Aeroflex Industries Ltd (NSE: AEROFLEX) Q1 2026 Earnings Call dated Jul. 29, 2025
Corporate Participants:
Unidentified Speaker
Asad Daud — Managing Director and Chairman
Analysts:
Unidentified Participant
Raman Venkata Kerti — Analyst
Viraj Parekh — Analyst
Prem Luniya — Analyst
Aastha Jain — Analyst
Jyoti Singh — Analyst
Soumya Shidhore — Analyst
Maitri Shah — Analyst
Dhaval Shah — Analyst
Rahul Kumar — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Aeroflix Industries Limited Q1FY26 earnings conference call. This conference call may contain forward looking statements about the company which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involves risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing STAR and then zero on your Touchton phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Asif Duat, managing Director of Aeroflex Industries. Thank you. And over to you sir.
Asad Daud — Managing Director and Chairman
Thank you so much. I hope I’m audible to everyone.
operator
Yes Sir.
Asad Daud — Managing Director and Chairman
Good morning to Good morning everyone. I welcome you all to Aeroflex Industries Limited Q1 FY26 earnings call. Joining me today are members of our senior management team and representatives from Strategic Growth Advisors LGA who is our Investor relations partner. I hope that you have had a chance to review our Q1 results and the investor presentation which is available on the stock Exchange and also on our company website. This quarter has been a challenging one as you have seen from the results. And it has been the first time in a very long time where our performance has deviated from a consistent record.
The decline in revenue was primarily because of external macroeconomic environment, especially the issues regarding tariffs and consequent disruption in the buyer segment across several key geographies. In the export market. The celebratory uncertainty led to a temporary dip in the procurement from our customers which also resulted in delayed orders and also cautious offtake. But we believe that this dip is only transitory and we have started to see signs of stabilization and sentiment coming back to some sort of normalcy. And we have also started to see the order flows starting to move from Q2 in Q2. I’m sorry.
We remain confident that the impact which has been seen in this quarter will be offset over the remainder of the year and we strongly believe that the long term demand for our products continues to remain strong and our strategic map is also firmly intact. Some of the key highlights of the quarter so one of the most significant developments that happened is include the next gen cooling technology for the data center infrastructure. We are proud to announce that we have signed a long term agreement with listed U.S. corporate with a listed U.S. corporation, the market capitalization of which Has a market capitalization of US$50 billion.
This agreement is for the supply of liquid cooling solutions for the data center. I think this is a great sector for the company to enter into considering the multi decade growth opportunities that this high potential sector provides to the company not only in India but across the world. Our state of the art Bellows plant and our engineering and our R D team. The key factors that help us to get this opportunity. I’m also happy to share that we have received the first order these 7.8 crores for providing these cooling solutions to the data centers. This order development of advanced flow control components which will be used for the cooling systems.
Now talking about our performance. For the first quarter our total income stood at 84.67 crores. It is a decline of 6% on a YMY basis. Our EBITDA stood at 15.8 crores which translates to an EBITDA margin of about 18.68 percentage. Our profit after tax stood at 7.7% which is a flat margin of around 8.6 8.46% which is mainly due to higher depreciation. From a margin perspective, our hoses and assemblies segment continue to deliver strong margins in the range of 22 to 23% which is in line with the trends over the past few years. However, the overall margin for the company on a consolidated basis saw a reduction primarily due to a couple of factors.
One is the ongoing expansion of operations at engineering which is currently in the scaling phase and also the the metal Bellows plant which has not yet reached the optimum capacity utilization. So these are the two projects that we have in which we have. It’s for the long term and where we feel that over the next few quarters we’ll be able to see these two segments contributing both in terms of revenue and also in terms of margin. So these are the strategic investments capex that the company has made and as their capacity utilization increases, we expect operational efficiency to improve and also the margins to normalize over the next few quarters.
The segment of our assembly continues to contribute more than 50% of our total sales which is in line with our full year targets. Despite this temporary blip, we expect to continue with our planned capacity expansion as we see that this is just a temporary black curve which will be normalized in this quarter and the growth to resume after that. To sum up, I think, you know, I think year one has been softer than what we had expected. But it. But we have firmly. We firmly have the belief for our long term outlook and we remain focused on execution on scaling up and we believe the business is well positioned to bounce back in the next few quarters with renewed momentum.
Looking ahead in terms of this financial year, outlook continues to remain positive. Our capacity expansions are progressing well and are in line with our long term objective and growth. As expected, these ongoing investments led to a slight dip in our margins, but as the new capacity scale up and fixed cost get absorbed, we expect the margins to gradually increase over the next few quarters. Our foray into the cooling solutions phase provides a strategic opportunity and it opens new doors to high growth actors such as the data centers and advanced thermal management technology. This will enable us to move from traditional business to enter into this new age next generation innovation led industry.
