Unimech Aerospace and Manufacturing Ltd (UNIMECH) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (Anand Rathi Share and Stock Brokers Limited): Ladies and gentlemen, good day, and welcome to Unimech Aerospace and Manufacturing Ltd Q2 and FY '27 earnings conference call hosted by Anand Rathi Share and Stock Brokers Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines 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 and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Valecha from Anand Rathi Share and Stock Brokers Limited. Thank you, and over to you, Mr. Valecha.
Manish Valecha (Anand Rathi Share and Stock Brokers Limited): Thank you. Good morning, everyone. We welcome you all to the Q2 FY27 earnings call for Unimech Aerospace and Manufacturing Limited. From the management team today, we have with us Mr. Anil Kumar Puttan, Chairman and Managing Director, Mr. Ramakrishna Kamojhala, Whole-time Director and CFO, Mr. Rajnikanth Balaraman, Whole-time Director, Mr. Mani Puttan, Whole-time Director, Mr. Preetham SV, Whole-time Director, and Mr. Aakash Jaiswal, AGM, Investor Relations. I would now like to hand over the call to Anil for his opening comments. Over to you, Anil.
Anil Kumar Puttan (Unimech Aerospace and Manufacturing Ltd): Thank you, Manish. Good morning everyone, and a warm welcome to Unimech Aerospace and Manufacturing Limited's Q2 and H1 FY27 earnings call. Thank you for joining us today. The second quarter has been an important period for us as we continue to build on the strong momentum witnessed at the start of the year and advance our overarching strategy, which is transforming Unimech into into an integrated multi-industry precision engineering platform. As indicated during our previous call, Q2 has turned out to be a very strong quarter. In H1 FY27, our revenues grew by 85% year-on-year to ₹231 crore, with significantly strong EBITDA margins at 38% for the period. Across our operations, execution remains robust, driven by steady order flow and sustained customer demand. Concurrently, our strategic initiatives, including the seamless integration of Bellows and ramp-up of our precision components business, are strengthening both our grow growth prospects and operational foundation. This strength is not only visible in our financial performance, but also in the strengthening of our order book and future revenue visibility. While our foundation foundational heritage in aerospace tooling has traditionally operated on short cycle purchase orders, we have deliberately evolved our business model to establish multi-year revenue predictability. By aggressively expanding our precision components and assemblies business and locking in multi-year term long-term supplier agreements with Tier 1s and global OEMs, we have fundamentally transformed our growth profile. I'm pleased to share that as of September 30th, our consolidated order book stands at ₹855 crore, representing in an increase of over of over 78% on a year-on-year basis, successfully building high-visibility multi-year compounding revenue streams. To further institutionalize this momentum and scale these compounding opportunities across our expanding footprint, our long-term value creation strategy rests on three core pillars: strengthening our core tooling business, expanding into higher-value recurring manufacturing opportunities across industries under our precision component business, investing proactively in capabilities and capacity to capture larger multi-year customer programs. Let me briefly walk you through our progress across these three pillars. Core aerospace tooling: Aero tooling remains our anchor backed by steady demand across our established engine and airframe programs. While traditional tooling operates on short-term cycle purchase orders, we are actively expanding into high-visibility contracts. For instance, we are negotiating long-term supply agreements with existing customers for high-demand tools such as engine stands. Converting such opportunities will allow us to layer predictable multi-year revenue streams on top of our agile, short-cycle PO to PO business. Precision components and assemblies: Alongside tooling, precision components represents our strongest multi-year growth engine, expanding our addressable market across aerospace, defense, semiconductors, capital equipment, energy, and nuclear applications. Our recent long-term agreements and program award award wins with OEMs and Tier 1s global aerospace majors reflect our successful entry into the complex aerostructures, engine components, and control systems. In semiconductors, our two-year development efforts are bearing fruit, generating some revenue in H1, with a step-up expected in H2. To demonstrate the sheer strength of our long-term revenue pipeline, as of H1-end, we have successfully qualified over 250 parts across our PCA component customer base, with another 340-plus parts currently in the throw out pipeline. As these parts move from qualification into series production, they will provide compounding multi-year revenue visibility. In nuclear, our existing order book provides a strong foundation of revenue visibility, and we are actively preparing to bid on upcoming opportunities. Finally, our Middle East
