent to have it in one company as compared to have, you know, two separate companies. Ultimately, one is supplying to the...

Super, super. Got it, got it. And, sir, your base business has done quite well this quarter. I mean, it's surprisingly done really well. I just wanted to understand, you know, in last phone call, you were speaking about some shipment delays. So, is there some, you know, leg of, let's say, Q1 to Q2, is there some revenue booking here as well from Q1 to Q2 because of, let's say, shipment delays in Q1 now probably might have got booked in Q2?

Well, not in this case. Yes, also what we have seen is, yes, well, the code 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 the 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 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 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, which geography is this customer? Is it the same customer?

Same customer.

Okay. Superb. Superb. Superb. And sir, in the previous phone call also, we have alluded to, you know, to probably look beyond SFN as well, right? If you could provide some, some collaborative answer on this, you know, what kind of products are we looking at? You know, what stage are we in? Are we looking to, you know, make some inorganic acquisition, probably to, you know, expand beyond SFN? If you can, you know, throw some light on this, that would be very much helpful.

Sure. So, you know, we are looking at developing products which are adjacent to SFN and which are used in the liquid cooling space itself. Yes, it will be difficult for me to comment on what is the product that we are building until and unless we have, you know, we have developed it and we've got the approvals for it. So, but yes, we are developing certain products which are, which will be used in the liquid cooling infrastructure and which is, you know, which will be a complementary So, I will be able to give more clarity on that once the approvals are done, you know, 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? It's not a part of SFN?

It's not exactly a part of SFN. It's actually, but it's used in the liquid cooling space itself. It's not SFN. It's complementary to SFN. So, that's the only thing I can say right now.

No problem, sir. No problem. Sir, last question from my end. Sir, what would be the Bellows revenue in this quarter? What contribution came in from Bellows this quarter?

Six crores.

Six crores?

Yeah.

Super, super, super.

Last year, sorry, last quarter was three crores. So, we are seeing also the bellows business increase.

Got it. And, sir, are these bellows more shortly stand-alone leasehold or is it a part of SM lease?

No, bellows are sold as both a bellow and also as an expansion joint. So, when you sell it as an expansion joint, it's in the form of, it's something similar to how we sell those assemblies here.

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 Mahavala from Trust Mutual Fund. Please go ahead.

Hi, sir. Good morning. Thank you for the opportunity. Thank you. The first question is, so today, obviously, the capacity ramp-up has been quite strong. It's between Q1 to Q2, also the growth has been strong. So, any thoughts on what will be a capacity utilization by the end of the year? Because I believe when we started, we were being very conservative and it will probably be 30-35%. So, will you be able to use 50% or more of the capacity in the first year only?

Oh, well, yeah, the, you know, as per the plan that we have. So, you know, the business, like I said, in this industry is evolving, you know, every month, right? Even we are learning a lot of new things about this industry every month, right? So that's why we have to, I would say, revise our, you know, projections almost on a monthly or maximum or quarterly basis. So, yeah, I think we are expecting that, you know, for this, you know, for this financial year, we will be, you know, reaching closer to about, you know, anywhere between 40 to 50 percent of our utilization, you know, of our total capacity utilization. For the skills business? Yeah, for the skills and resources.

Yeah, yeah. The second question was that, obviously, since we are acting up so well with our customers in India, any reason why the customer is not very keen to also start giving us orders in other markets? We've been in discussion with them, but now we've demonstrated also. So, what is the timeline looking like over there?

So, we have already, so we have already, we are now in advance stage of, you know, sampling and pricing and also we have already, so the discussion with our customers for international supplies started about a couple of months back. So, the progress is going, you know, quite good. We are already in the next level of discussion. So, you know, we are hoping that this should be, you know, closed soon. It's difficult to give any timeline on that because with international, you know, supply, there are a lot of controls, measures, checks, and audits required, you know, 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? So, this is simply, and we have the confidence of the customer.

No, so I would just like to clarify that the design of SFN internationally and the design of SFN in India is different. So, you know, so that is the reason why it takes some time because the SFN which is being designed for India, It's, it has been designed the keeping Indian conditions and, and Indian, you know, environment in mind as compared to the design internationally, which is, you know, which takes into consideration their requirements, their installation capabilities, and the geography of, of, of that particular country, the topography of that particular country. So the, the design actually, you know, It's completely, you know, different. Also, like I said in the previous course also, even in India, the design for each data center is very different. Hence, the design for every data center that we, you know, provide this SSN for also changes.

Understood. So, how different would the realizations be? How much more would the realizations be in the international market versus the domestic market?

Difficult to comment right now on the realization until and unless we have started the, you know, the first supply. But we expect the realization to be definitely, you know, higher than the India market. But it will be, you know, too early for me to comment on that.

Understood. And what about discussions with customers in international markets, X of the C customers? What is the status of progress on that?

Yeah, so these customers, you know, apart from the one who we are dealing with, these other customers, the discussion is at an early stage right now. And, you know, we expect also these customers to convert into customers soon, but difficult to give any tangents for those as they're in a much earlier stage.