We are focused on deepening our capabilities and also strengthening our product portfolio and we are building a more globally diverse presence across the world. Looking ahead, we are confident in the overall growth trajectory of the company and we are putting in all our efforts to fulfill our targets for this financial year. I would like to thank all of you for the continued support and trust that had in their company. Last quarter was just a blip and we hope normalcy will resume from this quarter onwards. With this I conclude my remarks and now I would like to open the floor for Q and A.
Questions and Answers:
operator
Thank you very much. We will 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’ll wait for a moment while the question queue assembles. The first question is from the line of Raman KV from Sequent Investments. Please go ahead.
Raman Venkata Kerti
Hello sir, can you hear me?
Asad Daud
Yes
Raman Venkata Kerti
sir. I just want to understand that in Q4 also there was a revenue regrowth due to shipment delays and you mentioned that those will be spillover in terms of in Q1 with respect to most of the delayed shipments were sent in April and again in Q1 there was a delay. So basically I just wanted to understand one was that there was a spillover of previous quarter also and despite that there was a revenue decline. So I just wanted to understand going forward, will there be revenue decline for next two quarters as well?
Asad Daud
All right, so in terms of, you know, for Q1 the majority reason for the dip in sales is because of the new orders or new decline in the demand from the international market. The exports we grew in the last quarter. However, the domestic market grew by more than 30% in Q1, so the decline in sales in Q1 is mostly due to the temperate dip in demand. So I hope I and for the next few quarters. So like I mentioned, we’ve already started to see things coming back to normalcy. You know, obviously will not be able to give specific numbers, but we have seen that we have started to already see the order flow from our export become much better in the month of June and July and hopefully in the next few quarter.
In the next few months as well. I believe that the last quarter was just a temporary blip, you know, in the growth of our company.
Raman Venkata Kerti
Okay, so answer with respect to the data center order of 7.8 crore which you received, what is the execution timeline?
Asad Daud
So it will be executed mostly in H2 as in dispatch.
Raman Venkata Kerti
And so what is the market opportunity of your product? Like I want to understand you are supplying liquid cooling solutions with respect to data centers. What is the total addressable market domestically as well as internationally?
Asad Daud
So in terms of data cooling. The. Estimated market size as the market estimate is somewhere around $4.4 billion. Right. But that’s for the entire cooling solutions for data centers and we obviously perform a subset of that. So specific the products that we are giving, you know, it will be hard to give a market size of that particular product. But if you see the overall data center cooling market, that’s around 4.4 billion and that growing at a CAGR of 20% worldwide right now. So it is expected to become almost five times in the next seven years. So that’s the market height in terms of obviously this is our first order that we have received.
Also have multiple discussions lined up subsequently as well. So we are hoping that this particular division will have a substantial contribution to the overall business of our company over the next couple of years.
Raman Venkata Kerti
Sir, my final question is with respect to your guidance, you earlier in Q4 guided about 20 to 25% batch growth in FY26 as well as midder margin improvement. And you said metal bellows and hide it would contribute 30 crores each. Are we sticking to the guidance or now that there has been a degrowth in terms of market demand, it will be revised.
Asad Daud
Yeah. So in terms of our guidance, right. Yes, we had given a guidance of the ebitda growth of 25%. And I think as company we believe that once we have a certain target, the entire team puts in this 150% in order to achieve those targets. However, obviously there are some, some situations which is beyond the control of the members or the company. Right. You know, but our internal target is obviously to. To achieve our annual targets but since obviously the first quarter has not been as far as planning but we estimate that our growth would continue to be in the range of more than 20%.
Raman Venkata Kerti
20. Bad growth or revenue growth?
Asad Daud
No, no EBITDA growth. Reason being a PAD group will be slightly lower because they have higher depreciation. So a lot of our investments in our capex. So if you see the, the. The given results you’ll see the the depreciation has, has increased. So hence that is why we have given the growth for the growth guidance for EBITDA.
Raman Venkata Kerti
I’m sure this metal bellow and ITL they start contributing like 30 crores each in this year.
Asad Daud
Yes. So we expect metal bellows and Hyder to start. So Hyder has already started to you know, contribute to the sales of Enrocnet. Obviously the scale is yet to reach but we expect this year that both of them will have contribution. I think combined both of them should contribute at least 15% to the 10 to 15% to the overall sales on a yearly basis.
Raman Venkata Kerti
Thank you sir.
Asad Daud
Thank you.
operator
Thank you. The next question is from the line of. From Carnelian Asset Management. Please go ahead.