Anil Kumar Puttan (Unimech Aerospace and Manufacturing Ltd): and through our joint venture with the Kanoo Group in Saudi Arabia marks our first international manufacturing footprint in the localized oil and gas market. Our initial equity investment of approximately USD 4 million deployed early this month fully capitalizes this phase, funding the infrastructure readiness required to capture regional localization demand. Platform expansion and strategic investments. To capture growing demand tailwinds across aerospace, defense, semiconductor, and industrial sectors, we are proactively expanding our manufacturing capability. Establishing scale-ready capacity early is a critical strategic enabler sending a clear signal to global OEMs that Unimech has the willingness, scale, and technical capability to support their multi-year growth requirements. We are installing dedicated automated special process cells and assembly lines at our existing facility. Trial runs are taking place this month, and next commissioning will be completed by December '26, and Nadcap certification is targeted to be in for March '27. Beyond organic growth, our broader ecosystem is firing on all cylinders. Forbes Bellows integration is complete, driving organic growth while opening doors to newer industrial applications with newer customers for Forbes. Propulsion capabilities, our strategic alignment with Dhruva Engineering, continues to progress through major indigenous propulsion qualification and international customer milestones. Taken together, these initiatives diversify our revenue streams, eliminate customer concentration risk, deepen client retention, and establish Unimech as a preferred global supply chain partner. We remain committed to disciplined execution, operational efficiency, and prudent capital allocation. I will now hand over call to Rajani to provide a deeper update on our specific customer programs, operational milestones, and strategic execution across our business.
Rajnikanth Balaraman (Unimech Aerospace and Manufacturing Ltd): Thank you, Anil. Good morning, everyone. Building on the strategic foundation Anil laid out, I'm excited to share how our operational execution across every business is unlocking massive growth, securing premier global accounts and expanding our multi-year order visibility. 1, starting with our tooling business. Our core aerospace tooling business continues to see robust, steady demand across established platforms. Crucially, leveraging this core capability to unlock transformative, long-term global programs across industries beyond aerospace. We are in initial discussions with a Dutch-based semiconductor OEM for supplying tools for their established machine base. If this strategic account is successful, this can open doors to massive tooling opportunities beyond aerospace in the first phase and in the second phase, opportunity for manufacturing high-volume precision parts for their OEM. 2, in precision components and assemblies line business, our overarching strategy is executing steadily, transitioning into recurring, high-volume manufacturing while aggressively capturing a greater share of wallet with top-tier global aerospace majors. Our marquee multi-year contract wins reflect this momentum. FACC, our USD 7.5 million, 5-year long-term supply agreement for crucial aerostructure components is actively moving into initial execution. Happy to indicate with the progress in qualification and discussion, the contract tenure can potentially double from the current disclosed period, similar will be the case with contract value. French Tier 1 manufacturer to air- aircraft majors, we secured a we secured a flagship program award valued at USD 4 43 million approximately spread over 10 years with qualification activity activities rapidly moving forward. Honeywell Aerospace, we locked in a 10-year long-term supply agreement extendable by an additional 2 years for the recurring supply of engine components and control systems. This is a strong validity of our capabilities on winning such programs and agreements in shorter span and making our entry into high-precision flying parts. Across our precision aerospace customers, we are targeting the qualification of over 320 parts in full year FY '27 alone. While these parts undergo first article inspection and throughout this fiscal
