Aeroflex Industries (NSE:AEROFLEX) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Aeroflex Industries Limited Q2 FY 'twenty seven Earnings Conference Call. As a reminder, all participants' lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. 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 of the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr.

0:46 Asad Dow, Managing Director. Thank you, and over to you, sir. Thank you so much. Good morning, everyone. I welcome you all to Aeroflex Industries Limited q two FY twenty seven earnings call. Joining us today are members of our senior management team along with representatives from strategic growth advisers, 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.

1:34 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 h one FY twenty seven, 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.

2:27 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 f y... In in h one f y twenty seven, which makes a significant milestone in our evolution from being just a flexible voice provider to an an integrated provider of advanced flow control and liquid cooling solutions. We have also announced the merger of Hydroengineering, which is a wholly owned subsidiary with Aeroflex.

3:24 This is aimed at strategically integrating operations of the... Of of Hydrointo Aeroflex and to create a more streamlined and efficient business structure. The merger is also expected to leverage existing infrastructure. It helps... 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 with it cost, enhance our operation coordination, improve resource utilization, and facilitate more and efficient capital allocation.

4:18 Now talking about the data center opportunity, the rapid advancement of 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 right 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 and this is creating a growing demand for reliable, leak proof, and precision engineered flow control solutions.

5:08 Aeroflex is well positioned to participate in this opportunity through its expertise in the flexible flexible flow solutions in terms of engineered assemblies and also liquid cooling skill... Skid assemblies. Our SFN skid assembly facilitate control to cooling 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 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.

6:01 Now talking about our capacity expansion, in this month, we have announced a capacity expansion, which involves total capital expenditure of INR $20.02 crores. 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 flow solutions, we have already completed the expansion of our manufacturing capacity to 20,000,000 meters per annum, and we have planned further expansion of 10,000,000 meters per annum, which will take our total capacity to 30 millimeters per annum, and it is estimated to be completed by March 2028.

6:50 And it involves an investment of approximately INR 124 This expansion program will comprise a mix of both brownfield expansion at the existing closure facility and also proposed new manufacturing facility for both assemblies. Now talking about the expansion plan for the skilled 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 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 square assemblies per annum, and the same is expected to be completed by March 2028.

7:50 And this will entail an additional investment of INR 8 crores. The overall investment of INR $20.02 crores will be funded primarily through a combination of internal approvals, bridge loan financing and equity for this if required. At the peak of capacity utilization, these additional capacities are expected to generate incremental revenue potential of approximately INR 500 crores to $5.50 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.

8:44 To talk about our technology innovation and r and d, which remains central to our long term growth strategy, and we continue to invest in new production capabilities, new product development, manufacturing process improvement, 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 com... A three d computer aided model of embedded hose assemblies. This technology automates the generation of three d CAD models of embedded 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.

9:43 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 assembly 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. And thirdly, to continuously invest in technology, R and 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 depends a multiyear opportunity for us, and a recently announced expansion program reflects our confidence in this opportunity and also our commitment to building these capabilities required to support the future growth.

10:49 Alongside our our growth investments, we also remain focused on maintaining a strong balance sheet, healthy cash flows, financial... 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 FY 'twenty seven, our total income for the quarter stood at a record crores, up 87% on a buying by basis. Our EBITDA stood at INR50.34 crores, which is a growth of 24% on a buying basis. Our EBITDA margin, 24.27% as compared to 234% last year.

11:39 The profit after tax stood at 36.56 crores, which is a 50. I have 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. I'm sorry. So we'll just... 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. PAT margins stood at 17.6%. Talking about H1, the total income for the quarter stood at $3.53.66 crores, which is a growth of 81% on a Y and Y basis.

12:27 The EBITDA stood at INR 83.83 crores, which is a growth of 103% on Y and Y basis. EBITDA margin stood at 23.77% compared to 21.19% in this in H1 FY 'twenty six. Profit after tax stood at INR 55.35 crores, and the past margin for the quarter was at INR 15.65 percentage. 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 04/01/2026 to better reflect the expected usage of the assets. This change resulted in a reduction in depreciation expense of INR 8.41 crores both for Q2 and for H1.