Viraj Parekh
Good morning sir. Thanks for the opportunity. Just a follow up question on the first participant. The last quarter you said there will be some spillover of orders to the next quarter in May and June. So given that Q1 has also been weak, should we assume that if the spillover was not there the numbers should have been lower than what we delivered this quarter.
Asad Daud
So the last quarter there was the spillover of the dispatches, the, the orders. In terms of the dispatches it, you know, it moved to this quarter. So yes, so this quarter obviously the fund was lower specialty specifically in the month of, in the early parts of the quarter. But like I said, July has been a good month where we have seen the things coming back to normalcy and also with this new project that we have and that we have received, I think we have, we have a lot of positives, positive, positive things happening in this month already and start of this quarter already.
So I think, and I think you know, we expect the Q2 to be normalized and then, and then Q3 to see back the company into the growth, the trajectory.
Viraj Parekh
In terms of percentage terms, how much would be the spillover from Q4 to Q1?
Asad Daud
I would not have the exact percentage right now but I can get back to you.
Viraj Parekh
Yeah, it’s the second question sir. We are seeing that things will get normalized in Q2 and the rest of the year, if I’m correct, this year out of Europe has been significantly down for US as a region and us for as you highlighted in the last quarter due to tariff uncertainty. But Europe particularly catches my eye because I think we are at a 14 crore quarterly run rate for Europe which is the lowest in the last five quarters. If I’m to assume that we get back to Europe in a similar run rate as last year, there would be, it would require of 40 to 45% growth from the current quarterly run rate.
So can you help me understand if this possible or not?
Asad Daud
Yeah. So we had a decline in Europe also and also in the US as well in terms of, in terms of the sales. Obviously Europe was also significantly impacted because some of our larger customers, who, you know, who we sell to, they ultimately use our products in their machineries and they also have a lot of exports to the US So hence their demand also saw a slowdown wherein in it it actually affected us. So you saw Europe got doubly one obviously from the demand itself in Europe. And second, because so far customers of Europe, they supply their end products across the US as well and they also got impacted.
So that is why US continues even after this drop, US continues to be our biggest market. Right. And our focus has been to grow the US market and to increase our presence in US because the European market has been topsy turvy over the last few years and we will continue to focus on building our presence in the market. Also like I mentioned that we have seen up in demand in this month in July from some of our European customers where they believe that the things are starting to get back to normalcy. Also recently the deal with the EU and the us Right.
So I think that’s also going to help the demand come back in Europe as well.
Viraj Parekh
Got it. Thanks. I’ll get back in here.
Asad Daud
Thank you.
operator
Thank you. The next question is from the line of Prem Lunia from Astute Investment Management. Please go ahead.
Prem Luniya
Hello, thank you for taking my question. So actually going back to the first question of the cooling market which we have cracked in, I wanted to understand the customer in which we have cracked in. Was this a replacement of an company who was already providing and now we have started providing or was it a completely new product? And if it is completely new product, if it was a replacement, can you just tell me what was the complete procurement by that company so that I can understand what is the market which we are catering to and what can we do?
Asad Daud
Completely this is a completely new product and a new project.
So this product is obviously being, being, you know, being utilized in the US and in, in Europe, but this is the first time in India where this company is, is, you know, utilizing the product manufactured in India for the data center. So, so this is a basically a completely new demand. It’s not replacing, you know, any, any existing competition or any existing customer in terms of the, so this project is, you know, with regards to the new technology which is the liquid cooling. So so just to explain to everybody, the the old data centers were generally cooled, you know, through air cooling which was, you know, when the computing power requirement was, was not very high.
But now since the last two to three years, with the use of, the increased use of AI, with the increased use of high, high high power and high speed computing, air cooling is not sufficient to cool the data centers. The there is a new technology of liquid co using a chemical and through the cooling and through the process of thermal cooling you that is actually the data centers or the disks of the centers are cooled through this particular chemical which flows through a piping system. So hence this is kind of a new like a new technology which was, which is I think I would say probably less than a couple of years old.
And hence this is a completely new area that we have, that we entered into and we want to supply. And obviously with the increase in adoption of AI across the world and also in a lot of sectors, but also in the non tech sectors, obviously there will be a huge demand for data centers and the data center, especially with high speed processing and high power processing, they will require the liquid cooling. So hence the demand for this particular cooling system is only going to see exponential growth over the next few years.
Prem Luniya
Right sir, just can you quantify that? Where do we see this business going to let’s say 10, 15%, 12 years down the line? And also will it have the same type of replacement cycle as the other. Industries where we cater to. And just one more question was on. Can you just please quantify how much was the market share of Aeroflex and Indian exports of our particular products?
