Can Its AI Data Centre Cooling Business Unlock a Bigger Earnings Opportunity?
The shares of this small cap firm, which is mainly involved in the production and supply of environment-friendly metallic flexible flow solution products, gained attention after venturing into the data center cooling industry, thus creating an opportunity to meet the rising demands for cooling solutions due to increased investments in data centers and artificial intelligence infrastructure.
With the market capitalization of Rs. 6,756 Crores, the shares of Aeroflex Industries were trading at around Rs. 510 per share which is 17 percent discount from its 52 week high of Rs. 614 per share and is trading at a P/E of 25 whereas industry P/E stands at 22.7
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Rising Demand for Liquid Cooling Solutions
Aeroflex Industries is strengthening its presence in liquid cooling solutions as the growing use of artificial intelligence (AI) increases the need for efficient data centre infrastructure. AI workloads require higher computing power, leading to greater heat generation within data centre servers. This is accelerating the shift from conventional air cooling to advanced liquid cooling systems. India has an announced data centre development pipeline of more than 9 GW over the next five years, creating potential demand for cooling systems and related infrastructure.
Liquid Cooling Skid Business Gains Traction
The liquid cooling business of Aeroflex is being pursued by way of Secondary Fluid Network (SFN) skid assemblies. These skid assemblies consist of stainless steel piping, metal hoses, and metallic expansion joints to enable coolant flow inside the data centre. The company earned revenues of ₹32.4 crore from SFN skid assemblies in Q1 FY27, while the same was ₹18.9 crore in Q4 FY26 and ₹2.3 crore in Q3 FY26. The rise in revenue shows that this business is becoming increasingly important for its operations.
Capacity Expansion to Support Additional Demand
To meet potential demand from the liquid cooling division and its existing flexible hose business, Aeroflex is increasing its manufacturing capacity. By Q1 FY27, the company had an annual manufacturing capacity of 9,000 liquid cooling skids and it intends to expand the capacity to 15,000 skids by Q3 FY27. This is an intended capacity expansion of about 67%. The stainless-steel flexible hose capacity is also being increased from 17.5 million metres to 20 million metres within the same period.
Core Flexible Hose Business Remains Important
Although liquid cooling is gaining importance as a new business opportunity for Aeroflex, stainless-steel flexible hoses, assemblies, and other value-added products have also been contributing to the company’s business. Metallic flexible flow products made by the company are used in many industries including oil and gas, chemicals, petrochemicals, pharmaceuticals, and steel. In the quarter one of FY27, there was a growth of 40.53% in revenue from stainless-steel flexible hoses, and 36.96% growth in assemblies and other value-added products.
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Global Market Opportunity and Product Development
Aeroflex has focused on opportunities outside of India due to its export business in more than 90 countries. Aeroflex pointed out the global direct-to-chip liquid cooling market and the wider liquid cooling market as areas of high potential, with growth rates of 33.2% and 35% per year from CY25 to CY32. Product development is another area where it has invested in, as there are 16 products that are being researched and developed for data center liquid cooling applications.
Conclusion:
Aeroflex Industries is well-positioned to capitalize on the growing need for AI data center cooling infrastructure as it continues to build up its primary flexible hose offering. The company’s expansion plans, liquid cooling skid sales and development efforts may help boost its performance. But the speed at which the company makes its money going forward will largely depend on the orders it receives, utilization and its execution. It is important that investors monitor the emerging liquid cooling segment’s impact on the bottom line.