13:13 The change in the depreciation methodology was undertaken based on the advice of technical experts And also considering the significant investment being undertaken in the capital ex... On CapEx and an and an assessment of the pattern in which the the future benefits of the of the assets are expected to be utilized, this deposition methodology will change from WDB to SLM. Our financial performance during H1 FY 'twenty seven has been extremely encouraging and with the company already achieving financial numbers close to its entire FY 'twenty six performance within the first six months of FY 'twenty seven. 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.

14:05 Lastly, 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. The The first question is from the line of Raman Kevey from Sequent Investments.

14:51 Sir, I have a few questions. One, to the merger with high debt. How much cost savings are you expecting? So the... We don't have 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 cost. And plus the the the whole the whole idea behind the merger is to utilize the the existing facilities of Hyder for manufacturing of products, which will be used for by Aeroflex Industries. Hence, we felt that it was prudent to merge both the companies.

15:40 If if if you can, can you give a ballpark figure in margin expansion you are expecting? How many... How much bps, 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 cooling kits contribute upwards of 30% of our total revenue, can you share the current order book and what's the execution period of those orders? So we... Typically, we see a pipeline of confirmed of confirmed supply over the next three months.

16:34 So we have... We already have a freeze pipeline of... You know, for this quarter and the start of the next quarter. A little bit difficult for me to give you a number on that due to confidentiality with the customer. Mhmm. But we typically get a horizon of of minimum three months. And then, obviously, for the month after that, we get a a ballpark, you know, a ballpark estimate in terms of the requirements. And so if... Can you also let us know what's the bid pipeline with respect to this liquid sales kits? How much order are you bidding worth?

17:20 So, actually, we are working with, you know, with one customer exclusively for India for the liquid cooling business, and and we don't bid directly to the end user of the data centers. We are working with this very large US multinational company for providing the liquid coating solutions to them. Okay. The particular solution which you provide for the India market, for The US multinational company, which you are bidding... Like, 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 datas... The liquid cooling market is... It's upwards of...

18:08 As of now, it's about 4 to $5,000,000,000, but it's growing at about more than 30% on a year on year basis. And the the biggest player in this industry is what is energy globally. And, yeah, and they are the... 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, yeah, 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.

19:04 Should you have a follow-up question, please rejoin the queue. The next question is from the line of Nikhil Chaudhry 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, 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. Sorry. Yeah. Go ahead. Yeah. So we have already we have already, you know, spoke... Speaking to a cup... A couple of players internationally also for the supply of liquid cooling solutions.

20:01 The, you know, the progress is 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 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 with quarters one by, like, on the incremental state capacities. Because another You're talking about the addition... You're talking about the additional capacity that we planned. Right? Yeah. So we have, you know, most of the... So so we'll be utilizing this additional capacity both for the India market as well as have have yet... Have your much certain capacity for international market as well.

21:06 So that... This expansion is, you know, considering both the opportunities. Got it. Got it. But I guess incremental capacities would be taken care of only just, like, probably two fifty, 300 megawatts. So I'm just thinking the expansion that we are seeing in India itself is... Like, would the next three, four years should be significantly large and considering you are working with a leading player. Won't the current capacities... The incremental capacities also fall short in your opinion? Yeah. So the... You know, like I said, in India, there is... 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, so in the past almost one and a half year, we have doubled our capacity or plan to double our capacity twice, right, from two to 15, that's, you know, that's why we'll... That's almost seven times, but from now 15 to 30.

22:15 So that's based on the increased demand that we are, you know, seeing coming in from, you know, across across the verticals, especially in India. And in the future also... India. 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 a very negligible leverage on the balance sheet, you have already told that you will be discussing equity raise if needed. But, like, take the added only if needed. Yeah. Yeah. Got it. Got it. Understood. So that should be surprising the Yeah. Apex as well as the growth also. The first would be internal accrual, you know, any kind of bridge, you know, 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 the Thank and all the best. Thank you.