Asad Daud
Okay, so in terms of the replacement cycle for this, it will be difficult for me to give a number because this is the first time that we are developing this product and mostly it depends on the, the amount of the, the quantum of the cooling that is being utilized. Obviously there will be requirement for, for replacement parts or spare parts. And all the contact that we have signed with the company was supply of scale and supply of the parts in case of any replacement as well in terms of market share of aeroflex exports.
So I don’t have the exact number in terms of market share, But I would say the aeroplane is the largest exporter of. Of hoses and assemblies from India. So we are by far, you know, the biggest player in terms of export. Also we are the largest in terms of the domestic market as well. So we are the leaders both in the domestic market as well as in the export market. Difficult to give exact market share number, but we are number one by far.
Prem Luniya
Thank you so much.
operator
Thank you. The next question is from the line of Arthur from pkd. Please go ahead.
Aastha Jain
Hi, good morning sir. Thank you for giving me this opportunity. So can I know what will be the revenue contribution from each of the segments going forward? And what was the contribution from each of the segments? I understand that you have given the split between assemblies and the other segment, but did we, did we get any revenue from metal bellows?
Asad Daud
Yes. So we had about approximately one point of business in the metal bellows. So we expect that over the next, you know, over the next couple of years, at least 10 to 20% of our revenue should come from these businesses. And plus is the new liquid cooling solutions. Right? That will be, that will be executed using our bellows facility and our machinery. So that will also see a significant, significant uptake. In terms of the percentage of contribution from, from this particular division,
Aastha Jain
20% will be by which year.
Asad Daud
This is, I’m talking about this year should. So in this year with all the new projects of bellows of this of liquid cooling and of high debt, 10 to 20% of the business can expect in this year from these particular divisions to give an exact percentage, so ballpark figure of 10 to 20%.
Aastha Jain
So what would be the margins in metal bellows?
Asad Daud
In metal bellows, the EBITDA margins is around 28 to 30% at an optimum capacity unit utilization. Obviously right now the utilization is not at that capacity. Hence you’re not seeing that those margins in the numbers. But once the bellows land reaches a certain capacity utilization, you’ll see the margins of 28 to 30% because the gross margins in the metal bellows range anywhere from 50% to 60%.
Aastha Jain
Okay, so what is the, what is the order book? As of now, do, do we have the certain order book in each of these segments?
Asad Daud
So if in terms of metal bellows and for obviously in terms of the liquid cooling, We’ve already mentioned the order that we have received in terms of hide air and bellows, obviously the scale at which they are right now, the order book is small, but we’re seeing that we’ve started to. So we’ve also got certification from the American Society of of Engineers which is one of the requirements for metal bellows. We have already received that certification and we have also, we’ve also, we have also applied for a couple of more certifications for metal bellows which we are expected to receive by September or October of this year.
Aastha Jain
So but my question is that, do we have any order book in hand? I know that we have approximately 8 crores in metal bellows, but apart from that for SMBs or other segments as well.
Asad Daud
Yeah, so, so, so, so those order book are. So, so we have, so we divide our order. So in terms of the overall business of Enerflex, we, we have two sets of customers. One is those customers who give us a tentative quantity on a yearly basis and then, and then they place periodic posed on their, you know, based on the quarterly requirements. And then we have certain projects that we work with the customers. These are long term projects wherein we start working with them on prototypes, then testing. Obviously first comes the design, then prototype, then testing and then it goes into production.
And then we have the set of distributors or assemblers who buy the regular, the regular product from us. And they mostly buy on, on two containers, one container basis. So those are ongoing orders which happen on a, you know, which happened on a, you know, quarterly or a monthly basis. So we specifically don’t have like a specific number for an order book of you know, a certain value or a certain amount.
Aastha Jain
Got it, got it. So my last question would be that who else we are competing with when it comes to data center liquid cooling product? And if you are competing with the player like in India as well as in the foreign market and in the foreign market, how much would be the price difference in percentage terms?
Asad Daud
Okay, so right now the project that we have got, it’s for supplying to the India market. So the US company has, has received the contract for the data center cooling for the India market. And we need to supply our products in the India market. So specifically in terms of price comparison will be difficult to tell you because once we in the international market only then we’ll be able to share with you the exact price comparable the international market. Our competitors are already supplying these kind of systems to the data centers. The likes of Senior and the likes of Parker, both of them are supplying the cooling systems to the data center.
So they are our competitors in this segment as well.
Aastha Jain
Okay, thank you sir.
operator
Thank you. Ladies and gentlemen. Anyone who wishes to Ask a question and one on their touchstone telephone. The next question is from the line of Jeevan. From Jeevan, please go ahead.