Rajnikanth Balaraman (Unimech Aerospace and Manufacturing Ltd): They represent a coiled spring setting up a massive compounding revenue ramp that will layer directly into FY '28 and beyond as serial production scales. In semiconductors, we are seeing a possibility of exponential scale. Our dedicated 20-month investment in semiconductor domain is delivering exceptional commercial returns. Performance across our precision metal and plastic machine portfolio is accelerating rapidly. 60 FAIs have already been qualified. We are moving up the value chain by proving our complex high-precision mechanical sub subassemblies as well in addition to our machining portfolio for our customers core equipment. Another 20 parts of components and assemblies targeted by end of this calendar year. Discussions with another major global semiconductor OEM for precision components are also underway. Three, special process automation and operational readiness. As Anil emphasized, investing ahead of the curve is our biggest strategic advantage. We are installing dedicated automated special process cells and assembly lines at our existing capacity existing facility, expanding our in-house capabilities to include anodizing, electroless nickel plating, passivation, zinc and cadmium plating, heat treatment, surface finishing, and nondestructive testing. This investment strengthens our end-to-end manufacturing ecosystem for aerospace and semiconductor OEMs, giving us complete control over quality, lead times, and process traceability while unlocking high-value program opportunities. We are proactively augmenting our overall shop floor capacity, cleanroom infrastructure, and machining capabi- capabilities ahead of demand. Demonstrating scale readiness early is precisely why premier OEMs are selecting Unimech for multiyear programs. Number four, the integration of Hobal Bellows has exceeded our expectations. Demand from key customers is bullish for the coming years, driven by the strong demand of genset engines in data center industry. And they have already requested additional capacity, which we are absorbing using our available infrastructure. New pipeline and cross-selling: Advanced engagements with new clients are underway for turbine switchgear bellows, as well as locomotive exhaust and engine bellows. Concurrently, our cross-selling strategy is active with Hobal's capabilities entering initial qualification stages across Unimech's existing customer base. Global majors like Wabtec are actively exploring broader partnerships with Unimech Group beyond bellows. AS9100 quality certification for the Vizag facility is underway with completion targeted by Feb '27 to unlock aerospace bellows opportunities. We are also evaluating the timing of new capex expansion as more customers are being onboarded, providing stronger visibility visibility. Number five, Middle East expansion via Saudi JV. Following our initial USD 4 million equity investment investment, construction of our Saudi Arabia facility in partnership with Kanoo is progressing on schedule. We are targeting commercial manufact- manufacturing readiness by March or April '27. While we continuously monitor regional dynamics, customer demand in the Middle East energy sector remains extraordinarily strong. Once local infrastructure is operational, we expect immediate production ramp-ups with complimentary overflow demand being fulfilled directly by our Indian manufacturing base. Six, Dheya Engineering. Unimech holds an approximate 27% equity stake in Dheya Engineering Technologies alongside exclusive manufacturing rights for their indigenous micro gas turbine and propulsion platforms. The strategic value of this partnership was validated in 26th September, when Havannaa Capital invested in Dheya at an approximate 200 crore valuation. I would also like to share few operational updates on Dheya. Development of the 40 kg thrust
Rajnikanth Balaraman (Unimech Aerospace and Manufacturing Ltd): 20 kg, 40 kg, 50 kg, and 100 kg thrust engines, targeting availability of all four variants by March '27. ECU or electronic control unit development is progressing in parallel across all these variants. Dheya is seeing encouraging interest both from domestic and global defense majors. Discussions are underway with global customers. Crucially on the certification front, Dheya has achieved a historic milestone by becoming the first private company in India to receive a prototype certification pathway from CEMILAC. Having successfully cleared the preliminary design review completing phase 1, we target completing the critical design review before December '26, moving directly into full scale engine testing to achieve final design approval certification by Feb '27. As Dheya's exclusive manufacturing partner, Unimech stands uniquely positioned to participate in India's private sector indigenous engine manufacturing. Before I hand over to Ram, I want to leave our listeners with two compelling indicators that define our transformation into a high visibility integrated manufacturing platform. We expect to exceed 590 qualified parts by end of the year by combining our established 250 plus qualified base with 340 plus parts currently in proposal. We will have more than 590 qualified parts across our customer ecosystem by close of FY27. This massive qualification footprint creates an unbeatable multi-year recurring revenue runway starting next year. Our consolidated order book stands at a strong ₹855 crore, up 715% y-o-y. This is anchored by a mix of firm POs and multi-year long-term supply agreements and award letters. This provides unprecedented top-line visibility and completely addresses historical concerns regarding short-cycle order dependency. Thank you. I will now hand over to Ram to take us through the financial numbers in detail.