23:13 Thank you. The next question is from the line of from. Please go ahead. Hello, sir. Am I audible? Yes. You are. You are audible. Yeah. Perfect. 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?

24:01 Yeah. So, you know, the exclusively remains, you know, intact, you know, you know, 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. So, you know, so the exclusivity would not be, you know, would not be an issue in this case. Oh, no. 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 only brownfield for the... For incremental capacity would still be under exclusive agreements. Right? Well, not, you know, exactly like that. So so we don't go with based on plan to plan. Okay.

24:53 Sorry. Yeah. You know? Yeah. So so so we don't do it like this plan is exclusive. This plan is not exclusive. Yes. Well, you know, we are we are not certain capacity to be devoted to our customers. So that capacity would be dedicated to them irrespective of of in whichever plant unit is being manufactured. Perfect. So just to conclude, you are saying there is some cap... Incremental capacity. From this, there is some capacity which is exclusive to your earlier customer, but there is few cap... There's a little bit of capacity which you can probably sell it to any any other customer. Right? Yeah. Internationally. Perfect. Perfect. Great. Great. And, sir, again, a question on Hyder. You... I mean, just one more. Of course, you told the rational for, you know, consolidating it. But let's say once you consolidate Hyder into Aeroflex, does this probably, you know, automatically get... 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?

25:54 Is it... Does that benefit also come in? Because you're already, let's say, certified from one... Are already the vendor, but I think Hyder was not certified. Right? But does their 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 when high there is subsumed under Aeroflex, it would help us to increase the fittings supplied to to Aeroflex's customers. That's one of the the number of the the criteria for merger. But also, one of the important criteria for merger that we had was that a lot of the capacities of high end has now been utilized to manufacture products for Aeroflex Industries.

26:42 So it is almost like a backward integration. So hence, we spent... Is... It it will be prudent to have it in 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, lag of, let's say, q one to q two? Is there is there some revenue booking here as well from q one to q two because of later shipment is in Q1 now probably might have got booked in Q2? Well, not in this case. Also, we have seen is, yes, well, the core business has has grown not to our surprise because we have been working on this since the past last year. So the the real the the real work behind the growth in this year is is a result of all the work that we have been, you know, doing over the past six to nine months.

27:50 There is no offtake from q one to q two because we have... You know, we are seeing the shipments go. The only one concern is that the cost of the shipments have increased, you know, significantly. If you see, you know, in terms of expenses, also, of the major expenses that has increased is the freight and forwarding because of the... You know, because we are aware of the the issues internationally of the Right. You know, 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 which which we... Which 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 evaluated you, you know, to probably look beyond SF and of...

28:42 As well. Right? If you could provide some some elaborative answer on this, you know, what kind of products are we looking at? You know, what stage are we in? Or 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 SSN 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, you know, we have developed it and we've got the approvals for it.

29:28 So... But, yes, we are developing certain products which are obviously be used in the liquid cooling infrastructure and which is, you know, which will be complementary product to to the SSL. The development is still ongoing in terms of, you know, product design and then, you know, sampling of the product and then testing and then, obviously, the commercial. So I would 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 integrated end product? Is it part of SFM, or is it, like, something else only? It's not a part of SFM? It's not exactly a part of SFM. It's actually...

30:15 It... But it's used in the liquid cooling space itself. It's it's it's not SFN. It's it's it's complementary to SFN. So that's 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 Belo's revenue in this quarter? What what what contribution came in from Belo's this quarter? 6 crores. 6 crores? Yep. Super. Super. Super. Last year Perfect. Sorry. Last quarter was 3 crores. So we are seeing also the Bellows business increase. Got it. And, sir, are these Bellows more shortly standalone leasehold, or is it a part of assemblies? No. Bellows are sold as as both a bellow and also as an expansion joint. So when you when you sell it as an expansion joint, it's it's in the form of...