Asad Daud
Yes, I can hear you.
Unidentified Participant
Yes, so this quarter one is due. To the tariff issue. It is fluffiness or normally also quarter one is weak as compared to reported.
Asad Daud
So Generally you know, Q1 is obviously one of the the quarters which are you know, which is generally I would say sometimes it’s it’s weak because of certain you know, but it will be difficult to you know to you know to confirm that. The reason being because our, our business depends on a lot also on the project. Right. So some of the projects can start in Q1 so you know, and we can see higher demand in Q1. So difficult to just say that whether you know, Q1 is always weak. Sometimes it’s weak, sometimes it’s strong.
And one of the major reasons for the dependent savings like I mentioned is the temporary dip in demand from the customers. It was to a great extent it was related to tariffs. Reason being might not have informed in the earnings call but the tariffs on our products increased by almost three times. So it was earlier three approximately about 3.5% and it increased to 10%. So that was also a significant cost addition to our customers as well. Right. Where they had to bear an additional beauty of 6.5% on the product. Hence we saw a temporary dip in the demand from the customers especially those who are distributors or who are assemblers who who wanted to reduce the inventory, who wanted to understand the market because a lot of the the panic initially was that due to this high tariff, significant decrease in the demand.
Hence none of the customers wanted to you know, to, to carry a large investment with them. So these were a few reasons where you know, we saw that because of that the tariff issue there was a dip in the demand which ultimately led to the dip in the order flow and then ultimately the departure.
Unidentified Participant
Follow up. To the that previous caller you said that certain competitor in the cooling cooling solution is there and is there any competitor in India also as we are the only supplier in India for the cooling solution to their data centers.
Asad Daud
So from the whatever information that we have that you know we are the the first ones to to enter into the space in India in terms of manufacturing of this product. That’s why this, the company that we have tied up with have chosen us, you know, as, as their supplier for the, for the data cooling solution. So this is a completely new business for India as well.
Unidentified Participant
Thank you sir.
Asad Daud
Thank you so much.
operator
Thank you. The Next question is from the line of Jyoti Singh from adihant Capital Markets Ltd. Please go ahead.
Jyoti Singh
Yeah thank you for the opportunity. So just few clarification like you earlier mentioned on the focus expansion on the focus. So like we are focusing on the Europe more or on a US because Europe we already have good presence and another on the data computing liquid cooling side any RFQs on the order book site in any certain geography we can discuss. And lastly on the competitor name side like you mentioned few but it was not very clear. So we can discuss on the data center cooling liquid site competition while are there and going forward still we are seeing demand impact because of the tariff.
If anything we can discuss on that side. Thank you.
Asad Daud
Yeah okay, thanks. So your first question was Europe versus usa. So USA remains our biggest market and the focus of the company remains the US. Europe over the past three to four years has seen a lot of, a lot of ups and downs. I think more downs than ups. The US was impacted right now because of the tariffs that I already mentioned. But US will continue to remain a dominant market and we will continue our efforts to focus on the US market in the near future as well. In terms of you know the RFQs of the orders, we have already received the order for 7.8 crores for providing the liquid for providing the components for data coding for data centers.
In terms of competition for this particular segment I mentioned Parker Hennesson which is listed company in the US and senior I think they are based in UK and they are also listed. So these two are our competitors in this segment as well. And your last question was on tariffs as already mentioned about tariffs that the one of the major reasons for the decrease in demand in the first quarter was largely driven by the issue of tariffs.
Jyoti Singh
Okay, thank you sir.
Asad Daud
Thank you.
operator
Thank you. The next question is from the line of Soumya F from Insightful Investments. Please go ahead.
Soumya Shidhore
Thank you for the opportunity. I just had a confirmation. I couldn’t hear you when you gave the exact revenue for metal bellows for the quarter. Did you say 4.8 crores or 1 point?
Asad Daud
1 point. 1.3 crores?
Soumya Shidhore
1.3. Okay, got it. That was all. Thank you.
Asad Daud
Also just to update to everyone, I think in terms of also obviously we’ve not yet had any questions on that particular on that particular point but I just wanted to update to all the members on the call in terms of our qit. So a lot of the people had had spoken to me previously about the plans for the qit. So I just Wanted to update to everyone that the whole, the whole idea for the company for the QIP works primarily for inorganic acquisitions and probably to everyone that we will, we will only proceed for the UIP once we have finalized the terms of the acquisition.
So. And any acquisition that we do will be value accretive for the shareholders. So the QIP will only be done once the acquisition opportunity. Hence I just wanted to update this to all the members.
operator
Thank you. The next question is from the line of Maitrisha from Sapphire Capital. Please go ahead.