Ramakrishna Kamojhala (Unimech Aerospace and Manufacturing Ltd): Thank you, Rajani. And a good morning everyone. So, echoing to what Anil and Rajani mentioned, yes, we continue to see encouraging movement across our business businesses, and our focus also remains on translating this demand into sustainable revenue growth while maintaining operational discipline. With this note, now I'll move on to the financial update and performance for Q2 FY27. Talking about revenue, revenue for the quarter stood at approximately ₹123 crore representing 14% sequential growth and sharp 98% year-on-year growth. As indicated in our last earnings interaction, this is an outcome of strong demand and robust execution. We are confident and we'll continue to see stronger revenue performance in the forthcoming quarters also. Happy to indicate for H1 level, our consolidated revenue reached ₹231 crore and 85% year-on-year growth. To put this performance in to perspective, in just 6 months we have achieved 96% of our entire full year revenue for FY26 and also a strong indication for the upcoming quarters. From a business mix perspective, aerotooling contributes approximately 67% of total H1 revenue. The remaining 33% came from precision component assembly, PCA business. Within this, Howebell contributed 30% of total H1 consolidated revenue. It means excluding Howebell, the PCA momentum just began and higher share of growth and revenue contribution is expected in coming quarters. Other income for the quarter and half year stood at approximately ₹7 crore and ₹14 crore respectively, maintaining a steady run rate. Let's talk about margins and cost structure. Consolidated gross margin for H1 remained strong at 67% with Q2 gross margin at 69%, supported by high value orders and favorable business mix. Subcontracting costs continue to hit at lower trend, 2% of our revenue. EBITDA margin for the quarter was robust at 40% with H1 margin at 38%, indicating strong business performance. This reflects operational excellence, a high margin order mix, and strong operational leverage kicking in as our revenue base expands.
Ramakrishna Kamojhala (Unimech Aerospace and Manufacturing Ltd): and employee costs and operational expenses were contained at 15% and 14% respectively as percentage of revenue, with a total of 1,332 employees on board. We believe these are a sustainable margin range going forward for this year. Talking about profitability and returns, profit after tax for Q2 stood at approximately 32 crores representing a PAT margin of 24%. This reflects a 14% sequential growth over Q1 FY '27 and a 103% year-on-year growth compared to Q2 FY '26. Supported by this strong Q2 performance, our H1 FY '27 PAT reached 60 crores, marking a 71% year-on-year growth. Like our top line performance, we have delivered nearly 94% of our full year FY '26 profit after tax within the first half of the fiscal year. On an annualized basis, both our ROCE and ROE for H1 stood at approximately 20% and 15% each. Coming to working capital and utilization capacity utilizations, working capital for the quarter stood at approximately 110 days, remaining well within our historical operating range. As we highlighted earlier, as our revenue mix shifts towards longer cycle aerospace and nuclear programs, inventory and execution lead times will increase. Accordingly, we expect working capital days to gradually move towards the 150 to 160 days range by end of FY '27. Our manufacturing facilities are currently operating at approximately 65% utilization, which includes about 15% to 20% of our available capacity is dedicated to new production introduction prove outs and customer qualification orders to secure future production volumes. Given the strong volume of customer inquiries what we are receiving, we will be initiating capacity expansion to support future demand if needed. Let's talk about capital allocation and proposed fund raise. Our capital allocation strategy remained focused on aligning capacity addition with the clear customer demand while maintaining a disciplined balance sheet. To support our future expansion plan, we are evaluating options and expect expect to consider an equity fund raise in early calendar year 2027, subject to final requirement and market conditions. This will also help the company achieving minimum public shareholding, MPS. Now I would like to talk about FY '27 growth outlook. Overall, we remain confident in our growth outlook for FY '27. Based on our current order book and delivery schedules, we expect H2 revenue to be higher than H1 with similar margins. This increase will be driven by higher deliveries to semiconductor capital goods OEM, execution of nuclear orders, and steady run rate performance across our other businesses. Our core priority remain translating our expanding pipeline into profitable, cash generative growth while building the manufacturing scale needed for the future. Thank you. I'll now hand over hand over the call back to operator for the question-answers session. Thank you.
Moderator (Anand Rathi Share and Stock Brokers Limited): Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants will wait for a moment while the question queue assembles. First question is from Mano Srinivasa Reddy from Yellow Investments. Please go ahead.
Mano Srinivasa Reddy (Yellow Investments): Yes, congratulations on the fantastic quarter sir. You have indicated a sharp step up in semiconductor revenue in H2. Roughly what share of revenue the semiconductor contribute in H1? What do you expect in H2? And where does the long-term agreement with the semiconductor equipment OEM stand?
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