31:06 It's in... It's something similar to how we sell those assemblies here. Okay? Super. Super. So 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 Alicia Mahavala from Trust Mutual Fund. Please go ahead. Hi. So good morning. Thank you for the opportunity. My first question is, so a, it'd obviously increased our capacity ramp up has been quite strong with within q one to q two as the growth has been strong. So any thoughts on what will be your capacity utilization by the end of the year? Because I believe when we started, we were being very conservative until it will probably be 30%, 35%. So is it able to use 50% or more of this capacity in the first year only?

31:56 Well, yeah, the... You know, as per the plan that we have. So, you know, the business, like I said, in this industry is is evolving, you know, 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 or maximum on a quarterly basis. So, yeah, I think we we are 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% of our utilization, you know, of our total capacity utilization.

32:43 For the kids business? Yeah. For the kids only. Yeah. Yeah. I see. Great. That's great. The 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've been in discussion with them, but now we've demonstrated also. So what is what is the timeline looking like over there? We have already... So we have already we are now in advanced stage of, you know, sampling and and and pricing, and also we have all... Already... So the discussion with our customer for international supply started about a couple of months back.

33:32 So the progress is going, you know, quite good. We are already in the next level of of discussion. So, you know, I'm... You know, we are hoping that this should be, you know, closed soon. It is difficult to give any timeline on that because with international, you know, supply, there are a lot of controlled measures, checks, and audits required, you know, which may take some time. But, yes, the the discussions are going at every advanced stage. The designing and the qualification would be the same. Right? So the system No. And they have the confidence of the customer only. No. So I would just like to clarify that the design of SSN internationally and the design of SSN in India is different.

34:21 So... And, you know, so that is the reason why it it it takes some time because the SSN, which is being designed for India, it's it's... Has been designed by 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 the geography of of of that particular country, the topography of that particular country. So the the design actually, you know, is completely, you know, different. Also, like I said in the previous calls also, even in India, the design for each data center, the... Is very different.

35:06 And the design for every data center that we, you know, provide this SSN for also changes. Understood. So how 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 market x of the c customer?

35:52 What is the status of progress on that? Yeah. So these customers, you know you know, apart from the one who we are dealing with, then these, you know, the customers, the the discussion is at an early stage right now. And, you know, we, you know, we expect also these these customers to convert into customers soon, but difficult to, you know, give any time lines for those as they are in in in a much earlier stage. Understood. And last bookkeeping question. In h one, how much is the revenue from metal values in file there? Metal values I mentioned is 6 crores. H one. H one. H one. Sorry. 9 crores.

36:42 I thought that was for q two when you said. No. I said 6 crores for q two and 3 crores for q one. So total 9 crores for Belos in h one. Okay. And Hyder? Hyder, the total is 11.5 crores. That includes the sales, yeah, from. Yes. Sorry, got it. No. Okay. You. The next question is from the line of Prem Lunya from Astute Investment Management. Yes, sir.

37:31 On the base set of numbers. I just wanted a understanding on the split of the base business revenue. So we used to provide this oil and gas and new energy and new divisions. What is the split currently for this quarter in HR? So, know, data center obviously is is now, you know, contributing a significant portion of the business, you know, in terms of the the 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 coming. And then obviously, oil and gas and steel convert the next best...

38:17 The next, you know, vertical. So, yeah, data center now has become obviously the highest vertical on account of, you know, obviously, the sales of liquid cooling business and also a lot of... We're getting a lot of demand of hoses... Sorry, hose assembly from the data center business as well. So these verticals combined are now contributing, you know, up almost to close to 26% to 27% of the of the business. And then obviously, firefighting remains one of the verticals. Steel, copper and gas, which contributes combined about 30% and then the other industries.

