Aeroflex Industries shares climbed 18% after the company posted a record Q2 profit of ₹36.6 crore, supported by strong demand for its liquid cooling solutions. While revenue crossed ₹200 crore for the first time, investors should note that a change in the depreciation accounting method played a role in the reported profit increase.
Aeroflex Industries shares rose 18% to ₹579 on the BSE during Thursday’s trading session as investors reacted to the company’s Q2FY27 financial performance. The company reported a significant jump in profit, which grew 156.9% year-on-year to ₹36.6 crore. For the first time in its history, the company’s quarterly revenue crossed the ₹200 crore mark, helped by a 94.5% increase in EBITDA to ₹50.3 crore.
Expanding for AI and Data Centers
The strong performance is largely driven by the company’s push into the liquid cooling market, which is crucial for data centers handling artificial intelligence and high-performance computing. In the September quarter, revenue from the liquid cooling skid assembly business climbed to ₹50 crore, up from ₹32.4 crore in the previous quarter. The company sold 1,475 units in this segment, suggesting that both demand and the price realized per unit are moving in a favorable direction for the manufacturer.
Investment and Capacity Plans
To support this growth, Aeroflex has announced a ₹202 crore investment plan to increase production capacity. The company aims to expand its stainless steel hose and braiding capacity to 30 million meters per annum and increase liquid cooling skid assembly capacity to 30,000 units per annum by March 2028. These investments are part of a broader strategy to strengthen the company’s presence in the United States and European markets, where demand for flow-control solutions remains active.
Understanding the Accounting Nuance
While the headline profit numbers are high, investors should consider the impact of a recent accounting change. The company adopted a new method for calculating depreciation—a standard accounting charge that accounts for the wear and tear of machinery over time. By switching to the straight-line method, the company reduced its depreciation expense by ₹8.4 crore for the quarter. This change effectively lowered expenses on the books and helped boost the net profit figure reported for Q2. This does not change the actual cash the business generates, but it is an important detail for shareholders to understand when comparing current profits to past quarters.
Going forward, the key factor for investors to track will be whether the company can maintain its 24.3% margins as it scales up its capital spending. The success of the current expansion plan depends on whether the projected demand from the AI and data center segments remains strong enough to utilize this new capacity efficiently.