Aeroflex Industries just delivered a quarter that makes you sit up and take notice. Profit after tax (PAT) for Q2 FY27 (September 2026) surged 156.9% year-on-year to ₹36.56 crore. Revenue crossed ₹200 crore for the first time, hitting ₹207.4 crore. That's an 87% jump from the same period last year. But here's the thing about headline numbers—they rarely tell the whole story. Let's dig into what's really driving this growth, the role of a clever accounting change, and whether this momentum can last. Investor Presentation +2
The PAT jump looks dramatic, but it's not all coming from selling more stuff. Two big factors are at play. First, the core business is genuinely firing. EBITDA (earnings before interest, tax, depreciation, and amortization) climbed 94.5% to ₹50.3 crore. That's faster than revenue growth, which means the company is becoming more efficient at turning sales into operating profit. Investor Presentation
Second, there's an accounting twist.
Think of WDV as charging more depreciation early in an asset's life, while SLM spreads it evenly. The company says this change better reflects how its machinery actually delivers value over time. The result? Depreciation dropped significantly. The presentation shows depreciation under the old method would have been ₹8.86 crore for the quarter, but under the new method it's ₹4.27 crore. That's a reduction of about ₹4.6 crore. Investor Presentation +2
This accounting change boosted PAT. On a WDV basis, the company estimates PAT would have been ₹28.32 crore. Under SLM, it's ₹34.00 crore. That's an uplift of roughly ₹5.7 crore. The reported PAT of ₹36.56 crore appears in a different table with an unusually low depreciation figure of ₹0.45 crore, which looks like a data inconsistency. Regardless of which number you use, the accounting change explains a meaningful chunk of the PAT surge. Strip it out, and PAT growth is still impressive—roughly doubling—but not quite the 157% headline figure. Investor Presentation
EBITDA margin expanded by 93 basis points to 24.3%, up from 23.4% last year. That might sound like small change, but in manufacturing, every basis point counts. Management attributes this gain to two factors: a better product mix and operating leverage. Investor Presentation +1
Here's what that means in plain English. Aeroflex isn't just selling more of the same. It's selling more high-value products—things like complex hose assemblies and specialized fittings that carry fatter margins than basic hoses. The company says raw material costs fell to about 55% of revenue from 59%, while employee and other expenses also dropped as a percentage of sales. That's operating leverage in action: fixed costs get spread across a larger revenue base. Investor Presentation
The depreciation change doesn't touch EBITDA margins, so this improvement is purely operational. It shows the company is getting better at what it does, not just better at accounting.
The real star of the show is the liquid cooling skid business. This division has gone from practically nowhere to a major growth driver in just three quarters.
That's a 2.6x increase in just six months. Investor Presentation +1
Volume tells the same story. The company sold 571 skids in Q4 FY26, 1,040 in Q1 FY27, and 1,475 in Q2 FY27. That's 42% quarter-on-quarter growth in Q2. Average selling price per skid also improved, rising from ₹3.11 lakh to ₹3.39 lakh. The company says skids typically sell between ₹1.1 lakh and ₹5.5 lakh depending on specifications, so the price reflects the mix of products rather than a simple price hike. Investor Presentation +2
What's driving this demand? Artificial intelligence and high-performance computing. These workloads generate tremendous heat, pushing data centers beyond what air cooling can handle. Liquid cooling is becoming essential. Aeroflex cites market research projecting 33.2% annual growth for the global liquid cooling market and 35% for direct-to-chip cooling through 2032. That's the tide lifting all boats, and Aeroflex is positioning itself to ride the wave. Investor Presentation +1
To capture this opportunity, Aeroflex is spending big.
Stainless steel hose and braiding capacity will grow from 20 million meters to 30 million meters per year. Liquid cooling skid capacity will jump from 12,000 units currently to 30,000 units by March 2028. The company expects this investment to generate ₹500-550 crore in additional peak revenue. That works out to roughly 2.5 times revenue for every rupee invested. Investor Presentation +1
The expansion is happening in phases. Skid capacity reached 12,000 units and is targeted to hit 15,000 by December 2026. The next phase takes it to 30,000 by FY28. Management expects the 15,000-unit capacity to be optimally utilized in FY28, the first full year after commissioning. Investor Presentation +1
That customer provides a yearly pipeline broken into quarterly orders. If that pipeline slows down, the new capacity sits idle. Management says it has about three months of visibility on orders, with tentative schedules shared two months ahead. Beyond that, it's anyone's guess. Transcript +1
It's not just India.
The ports and terminals segment has emerged as a key contributor, though the company hasn't disclosed specific revenue numbers for this segment. In Europe, demand comes from Italy, Spain, France, and the UK, spanning traditional industries and data centers. Aeroflex is already exporting hose assemblies for European data center applications. Investor Presentation +1
How does Aeroflex compete against global giants like Senior and Parker? The company argues it has several advantages. It developed its skid products in about a year when they weren't available in India. It has 16 data center liquid cooling products in R&D. It's an approved supplier to a leading global thermal management provider. And it's located near JNPT port, which helps with exports. Management also cites India's cost advantage as a competitive factor. Transcript +2
These are management claims, not independent validations. Global competitors have deeper pockets and broader product ranges. But Aeroflex is moving fast and establishing a beachhead in a growing market.
Every growth story has risks, and Aeroflex is no exception. The first is customer concentration. The skid business depends largely on one exclusive partner. That gives the customer significant negotiating power. If they push for lower prices or shift orders elsewhere, Aeroflex's growth trajectory takes a hit. Transcript +1
Then there's the margin question. EBITDA margin is already at 24.3%, close to management's 25% target for the next few years. Operating leverage has helped, but as capacity utilization stabilizes, those benefits diminish. Future margin gains will have to come from product mix and efficiency improvements, not just spreading fixed costs. Transcript
Raw material costs are another wild card. Stainless steel prices have been relatively stable, but history shows they can swing. The company typically passes through about 60-75% of raw material changes, not 100%. A sharp increase in steel or logistics costs could squeeze margins. Transcript +1
Competition is also heating up. Senior and Parker are already in the market. As more players enter and capacity comes online, pricing pressure could intensify. Skid realizations have already fallen from about ₹5 lakh to around ₹3.4 lakh as volumes have grown. That's not necessarily bad—it reflects a broader product mix—but it shows pricing isn't immune to market forces. Investor Presentation +1
Aeroflex Industries is executing well on a clear strategic pivot. The company is transforming from a flexible hose maker into an integrated flow-control solutions provider, with liquid cooling for data centers as the growth engine. The Q2 FY27 numbers show this strategy is working, even after adjusting for the accounting change. Transcript
The capacity expansion positions the company for significant growth if demand holds. The target of ₹500-550 crore in incremental revenue is ambitious but not unreasonable given the market opportunity. Investor Presentation
But the risks are real. Customer concentration, execution delays, and competitive pressure could all derail the best-laid plans. Investors should watch three things closely: monthly skid volumes against the 750-unit exit guidance, margin trends as new capacity comes online, and any signs of customer diversification beyond the current exclusive arrangement. Transcript
The story here isn't just about one great quarter. It's about whether Aeroflex can convert the data center cooling boom into a sustainable, long-term growth platform. So far, so good. But the next few quarters will tell us if this is the beginning of a much larger story or just a very impressive flash in the pan.