39:05 Sure, sir. And sir, the expansion we are doing in the whole business was from 20 to 30. You see major of it being utilized, you know, domestically or internationally, and what industries you're seeing major growth? So for the whole assembly, the major business would come from internationally Because internationally, we are the the... You know, that's the market for our hose assembly. The international is the biggest market for us, and that is where we will be, you know, seeing the greatest attraction coming for the hose assembly. And industries would be? Industries, I would... One would be data center because they also also have a requirement for hoses. Firefighting, this continues to be one of the the high growth industries internationally.

39:55 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 the company for the near future. The next question is from the line of Shreyans Salisara from Equintas Wealth Advisors. Congratulations on greater numbers and doing the exemplary execution that you guys have done. Again, the clarification question.

40:41 So somebody asked on the international skilled assembly side. Is it for the same customer that we have? We are going start with international. Is my understanding correct? So for the international, yes, the the discussion is in the in the advanced stage with the same customer, but also, primarily, discussions have also started with the other customers as well for other reasons. So we'll be doing from the same plan, but for the multiple customers, maybe for international. Only the restriction of exclusive deals only for the domestic side. Right? So like I mentioned earlier also, the the whole idea for exclusivity is for the India market, and we we have dedicated certain capacity for the customer for the India market.

41:29 The the remaining additional capacity, we are are open to explore either internationally or or, you know, or sell to the same, you know, customer in India as well. So that's more of, you know, fungible. So we're utilizing that for our... You know, for for any kind of exports that we do. So to one plant related is more of capacity and based on the demand. Got it. Got it. Clear. And so you provided guidance on... For F twenty seven, but, you know, you had a broader guidance for F twenty nine as well. It's something around INR 1,000 crores of top line with 25% operating margins. What would those numbers look like now given that we have upgraded our baseline F27 guidance?

42:18 Yes. Obviously, target for FY twenty nine thousand, 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 '28. We expect that... And and we expect this capacity to be at peak utilization in FY thirty. We expect the top line to be close to about 1,500 for FY thirty. FY thirty. And margin trajectory, if you can write any sort of number? I think we would maintain at about 25%.

43:04 It'll be... You know? That's what we, you know, 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, operating there as well. Plus, I think from your guidance that you spoke, that 70% EBITDA margin and 60% net growth for '27, that already implies a 24% sort of margin for '27. So I thought maybe, you know, it could be easily crossing twenty five percent plus.

43:56 Well, maybe you want to be conservative and or whatever. I just wanted to get your thoughts around that. So I think you answered my question. So also, with regards to the subsidy, right, the subsidies, the turnover as compared to the quarterly turnover of the of Aeroflex is about 3%. Talking about the the margin impact on the on the owner of the business would be, you know, you know, quite minuscule from that angle if you see. The whole idea is that... You know? And in terms of the in terms of the the future, I do 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 FY 'thirty.

44:58 The next question is from the line of Jayanam Doshi from CrispMS. Congratulations on a great set of numbers. So two questions. One is, like, are our current SKAD assembly is compatible with what is 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 loads? Okay. So, see, you know, our designs of of is quite fungible. It depend... Like I mentioned, it it changes from data center to data center also.

45:48 And with regards to their, you know, team, so the design team of Huddl works that in close connection with our design team to develop the the the design and then ultimately develop the product. So it's more of a collaborative, you know, you know, collaborative, you know, work that we do. So our, you know, our products will be in in accordance to what is the requirement by. Understood. Understood. And secondly, like, the average realizations for scared have improved to, like, 3.39 lakhs for scared 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?

46:35 So the realization per a kid, you know, can vary, you know, significantly. It can be... You know, we have sold kids about at a value of 1.5 lakhs also in this school. So we have sold kids at value of, you know, 5 lakhs depending on the complexity of the skid. Right? So the number that you're seeing is an average. This average can fluctuate depending on the the, you know, the data center project that, you know, that takes place in that particular quarter. So it is... You know, this this is just an average metric. It doesn't, you know, there is no... It doesn't show whether it's it's improving or it's declining. It's just an average of, you know, what we have supplied in the entire quarter.