Maitri Shah
Yeah, hello, am I audible?
Asad Daud
Yes,
Maitri Shah
Yeah, I just had two questions. The first one was we supplying cooling system parts? So could you explain what percentage of parts are not the entire cooling system do we cater to?
Asad Daud
Sorry, what part?
Maitri Shah
So the parts that we are supplying, what is the percentage of that in the entire cooling system?
Asad Daud
Okay, difficult to, you know, to give a number for that because the entire system, the project is taken by the company who was, you know, who has ultimately given up this contract, you know. You know, so the cooling or the cooling solution is just one part of the entire project, the cooling project that they have taken. So it will be difficult for me to, to give you a number.
Maitri Shah
Maybe 10 of our parts are used in the entire cooling system. Is that
Asad Daud
I will be very frank. Will be hard for me to say because I, you know, any number I say will be just a very, very wild estimate. So I think, I think we’ll be just to wait for at least a couple of quarter zone we started to, to deliver the cooling solutions and once we, you know, get better, you know, understanding in terms of the, in terms of the final usage, only then we’ll be able to, to give you an estimate. So right now it’ll be slightly, you know, pretty much I would say to, to give any number on the percentage.
Maitri Shah
Okay, okay, that makes sense. And previously we said that we are guiding for a 20% growth in our EBITDA. Is that correct? Hello?
Asad Daud
Yeah, sorry.
Maitri Shah
Yeah, Are we guiding for the 20% growth in our EBITDA, is that correct?
Asad Daud
Yes, considering the Q1 results.
Maitri Shah
So it has a 20% growth in our EBITda with a 19% margin. So are we expecting our revenues to be around the 500 crore mark for this year?
Asad Daud
So our margins, our margins will be definitely much, much more as compared to what we had in the first quarter. Right. I generally our margins, our EBITDA margins should range anywhere between 21 to 22% on an annual basis.
Maitri Shah
This is under control level.
Asad Daud
Yeah, totally at a console level.
Maitri Shah
Yeah. Because in the presentation it was mentioned that we are guiding for a 19 margin, EBITDA margin and console level. So are we, are we increasing the guidance to 21%?
Asad Daud
Oh, I think in the, in the presentation about 19 is the margin which is in Q1, not on projection. So just double check.
Maitri Shah
Yeah, it was okay. Okay, so we are guiding for the 21 margin.
Asad Daud
Yeah, 21 to 22% margin. That’s what so like I, I think in a couple of quarters back maybe, I think last year, our aim is that you know, in some quarter budget could go up. In some quarters, you know, margins could go down. Our aim is that like we had mentioned approximately around a year or so back that over the next four to five years we expect our EBITDA margins to increase anywhere from that time it was around 20. So from 20% to 25% over the next four to five years. That’s what we planned. Right.
So yes, it could happen in one quarter, margins could be 19%. In one quarter margins could go know, go up to 23%. But what we focus on, we focus on our long term targets. Our long term target is for the next four to five years to, to reach an EBITDA margin of 25%.
Maitri Shah
Okay. Okay, that is it for my side. Thank you.
Asad Daud
Yeah, thank you.
operator
Thank you. The next question is from the line of Dhavalshah from Ford Capital. Please go ahead.
Dhaval Shah
Hi, thanks for the opportunity. So one quick question. You just mentioned that the tariff has. Increased from 3% or to 10%. Now we recently had a statement from. Trump saying that the global baseline tariff will be 15 to 20%. So one, so in best case scenario. If it is 15% and worst case. 20%, what’s your take on that and. What would be the impact on our business?
Asad Daud
So it will be difficult to predict, Mr. Trump, what happens. But obviously any increase in tariffs just have, tends to have a short term impact on the business. Like I mentioned, like the increase in the targets in Q1 impact in Q1, but we have already seen that from July it’s coming back to normalcy. So any increase, substantial increase in tariffs tends to have an impact only for a couple of months. So you know, in case for example, if the tariffs, you know, further increase, which I hope not, but you know, you know, you’ll see an impact for a couple of months but then over a period of time it tends to smoothen out.
Also if you see that our growth in our domestic business is, you know, has been significant in this quarter. So we are also, we are also aware of the of the situation in the international market. And hence we are trying to the extent the possible to de risk ourselves from, from any external shocks in the international market. Also if you see this, this, this order of, of almost 8 crores from the cooling systems, right. That will also be a domestic order. So this will also help some increasing our sales of the sales of the domestic business.
So we are seeing increased right now the contribution of domestic business to our sales is 28% whereas I think almost a year or so back was around 16%. So you’re seeing that the domestic business is seeing considerable. I think over the next couple of quarters this might also increase.
