Motilal Oswal initiates Unimech coverage on 83% EBITDA view
Indian aerospace tooling firm Unimech is projected to deliver an 83% EBITDA CAGR through FY28, driven by shifting global MRO demand to Asia, though analysts warn of heavy client concentration.
Motilal Oswal has initiated coverage on Unimech, an Indian aerospace tooling manufacturer whose shares have risen 40% in 2026. The brokerage forecasts an 83% EBITDA CAGR, a 74% revenue CAGR and a 57% PAT CAGR over the FY26-28 period.
The company manufactures specialized tools for LEAP, Pratt & Whitney and Rolls Royce aero engines, alongside airframe tools for Airbus and Boeing. This core aerospace segment accounted for 80% of Unimech's total revenue in FY26 and currently serves 18 customers. Motilal Oswal expects this unit to remain the primary revenue driver in the medium term.
The positive outlook relies on Unimech's competitive pricing combined with structural industry shifts. The brokerage highlighted the shift in global maintenance, repair and overhaul (MRO) demand toward Asia as a major catalyst for the company's growth.
Unimech also operates a precision engineering division focused on high-mix, low-volume work. This segment contributed the remaining 20% of FY26 revenue across 17 customers. While currently the smaller business line, analysts expect it to grow faster due to a vast total addressable market.
These projections follow a challenging FY26, where revenue was flat and profits declined due to margin contraction. Looking ahead, Motilal Oswal expects growth to be driven by a recovery in both the aero tooling and precision components businesses. Contributions from a recently formed joint venture and new acquisitions will also support the top line. EBITDA margins are forecast to hold at 35%.
Capital efficiency is expected to improve significantly. Return on equity is projected to reach 16% by FY28, up from 9% in FY26, while pre-tax return on capital employed should climb to 18% from 12%. These improvements will be supported by better asset turnover and stronger operating performance.
To fund this expansion, Unimech raised Rs 500 crore through a December 2024 IPO. The company allocated Rs 80.3 crore for capital expenditure, Rs 40 crore for debt repayment and Rs 70 crore toward working capital requirements. Unimech continues to pursue inorganic opportunities to expand its presence in aerospace, defence, energy and semiconductor equipment sectors.
However, Motilal Oswal flagged several key risks. The firm's high revenue concentration in aerospace, heavy dependence on its top five customers, and significant reliance on a limited number of international export markets could expose investors to volatility.
