Analyst Initiates Coverage With 'Buy' Rating

Aequs' share price saw a marginal uptick, trading around ₹124.45 on Friday. This followed JM Financial Institutional Securities' initiation of coverage with a 'Buy' recommendation and a 12-month target of ₹145, suggesting a potential 15% upside. The brokerage sees Aequs as a long-term growth story, driven by its solid standing in the aerospace sector and its emerging consumer electronics frontier. The company, led by Aravind Melligeri, is a Tier I supplier to global aviation giants like Boeing, Airbus, and Safran. Its substantial aerospace order book, valued at $814 million, provides significant revenue visibility for the next three to four years. Despite this positive analyst outlook, the stock has experienced considerable volatility, declining approximately 13.44% over the past month and 18.23% over the last three months, reflecting broader market sentiment and company-specific concerns.

Aerospace Division: A Strong Foundation

Aerospace manufacturing remains Aequs' core business, accounting for an estimated 75% of its enterprise value, according to JM Financial's assessment. The company has spent over a decade cultivating its expertise, now supplying over 5,200 parts for global aviation programs. This segment benefits from strong demand drivers, including Airbus's plan to increase its sourcing from India to $2 billion by 2030, up from $1.4 billion in FY25. Aequs' end-to-end manufacturing and forging capabilities position it well to capture a larger share of this expanding market. The aerospace division in India operates at a utilization rate of approximately 71%.

Competitors in the broader Indian aerospace and defense sector, such as Hindustan Aeronautics Ltd. and Bharat Dynamics Ltd., trade at significantly higher P/E multiples.

Consumer Electronics: Growth Hopes and Challenges

The consumer segment, which includes plastic toys and kitchenware, represents a new area for Aequs, contributing an estimated 25% to its enterprise value. A recent significant order involves the machining and supply of smartwatch enclosures and laptop parts for facilities in Vietnam. However, this segment has historically struggled with profitability, and its current capacity utilization stands at a low 31%. While management expects profitability to improve as utilization increases, this remains a key challenge. The company has invested over ₹600 crore in this vertical over the past two years, with a further ₹230 crore planned, primarily for debt reduction and capital expenditure.

Despite diversification efforts, this segment has shown growing EBITDA losses and negative returns on capital, requiring significant improvement to achieve profitability. In contrast, the broader Indian IT and electronics manufacturing services (EMS) sector has seen difficulties; the Nifty IT index has experienced a year-on-year decline of 21.1% as of March 19, 2026. Peers like Dixon Technologies (P/E 34.5x) and Kaynes Technology (P/E 61.5x) operate within this dynamic but challenging ecosystem.

Key Risks for Aequs

Despite the positive analyst report, Aequs faces considerable risks. The company has reported negative Return on Equity (ROE) for three consecutive years and a net loss in FY25, with its consumer segment contributing to growing EBITDA losses. The low capacity utilization of 31% in the consumer electronics division presents a significant operational bottleneck, directly impacting its ability to achieve profitability. Aequs' valuation is currently impacted by losses, leading to a negative P/E ratio.

Furthermore, the company's reliance on a few key global OEMs in its aerospace segment, while a strength, also presents concentration risk. Although Aequs managed logistics costs during the Red Sea crisis through operational efficiencies, ongoing geopolitical instability can still impact supply chains and freight costs. The company's aggressive expansion into consumer electronics, a sector known for lower margins and intense competition, carries inherent risks that may be underestimated by current optimism.

The company has also diversified into defense with a stake in Ajna Aerospace, signaling a strategic shift but also introducing new regulatory and execution complexities.

Analyst's Outlook and Valuation

JM Financial's target price of ₹145 is based on a 22x FY30 EV/EBITDA multiple, discounted to FY28. This reflects a long-term view, expecting current capital investments to yield results. While near-term ROCE is projected to remain below 10%, the brokerage believes the risk-reward is attractive. Analyst forecasts suggest Aequs could grow earnings and revenue significantly over the next three years, with a projected EPS growth of 107.2% per annum, though profitability is not expected until FY27 or FY28. The company's strategic expansion into defense through its UAV venture could offer an additional growth area, dependent on government contract approvals. The ultimate success of Aequs’ strategy hinges on its ability to successfully scale its consumer electronics business and improve its capacity utilization to drive profitable growth, balancing this against the steady performance of its core aerospace segment.