Unimech Aerospace Navigates Tariffs with Strategic Diversification and Capacity Expansion in Q2 FY26

Unimech Aerospace and Manufacturing Limited, a key player in precision engineering, reported a resilient performance for the second quarter of fiscal year 2026, surpassing initial expectations despite significant external headwinds. The company, known for its critical parts and components in aerospace, defense, energy, and semiconductor industries, posted a consolidated revenue of INR 61.98 crore for Q2 FY26, marking a 1% year-on-year increase. For the first half of the fiscal year, revenue reached INR 124.97 crore, growing 4% compared to H1 FY25. While profitability saw some impact, the company's strategic initiatives and robust order book signal a strong long-term trajectory.

EBITDA for Q2 FY26 stood at INR 18.54 crore, with a margin of 29.9%, while Profit After Tax (PAT) was INR 15.67 crore, representing a 21.8% margin. The first half saw EBITDA at INR 38.34 crore (30.7% margin) and PAT at INR 34.80 crore (23.8% margin). The aero tooling segment continued to be a significant contributor, accounting for approximately 78% of Q2 revenues. However, the company acknowledged that the previously provided annual revenue and margin guidance for FY26 would be challenging to achieve, primarily due to the impact of additional U.S. export tariffs and a shift in customer procurement strategies.

Navigating Headwinds and Strategic Growth

The company's performance in Q2 FY26 was notably influenced by geopolitical uncertainties and tariff implications in the U.S., which led to a temporary slowdown in order pickups from American customers. This prompted a shift from a 'build-to-inventory' to a more 'build-to-order' approach by clients, affecting revenue realization. To mitigate these near-term effects, Unimech is actively establishing a free-trade warehousing zone in India, expected to commence operations in Q4 FY26, and leveraging drop shipment mechanisms for non-U.S. customers. This proactive approach aims to reduce tariff impact and improve logistical efficiency.

Despite these challenges, Unimech secured a significant $4 million order for ground support equipment under the LEAP engine program, a substantial increase from its historical order values of$0.5-$1 million. This achievement underscores the company's growing capability to handle larger, more complex projects. The outstanding order book stood at INR 104.8 crore as of the first week of November 2025, with approximately 95% pertaining to the tooling business.

Diversification and Capacity Expansion

Unimech's strategic focus on diversification continues to yield results. The precision engineering segment, which extends beyond aero tooling, is progressing well. The company onboarded a new aerospace customer and is executing nearly 100 First Article Inspection (FAI) articles for unmanned aircraft systems. In the semiconductor space, over 50 FAIs have been completed across semiconductor, medical, and defense tier-1 OEMs, with successful approvals expected to lead to long-term orders from calendar year 2026.

Capacity expansion remains a cornerstone of Unimech's strategy. The company added two more facilities, bringing its total serving capacity to 243,000 sq ft, with plans to expand to 300,000 sq ft. The precision parts and assemblies capacity expanded to 1,81,770 hours, a 24% growth since March 2025. However, overall machine utilization stood at 55%, which management attributes to the initial phases of entering new segments requiring qualification orders. They anticipate utilization to improve by 7-10 percentage points by mid-next year.

Inorganic Growth and Future Outlook

Unimech is actively pursuing inorganic growth opportunities and joint ventures. The company holds a 16% stake in Dheya Engineering, with a roadmap to acquire 30%. Dheya has achieved significant technical milestones, including self-sustained operation of its DET-500 engine and AS9100 certification, strengthening Unimech's position as an exclusive manufacturing partner. Advanced discussions are underway for joint ventures in the Middle East (oil and gas) and the U.S. (aerospace and defense).

The domestic nuclear segment presents a robust pipeline, with bids submitted for projects amounting to approximately INR 800 crore, and more RFQs expected. India's growing emphasis on nuclear energy, including 700 MW PHWR reactors and the prototype fast breeder reactor in Kalpakkam, signals substantial long-term opportunities for Unimech. The company's strategic goal is to achieve INR 1,000 crore in revenue by FY29, with aerospace tooling contributing 65% and nuclear/precision segments 35%.

Unimech Aerospace and Manufacturing Limited is clearly in a phase of strategic investment and diversification. While short-term challenges from tariffs and initial lower utilization are present, the company's proactive measures, strong order book, and expansion into high-growth segments position it for sustained long-term value creation. Management's disciplined approach to cost control and focus on operational efficiency, alongside its inorganic growth agenda, reinforces confidence in its future trajectory.