Understood. And last bookkeeping question, in H1, how much is the revenue from metal bellows in file there?

Metal bellows, I mentioned, is 6 crores. H1, H1. H1, sorry, 9 crores.

I thought that was for Q2 when you said.

No, I said 6 crores for Q2 and 3 crores for Q1, so total 9 crores for bellows in H1. Okay. And high debt? High debt, the total is 11.5 crores. That includes the sales from, sorry, go ahead. No, no. Okay. 11 crores. Thank you. 11.5, yeah. Thank you.

Thank you. The next question is from the line of Prem Lonia from Astute Investment Management. Please go ahead. Yes, sir. Your order will.

Yes, congratulations on the start of numbers. I just wanted an understanding on the split of the base business revenue. So, we used to provide this oil and gas and new energy in new divisions. What is the split currently for this quarter and HR?

So, you know, data center obviously is now, you know, contributing a significant portion of the business, you know, in terms of the overall business. In terms of the next, I think post and terminals is becoming a very big business for us where we're seeing a lot of demand and traction come in and then obviously oil and gas and steel, uh, uh, the next best, uh, the next, uh, you know, vertical. So yeah, data center now has become obviously the highest vertical on account of, uh, uh, you know, obviously the things of liquid cooling business and also a lot of, uh, uh, be getting a lot of demand of hoses, uh, uh, sorry, hose assemblies from, uh, the data center, uh, business as well. So, these verticals combined are now contributing, you know, almost close to 26 to 27% of the business. And then, obviously, firefighting remains one of the verticals, steel, alcohol, and gas, which contributes combined about 30% and then the other industries.

Sure, sir. And, sir, the expansion we are doing in the hoses from 20 to 30, you see nature of it being utilized domestically or internationally, and what industries you are seeing nature growth?

So, for the host assemblies, the major business would come from internationally, because internationally we are the, you know, that's a market for our host assemblies, the international is the This is the biggest market for us, and that is where we will be, you know, seeing the greatest attraction coming for the hoses assemblies. And 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. So, these three will be the major growth drivers for, you know, for the company for the near future.

Sure, sure.

Thank you. Thank you.

Thank you. The next question is from the line of Shreyans Talisara from Equinist Wealth Advisors. Please go ahead.

Hello. Am I audible?

Yes, sir.

Congratulations on greater numbers and, you know, doing the exemplary execution that you guys have done. Again, the clarificatory question. So, somebody asked on the international SCID assembly side, is it for the same customer that we have? We are going to start with international, is my understanding correct? Right.

So, for the international, yes, the discussion is in the advanced stage with the same customer, but also primarily discussions have also started with the other customers itself.

So, we'll be doing from the same plan, 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, you know, or send to the same, you know, customer in India as well. So, that's more of, you know, fungible. So, utilizing that for our, you know, for any kind of exports that we do. So, one plant created, it's more of capacity and based on the demand.

Got it, got it here. And so you provided guidance on for F27, but you know, you had a broader guidance for F29 as well, something around 1000 crores of top line with 25% operating margins. What would those numbers look like now, given that we have, you know, upgraded our baseline F27 guidance?

Yeah, obviously, the target for FI 29,000, 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 28, we expect that and we expect this capacity to be at peak utilization in FI 30. We expect the top line to be close to about $1,300 for FI 30. FI 30.

And margin trajectory, if you can write any sort of number?

I think we would maintain at about 25%. It'll be, you know, that's what we believe. Obviously, there'll be certain benefits from economies of scale, But also, certain pressures in terms of the pricing, you know, as we scale up in our vertical. So, considering both, we expect margins to be 25% and slightly upwards.

Because I'm also factoring in that you will, you know, integrate this subsidiary and there could be some sort of benefits from there, opting there as well. Plus, I think from your guidance that you spoke that 70% EBITDA margin and 60% EBITDA growth for F27, that already implies that 24% sort of margin for F27. So, I thought maybe, you know, it would be easily crossing 25% plus, or maybe you want to be conservative and whatever. Just wanted to get your thoughts around that. So, I think you've answered my question, you know.

So, also, with regards to the subsidy, right, the subsidy, the turnover as compared to the quarterly turnover of Aeroflex is about 3%. I'm talking about the margin impact on the overall business would be, you know, quite miniscule from that angle, if you see. The whole idea is that, you know, and in terms of the future idea, see, obviously, our internal targets will always be, you know, much higher. But what we expect, like I said, that margins to, you know, to be at 25% and with the top line of close to 1,500 by 530.

Got it. Got it. Very clear. All the best. And thank you very much. Thank you.

Thank you.

Thank you. The next question is from the line of Jainam Doshi from Chris PMS. Please go ahead.

Hi, sir. Good morning. Thank you for providing the opportunity. Congratulations on a great set of numbers. So, two questions. One is, like, are our current skid assemblies compatible with Vertiv's planned 800 VDC data centers, or will the design need any modification? And 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 load.

