Asit C Mehta report on Aeroflex Industries
Our recommendation is based on: 1) Patents and license approval by relevant authorities for suppling its products to the relevant regions, 2) High barrier to entry, given the required level of precision in execution, 3) Capital Expansion, 4) Strong corporate governance with an occupational Healthcare Center and Mind & Body Wellness Center. Despite of red sea challenges and higher contribution of revenue from exports, better margins from its assembly business line, Phased capital expenditure and reduction of imports of raw material from China, makes us believe in the value that can be generated from Aeroflex industries. We believe that addition of metal bellows, and increased focus on revenue from assemblies will help improve EBITDA Margins from 20.06% in FY23 to 23.09% by FY26E. We expect Revenue growth of 30% in FY26E and EBITDA growth of 38% driven by higher volumes and lower costs.
Outlook
We are Initiating coverage on Aeroflex Industries with a with a “BUY” recommendation and target price of Rs.183 based on 27x FY26E P/E Multiple.
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