Dhaval Shah
Right. So your export margins would be certainly higher than the domestic margin. So your EBITDA growth guidance takes into consideration increase contribution from domestic revenue and. Probably decrease from the export revenue.
Asad Daud
So in terms of margins, yes export exports have definitely better margins. But domestic has better, better inventory, better working capital cycle. So, so profit per unit of time is better in domestic as compared to the, to the international market. But the overall margins in terms of the value might be better than export but in terms of unit of time it’s better in the, in the domestic market.
Dhaval Shah
Okay. And so this new business which is data.
Asad Daud
I can’t hear you. Hello? You’re not audible. Hello?
Dhaval Shah
Hello?
Asad Daud
Yeah,
Dhaval Shah
the question is that the new. Business which is data center pulling solution, the margin for those business are going to be higher or lower than the current margins average margins for the business.
Asad Daud
Actually we have signed a confidential agreement with the, you know, with the customer. So hence I will not be able to share the margins for this particular business right now because like this is specific to a customer. So it’ll be difficult for me to, to share anything right now because it will be in the public domain.
Dhaval Shah
Okay. All right.
operator
Thank you. The next question is from the line of Rahul from TCG amc. Please go ahead.
Unidentified Participant
Yeah, hi. So basically had two questions. One was that what would be the peak metal barrel revenue and higher revenue like your phase one metal bill below capex has already been done. So can you guide us that you know what is the peak revenue potential and by which you’re like FY27 or end of FY26. You’ll be able to reach that. That’s my first question.
Asad Daud
So the peak revenue for the Bellows project would be somewhere close to 80 to 90 crores. And the peak revenue right now considering the current investments that we have made in High day would be somewhere close to 32 to 35 crores. We are also expanding so we Are also over the. For the second half of the year we will set up more machines in Hyde. But currently the peak revenue for High Day will be somewhere close to 30 to 35 crores on an annual basis.
Unidentified Participant
Okay, so how much would the high revenue would go into your internal consumption of your assemblies?
Asad Daud
So say on a ballpark figure, approximately 25 to 30% of the sales of ideas would be internally utilized.
Unidentified Participant
Okay. My second question, sir, is that basically we saw very good growth in the domestic market and your aspiration is to grow by, you know, 25% on a annual basis for, you know, the next coming years on the basis of ebitda. So I wanted to understand that. Is the domestic market that big to absorb this kind of growth going forward if we see any tariff issues prolonged for the incremental future? So will you be able to channelize and get the growth by supplying it to the domestic players or is it a bit of a challenge in terms of domestic growth?
Asad Daud
So, you know, domestic market, right? Domestic market, you know, will not be able to replace, you know, completely the export market, right? Because export being a larger chunk of our business, you know, still will continue to be one of the main, the focus area of the company. The domestic market will have the growth opportunities. One is obviously in the, in the existing sectors where we are already present in terms of new projects, new new expansions brought on by, by, you know, in the manufacturing space. Second also this new technology of the cooling systems, right? The market in India has just started, right? So that is an opportunity.
So the domestic business will, will be, the growth will be driven by one, the existing industries that we have already been into. Plus also these, these new businesses or the new technologies or the new sectors that we are entering into. The growth in the export cannot be completely compensated by domestic, you know, that will not be, you know, possible. The growth in the export will happen. One from obviously higher demand coming in from our existing customers and also new projects and new OEMs that we have have that we have started to get on board. Those will contribute to the sales in the export market.
Unidentified Participant
Okay, so the domestic demand is being catered by other domestic players. Is it that or are we importing?
Asad Daud
We are manufacturing. And the domestic demand is catered obviously by Aeroflex also and also by the players who are in the domestic market. So it’s a mixture of both. So aerofx is also supplying in the domestic market and our competitors are also supplying in the domestic market.
Unidentified Participant
So any market share data, if you can share with us for the domestic market that you hold.
Asad Daud
Specifically for the domestic market. I don’t have a market share data we have for the overall worldwide marketing which is part of our presentation specifically for, for India marketing.
Unidentified Participant
Okay, okay, thanks a lot for your answers.
Asad Daud
Thank you. Thank you.
operator
Thank you. The next question is from the line of Rahul Kumar from Wake area. Please go ahead.
Rahul Kumar
Hi, just one question actually. For the exports which you did to us, did you have to bear the extra tariff of 10%?
Asad Daud
So in most cases our shipments, you know, are FOB or CIS. In most cases our customers only abort the cost of the tariff. There were like a few, one or two cases where we had to, that was just, you know, you know, it was a very small quantity and a small order. So. But in most cases that the customers only bought the cost.