Okay, so, see, you know, our designs of SFN is quite fungible. Like I mentioned, it changes from data center to data center also. And with regards to their team, so the design team of Vertiv works in close connection with our design team to develop the SFN design and ultimately develop the product. So it's more of a collaborative work that we do. So our products will be in accordance to what is the requirement by Vertiv.

Understood. Understood. And secondly, uh, like the average realizations for scared to have improved to like 3.39 lakhs, uh, per skid in the current quarter. So going ahead, do we see these realizations improving as the mix improves or would this be in a similar range?

So, the realization per skid, you know, can vary, you know, significantly. It can be, you know, we have sold skids about at a value of 1.5 likes also in this school. So, we have sold skids at value of, you know, 5 likes depending on the complexity of the skids, right? So the numbers that you're seeing is an average. This average can fluctuate depending on the, you know, the data center project that, you know, that takes place in that particular quarter. So it is, you know, it is just an average metric. It doesn't, you know, there is no, it doesn't show whether it's improving or it's declining. It's just an average of, you know, what we have supplied in the entire quarter.

Understood. Fair enough. Like, these were my questions. Thank you for the opportunity. Thank you.

Thank you. The next question is from the line of Deepak Pandey from Shagun Capital. Please go ahead.

Sir, just a question on your parent company's acquisition. You have some sort of acquired avals company that, you know, caters to data center. So, what are the plans there? Any plans for backward integration? And will they expect as a supply to Aeroflex?

So, I think the parent companies acquired them mostly into sanitary wells. So, it will be difficult for me to comment on this call with regard to that. We, at Aeroflex, are already working on certain potential acquisitions, and, yeah, we, you know, once anything is finalized, we'll let you know. But difficult to comment on the parent company's acquisition.

So, broadly, the DC, you know, basket remains in the Aeroflex industry, right?

Yeah, the liquid cooling vertical is under Aeroflex industries itself.

Thank you.

Thank you. The next question is from the line of Disha from Sapphire Capital. Please go ahead.

Hello. Yes, your order. Yes.

Yes, your order.

Yes, thank you so much, sir, for this opportunity and congratulations for the stellar set of results. Couple of questions, sir. Firstly, on our, so Asker Assembly's business has done very well, but in our base business, the growth has been stellar. So, how do you, do you see this momentum continuing in the second half as well? And what sort of growth should we target for both the Exable Hoses business and the Assembly business for this year?

So, yeah, so our code business is growing at a, you know, 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, you know, growth, we expect that this year, we expect that sales on an overall basis to achieve a growth of almost 60% for the entire company, you know, for the entire year. So, we expect this year to close somewhere about $715 to $725, I believe.

Right, right. And so, for the Great Assembly business, given the run rate we are at, would it be fair to assume that we can do around 200 sort of, no, 200 CR from this business to this year?

Well, the initial target for this year was somewhere close to 125. Obviously, that will be, you know, achieved in this quarter itself. So, the target for this year is to achieve anywhere between 150 to 200.

Right, right. And so, for the whole, the SS Moses business, what's the capacity utilization currently and post the expansion to 30 million meters, what sort of peak revenue do we see from this segment?

So, you know, the peak revenue that we see from this particular segment will go, you know, closer to about 900 crores, 80 to 900 crores on the peak utilization and assuming about 70 to 75 percent of the capacity is utilized for making the whole assemblies. 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%. Okay, okay. And so just if I heard it correct, the KPS number that you mentioned, so 78 CR will be for the skid assemblies and the remaining will be for the whole assemblies.

Yeah, 1.24 for the hose assembly.

Right, and so for this 15,000 sort of capacity, those create assemblies that we have, for next year, it would be fair to assume 80% utilization, right?

For this year, 15,000, right? For the one that's already commissioned, yeah.

Yeah, the one that's already commissioned, yeah.

Yeah, our target is to reach the peak utilization by next year. Okay, that is it.

Thank you so much. Thank you.

The next question is from the line of Swaraj Mehta from Perpetual Capital Advisors. Please go ahead.

My question was first on the receivables. What was the reason for increasing receivables this quarter and what would be a sustainable number going forward? How do we see it going forward?

So if you see the receivables has grown in line with our growth in the sales. But if you see, 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, a trade working capital, a trade receivables, you know, days have also reduced in this particular, you know, quarter and also in this first half of the year as compared to the first half of last year.

And some of the welding automation that we, two lines that we have, can we add 0.5 to 1% improvement in margins or this would be the max that's improved and is there?

So, it is hard to directly, you know, allocate welding, you know, automation to exact increase in percentage of margins. 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 These are our production capacities, and I think third, which is the most important, is I think it helps in a better quality, you know, product because the product which is made by machine has, you know, fewer additions as compared to the one which is made manually. So 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.

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, If you have any questions, you can please get in touch with SGA, who is our investor relations partner, and anything else, you can also contact our investor relations team. So, thank you so much, everyone, for joining today's call.

Thank you. On behalf of Aeroplex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.