Riding on multiple tailwinds…
About the stock: Aeroflex Industries Limited (AERIND), incorporated in 1993, is engaged in the business of manufacturing and supply of metallic flexible flow solutions made with stainless steel
• Product range includes stainless steel corrugation products (braided and non-braided) such as hose, double interlock flexible metal hoses, composite hose, stainless steel hose assemblies, teflon/PTFE hose, fittings
• FY24 revenue Mix : ~84% from exports, ~16% from domestic markets
• Consolidated revenue of the company has grown by ~30% CAGR in the last 3 years during the period FY21-24 while EBITDA and PAT have grown by ~40% CAGR and ~91% CAGR respectively over the same period
Investment Rationale
• Strong industry tailwinds favour long-term growth; focus on expanding reach to new-age industries: AERIND, which generates ~84% of its revenue from international markets, is well positioned to benefit significantly from healthy global demand of flexible flow solutions, given that it is an integral part of key industries (like steel & metals, oil & gas, chemicals, port terminal handling, paper, pharma, residential & commercial etc). Moreover, company is expanding its presence to new age sectors like fire sprinklers, solar, robotics, semiconductors, aerospace & satellite and electric mobility. With distinctive manufacturing capabilities, led by strong R&D, state-of-the-art Infra, global presence & 2500+ SKUs, the company is poised well to capture sizable share of increasing demand from organised sector
• Expanding capacities across segments; Focus remains on increasing share of better-margin product segments: Company has expanded its capacity of “SS flexible hoses” segment (60% of revenue) to 15 mn mtrs by adding 3.5 mn mtrs in phases over the last 12 months. The company is in process of further expanding this capacity to 16.5 mn mtrs by Dec-2024. Moreover, company is expanding its existing product offerings through better-margin products like metal bellows. In other segments too (composite hoses & assemblies/fittings), company is in process of expanding capacities and targets to increase the overall share of higher-margin products. Company is also focused on expanding its product portfolio across existing & new materials too including SS, bronze, inconel, monel, PTFE etc
Rating and Target Price
• With capacity expansions across existing segments & venturing into new product segment (metal bellows), company remains focused on improving profitability through increasing overall share of better-margin products
• We estimate revenue CAGR of ~25% over FY24-26E while EBITDA & PAT CAGR of ~34% & ~37% respectively over the same period. We assign BUY rating on the stock with a target price at ₹ 230 (valued at 38x P/E on FY26E)
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