Rahul Kumar
Okay, and what are the discussions ongoing with respect to the, let’s say the contracts going forward in terms of the tariffs and you know, and the pricing?
Asad Daud
So the whole, you know, when we spoke to our customers starting, you know, in the middle of April, right. They, they had an internal, a lot of them at the rate to reduce their, you know, procurement temporarily as they were not sure about the, the demand for their product in the market because everybody felt with the direct coming in there’ll be a significant drop in demand, you know, in the US in terms of the end of the products. So hence the entire procurement cycle got delayed. But what they’ve seen is that the expected reduction in demand was not as significant as the people had.
And hence starting to see that the people have started to see the orders flowing back to normalcy.
Rahul Kumar
Yeah, no, I just wanted to understand your contracts with your customers in light of these tariffs now.
Asad Daud
Yeah, so what happens is with a couple of our large customers, we have annual contract, so they get tentative quantity for the year and then the quantity, you know, on a quarterly basis based on their market demand, they release the PoS. So like I mentioned, you know, the PoS for the first quarter when they were lesser than, you know, you know, what they would generally secure. So and like I mentioned, but that was because of the expectation in the market that their demand is going to significantly go down. Hence the few of the contracts that we had, the customer wanted to buy a lesser quantity than the contract.
And then like I mentioned then we have a lot of customers who are distributors and assemblers and they generally work on orders on a product on a multi container basis, say for example, two containers or three containers and they place the order only, you know, when they have, you know, or only when you Know they see a sharp decline. They tend to delay their purchase so that they don’t have to bear the grunt of our entry.
Rahul Kumar
And what’s your share of business in exports from you know, these assemblers and distributors and OEMs?
Asad Daud
Okay, it’s mostly so we have three segments, we have OEMs, we have channel partners or distributors, and then we have, you know, we have assemblers. Our split is mostly equal that we have 30% of our business coming in from OEMs, around 5% of the business from the distributors and that from the assemblers.
Rahul Kumar
Okay, and, and is that a similar mix for the domestic business also?
Asad Daud
No. So in the domestic business about only. So in the domestic business, only about 20 to 25% of the business comes in from distributors and offenders. The reason being in the domestic market we are supplying directly to the end customer. So your likes of your steel plants, oil and gas plants, ports and terminals, we are a direct vendor to them. So we supply directly. We have ARCs and annual rate contracts and AMC. So in India the split is 70 by 25.
Rahul Kumar
Okay. And just for exports also then are you, do you have to reprice your products in view of tariffs?
Asad Daud
So like I mentioned earlier, the increase in the cost of tariffs was mostly borne by the customers. So generally repricing for us is not so relevant, you know, on a case by case basis where we feel that the, the customer might be really adamant on, on a certain discount in lie of tariffs. We do it on a case by case basis depending on customer, his, you know, his business potential, his business tenure with the company. So it actually depends on, on the customer. But it’s been generally true and public right now.
Rahul Kumar
Okay. And let’s say if you, when you’re skating to us and where are your competitors based out of algae based out of us or.
Asad Daud
No. So our competitors are based out of us, our competitors are based in Europe, competitors are based in. So so when we supply to Europe, the competitors are mostly European companies, then it is the, the companies who are manufacturing in Turkey then. And when we are supplying to the US it is, you know, we are competing with obviously the American manufacturers. Plus also manufacturers in Turkey and Europe are ultimately, you know, supplying to the US So and then obviously when we are supplying in, in India, our competitors are the ones who, who are manufacturing in India.
Rahul Kumar
Okay. Okay. So then for the supplies to us, are you not at a relative disadvantage with respect to pricing?
Asad Daud
Repeat it please.
Rahul Kumar
I think given the tariffs now, are you not taking relative disadvantage versus your US manufacturing competitor?
Asad Daud
Not yet. I think you know, tariffs of 10% doesn’t, because the difference between our cost landed and the US cost is still, you know, much more than 10%. So even if a 10% duties, you know, which is there right now, we are not at a disadvantage as compared to European or. Sorry, as compared to the American manufacturers. Obviously, if it goes up to 25:30, that’s a different case. But right now, you know, that’s not an issue.
Rahul Kumar
Okay. Yeah. Thank you.
operator
Thank you. Due to time constraints, this will be the last question. I would now like to hand the conference over to the management for closing comments.
Asad Daud
Thank you so much, everyone for your questions. If in case I have not been able to answer any questions of anybody, you can reach out to sga, who is our investor relations advisor, and we can now clarify you on the same. Thank you so much for your time, for listening to us and for sharing your queries. Hope to see you for the next earnings call. Thanks a lot.
operator
On behalf of Aeroflex Industries Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your line.
Asad Daud
Thank you, everyone.