47:29 Understood. Fair enough. Like these were my questions. Thank you for the opportunity. Thank you. Thank The next question is from the line of Deepak Pandey from Chagun Capital. Please go ahead. Sir, just a question on your parent company's acquisition. You have some sort of acquired awards company that, you know, keep us to data center. So what are the plans there? Any plans for backward integration? And will this, like, there's a supply to Aeroflex? So I think the parent company has acquired them mostly into sanitary valves. So it'll be difficult for me to comment on this on this call with regards to that. We at Aeroflex are already working on certain potential acquisitions.

48:19 And, yeah, we... You know, once anything is finalized, we'll let you know, but difficult to comment on the parent company acquisition. So broadly, the DC basket remains in the Aeroflex Industries, right? Yes. The liquid cooling vertical under Aeroflex Industries itself. The next question is from the line of Disha from Sapphire Capital. Yes. Thank you so much, sir, for this opportunity, and congratulations for a stellar set of results. Couple of questions, sir. On our... So our business has done very well, but you know, 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 these, the flexible motor business and the assembly business for this year?

49:21 So, yes. So our core business is growing at a, 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, we expect the sales on an overall basis to achieve a growth of almost 60% for the entire company for the entire year. So that's between So we expect this year to close somewhere about seven fifteen to seven twenty five at the least. Right. Right. And so for for the scale assembly business, given the run rate we are at, would it be fair to assume that we can do around 200 sort of 200 from this business to this year?

50:14 Well, the the initial target for this year was somewhere close to 125. Obviously, that will be, you know, achieved in the... In this quarter itself. So the target for this year is to to achieve anywhere between one fifty to 200. Right. Right. And, sir, for the whole... SS holder business, what's the capacity utilization currently? And post the expansion to 30,000,000 meters, what sort of peak revenue do we see from this segment? So the peak revenue that we see from this particular segment would go closer to about 900 crores, INR 900 crores on the peak utilization and assuming about 70% to 75% of the capacity is utilized for making the whole assembly.

51:12 Terms of the... Yeah. Sorry? Yes. Yes. Please go ahead. Sorry. Yeah. So in in terms of the capacity utilization on an overall basis, right now, we are at about an 80% utilization. Okay. Currently, we're at 80%. Yeah. Okay. Okay. And, sir, just if I'm already correct, the CapEx number that you mentioned, so 78 CR will be for the steel assemblies, and the remaining will be for the whole assemblies. Business. $1.24 for the whole assembly. Right. And and, sir, for this 15,000 sort of capacity, those steel assemblies that we have, that... For next year, it'd be fair to assume 80% utilization. Right? For the... For this year, 50... 15,000.

51:58 Right? For for the one that is already commissioned. Yeah. So Yeah. The one is already commissioned. Yeah. Yeah. Our target is to reach the the peak utilization by next year. Right. Okay. Which is at least. Sorry. F... February thirty eight. Sorry. Yeah. Yeah. Yeah. That is it super much. Thank you so much, and all the best. Thank you. Thank you. The next question is from the line of Suraj Mehta from Perpetual Capital Advisors. Please go ahead. Hello, Suraj. This is on a great set of numbers. My question was, first on the receivables. It has 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?

52:45 So if you see the receivables has grown in line with our growth in the sales. So 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 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. And sir, the building automation that we two lines that we have, can you add 0.5 to 1% improvement in margins? Or this would be the max improvement is there?

53:35 So it is it is hard to directly, you know, allocate building, you know, automation to exact increase in percentage of margins. The whole idea for us to to automate welding is for a couple of reasons. One, obviously, to to reduce our dependency on manual work. Second, it helps us to to increase 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 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.

54:30 Okay. Got it. Thank you so much. 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 with SGA, who is our investor relations partner. And and and anything else, you can also contact our investor relations team. So thank you so much, everyone, for joining today's call. Have a great day. Thank you.

55:17 On behalf of Aeroflex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.