Motilal Oswal initiates coverage on the aerospace stock that rises 40% in 2026. Know the target, the upside

Domestic brokerage firm Motilal Oswal has given a buy rating on Unimac Aerospace and a Rs. Initiated coverage with a target price of 1,530, indicating upside of 27% from current market levels. The stock is already up 40% on a year-to-date basis.

The company manufactures specialized aero engine tools for LEAP, Pratt & Whitney and Rolls Royce engines and airframe tools for Airbus and Boeing. UNIMECH currently serves 18 customers in this segment.

Why is Motilal shares booming?

Motilal Oswal says the company has the ability to offer competitive pricing with a favorable tailwind from new engine programs and the shift in MRO demand towards Asia suggests strong growth potential. The segment contributed 80% of its FY26 total revenue and will remain a major contributor in the medium term.

1.) Expansion into new markets – Strong industry penetration with a high-mix and low-volume precision engineering business has been the company’s core strategy. It currently serves 17 customers in this segment. The segment contributed 20% to its FY26 total revenue. However, considering the huge total addressable market, this segment is expected to grow faster.

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2.) Acquisitions, Joint Ventures give good indication – Motilal Oswal said Unimac continues to pursue inorganic expansion opportunities that are aligned with its long-term strategy to strengthen its capabilities, innovate and expand its market presence.

The brokerage noted that after the acquisition of Hobell Bellows, the joint venture with Kanoo and investment in Dheya Engineering, the company is now looking for opportunities to establish a manufacturing footprint in the US through acquisitions or organic expansion. It added that these initiatives are expected to lead to faster market penetration and enhanced services for Unimac’s marquee customers in Europe and the US.

3.) Financials look strong – Analysts expect Unimech to deliver 74% revenue CAGR, 83% EBITDA CAGR and 57% PAT CAGR in FY26-28E after a flat revenue performance and decline in profits due to margin contraction in FY26.

The brokerage believes the company’s core arrow tooling and precision components business will grow with a healthy recovery, with contributions from its recently formed joint ventures and acquisitions. It also expects EBITDA margin to remain at 35%, while RoE and pre-tax RoCE are estimated to be 16% and 18% respectively by FY28, from 9% and 12% in FY26, supported by better asset turnover and stronger operating performance.

Motilal Oswal believes Unimac is well positioned to capitalize on long-term growth opportunities in the aerospace and defense, energy and semiconductor equipment sectors. However, the brokerage highlighted key risks including the company’s high revenue concentration in the aerospace business, dependence on its top five customers and significant reliance on exports and a limited number of international markets.

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Unimech through its IPO in December 2024 at Rs. 500 crore, including a fresh issue of Rs. 250 crores included. For the company capital expenditure Rs. 80.3 crore, debt repayment of Rs. 40 crore, for working capital requirements Rs. 70 crore and intends to use the remaining proceeds for general corporate purposes and expenses related to the issue.

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