- Aeroflex is shifting focus to assemblies and data centre cooling to boost higher-value products
- The company targets assemblies to contribute 60-70% of revenue within the next three to four years
- Aeroflex's exports form 74% of revenue, with the US as the largest market at 47% of sales
Aeroflex Industries is expanding beyond its traditional hose business into assemblies and data centre cooling, as investors track a move into higher-value products and new export markets. The global data centre cooling market is projected to grow at a 33% compound annual growth rate to $21 billion, or about Rs 1.9 lakh crore, by 2032 from about $3 billion now.
The company's strategy centres on increasing the share of assemblies in revenue, supported by demand from artificial intelligence-led data centres that need liquid cooling systems. Management aims to raise assemblies to 60% to 70% of revenue over the next three to four years, a shift that could support margins as these products generate higher returns than standalone hoses.
Core Business
Aeroflex makes flexible metallic flow solutions used in the transfer of solids, liquids and gases. Demand has historically come from industrial and manufacturing customers moving away from rubber and polymer hoses to stainless-steel alternatives.
Its products include stainless-steel flexible hoses, fittings, assemblies and liquid cooling skid assemblies. These components absorb system stress, manage thermal expansion and resist chemical degradation.
The company's revenue base is spread across sectors. Steel and metals contribute 25%, followed by new-age industries and others at 24%, oil and natural gas at 20%, petrochemicals and chemicals at 16%, refinery at 8%, and mining and drilling at 7%.
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Margin Shift
Value-added products accounted for 54% of revenue in 9MFY26, while stainless-steel flexible hoses made up 46%. Because hoses are an input for assemblies, higher assembly sales allow Aeroflex to capture more value across the same chain.
Management has said the planned change in product mix is intended to improve profitability as well as scale.
Data Centre Opportunity
Aeroflex is positioning itself for rising demand in liquid cooling systems as AI workloads increase power use and heat generation in data centres.
Unlike traditional industries that mainly buy standalone hoses, data centres need integrated assemblies. Aeroflex's liquid-cooling skid assemblies and Secondary Fluid Network solutions are designed to distribute coolant safely in high-density computing environments.
The company has secured a five-year exclusive contract for the Indian market with a US-based multinational. Under the agreement, it supplies secondary fluid network flow solutions and skid assemblies, with some products co-developed with its partner.
Export Exposure
Exports contributed 74% of revenue, with Aeroflex supplying customers in more than 90 countries. The United States is its largest single market at 47% of sales.
That exposure also brought pressure from recent tariffs. The company absorbed an 8% price discount to retain clients, according to the text provided. Europe is the second-largest geography, contributing about 30% of export revenue.
The proposed India-EU and India-UK trade agreements could support growth if implemented.
Capacity Expansion
Aeroflex made its first commercial dispatch in Q3FY26, marking the move from development to execution in the data centre business.
The company is expanding skid assembly capacity to 15,000 units a year from 2,000 units, with completion targeted by June 2026. It is also setting up a dedicated facility in Chakan, Pune, for the product line. Management expects peak utilisation in two to two-and-a-half years, likely by FY29. At 80% utilisation, annual revenue could reach Rs 300 crore to Rs 350 crore.
Across existing operations, hose capacity is targeted to rise to 20 million metres by Q2FY27, while assembly stations are set to increase to 70 from 46.
Financial Performance
Total income rose 18% year-on-year to Rs 379 crore in FY25. EBITDA increased 24% to Rs 82 crore, with margin at 21.54%. Net profit climbed 26% to Rs 52.51 crore.
In 9MFY26, revenue rose 10% to Rs 317 crore. EBITDA grew 13% to Rs 70 crore and margin improved to 22.2%. Net profit fell 8% to Rs 38 crore, driven by higher depreciation and a weaker first quarter affected by tariffs. Exports then grew 30% year-on-year in Q3, according to the text provided.
Valuation And Risks
At a share price of Rs 289, Aeroflex trades at a price-to-earnings multiple of 78, above its three-year median of 50.
That suggests investors are already pricing in part of the expected growth from assemblies and data centre cooling. Risks include commodity price volatility, tariff pressure, export dependence and supply chain disruption.
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