Aeroflex Industries: Finding an AI Data Center Proxy the Market Missed
Identified Aeroflex as an indirect AI infrastructure beneficiary through liquid cooling demand, built a full thesis and model before the market recognised the connection
Hastin Mehta
Articled Assistant at Transaction Square
From their time as
Articled Assistant
Transaction Square • 2023 - 2026
Overview
Hastin began researching Aeroflex Industries in April 2026, when the stock was trading around 190 to 200 rupees. The dominant market narrative was that the stock was expensive at 67x earnings and that PAT growth had been inconsistent. He disagreed with that framing.
The Story
Hastin began researching Aeroflex Industries in April 2026, when the stock was trading around 190 to 200 rupees. The dominant market narrative was that the stock was expensive at 67x earnings and that PAT growth had been inconsistent. He disagreed with that framing.
His entry point was a data point from a Vortex press release: India's sovereign AI factory had deployed over 4,000 NVIDIA Blackwell GPUs. Every data center running Blackwell GPUs physically cannot use air cooling because the thermal density is too high. Liquid cooling is not optional; it is the required infrastructure. That observation sent him looking for who makes the components.
What Aeroflex Actually Does
Aeroflex manufactures stainless steel corrugated flexible hoses, exported to over 90 countries across more than 3,000 SKUs. The product set includes customized SS assembly solutions with rising margins, liquid cooling skid assemblies for AI data centers, metal bellows used in nuclear, aerospace, and semiconductor fabs, and hydraulic fittings through the Hyderabad Air Engineering acquisition completed in April 2024.
The moat was specific. Aeroflex was India's only ASME-certified SS hose and SFN skid manufacturer, with a NABL-certified testing laboratory, a dedicated plant at Chakan and Pune, and DGFT two-star export house status. In the liquid cooling segment specifically, some small Indian players existed, but none manufactured SS corrugated hose-based SFN skid assemblies. That was a completely different product with zero direct Indian competition.
The Valuation Case
The market was looking at a trailing 67x PE and calling it expensive. Hastin built the forward model. For financial year 2026, he estimated revenue of approximately 450 crore, EBITDA of 100 crore, and PAT of around 57 crore, giving an EPS of 4.3.
For financial year 2027, he projected revenue of approximately 620 crore and reported PAT of around 92 crore, with net cash of 100 crore. This would be the first year of positive free cash flow. The PAT growth assumption of approximately 62% was driven by three specific factors: the liquid cooling infrastructure adding approximately 40 crore of EBITDA from zero, the assembly mix rising from 54% to 60%, adding a further 9 crore of EBITDA, and depreciation and amortization stabilizing as the CapEx cycle closed.
For financial year 2029, he projected revenue of approximately 900 crore, EBITDA of 240 crore, reported PAT of 160 crore, ROCE of 24.3%, and net cash of approximately 300 crore, representing 8.5% of the market cap at the time of analysis. On those numbers, the stock was trading at a significant discount to its forward value.
He concluded the stock was a potential tripler to quadrupler over two to three years. The stock subsequently moved from approximately 200 to 500 rupees.