AeroEdge Co., Ltd.

Business Details

Based on a long-term supply agreement with Safran Aircraft Engines (France), the company mass-produces and sells titanium aluminide low-pressure turbine blades installed in LEAP engines. Its main customer is Safran Aircraft Engines, which accounts for the majority of sales. The company adopts a free-issue material model in which materials are supplied by the customer at no cost, resulting in a revenue structure where profit margins rise as sales expand. Globally, only two companies, including AeroEdge, are capable of supplying titanium aluminide blades for LEAP, giving the company a high barrier to entry. The company has reached a point where mass production of a new material is feasible, and has already concluded an agreement with Safran (France) regarding new material supply and expansion of market share.

Recent Overview

Cumulative Q3 saw revenue up 36% and operating profit up 68%, with a new material mass-production agreement also concluded

In the cumulative third quarter of FY2026 (ending June 2026) (July 2025 to March 2026), revenue was ¥3,775 million (up 36.0% year on year), operating profit was ¥1,007 million (up 67.9%), ordinary profit was ¥969 million (up 81.4%), and quarterly net profit was ¥660 million (up 44.2%), representing substantial increases across all profit items. The number of engines' worth of titanium aluminide blades sold reached 630 engines (up 29.9%). The company has reached a point where mass production of the new material is feasible and has concluded a supply and market-share-expansion agreement with Safran (France); contract development revenue associated with mass-production development was also recorded. The full-year earnings forecast (revenue of ¥5,050 million, operating profit of ¥1,070 million) remains unchanged from the previous forecast. As a subsequent event, the company resolved to conduct a 1-for-2 stock split with a record date of June 30, 2026 (effective date July 1, 2026). Long-term borrowings increased due to expanded capital expenditure, and the equity ratio declined from 47.3% to 39.4%.

Key Products

Growth Drivers

• Mid- to long-term demand expansion driven by the high order backlog for LEAP-equipped aircraft (A320neo family, 737MAX) (as of the end of March 2026: 7,400 units for the A320neo and 5,388 units for the 737MAX)
• Revenue expansion through the new material supply and market-share-expansion agreement with Safran (France) (expanding from the current 40% to the upper 40% range starting in 2028)
• Building a vertically integrated system and resolving material dependence risk through the start of mass-production supply of the new material (to begin in stages from FY2027, ending June 2027)
• Revenue diversification through the launch of mass production for two new non-LEAP aircraft engine parts projects
• Expectations for accelerated production increases following the FAA's removal of the production cap on the Boeing 737MAX
• Profit margin improvement effect from sales expansion under the free-issue material model (high operating leverage)
• Continued expansion in demand for small and medium-sized aircraft against the backdrop of recovering and expanding air passenger demand

Risks

• Customer concentration risk due to the large proportion of sales attributable to the main customer, Safran Aircraft Engines
• Dependence on a single European supplier for titanium aluminide blade material (being addressed through new material development, though mass-production risk remains)
• Impact on sales volume from supply chain disruptions and production delays at Boeing, Airbus, and others
• Risk of increased fixed costs and lower profit margins due to upfront investment (personnel hiring, capital expenditure) associated with launching new mass-production projects and new material mass-production development
• Financial leverage risk from increased borrowings (long-term borrowings balance of ¥4,783 million) and a lower equity ratio (39.4%) accompanying expanded capital expenditure
• Foreign exchange risk (the majority of sales are denominated in foreign currency)
• Constraints on production process changes due to the high quality requirements and certification standards specific to the aircraft engine industry
• Impact on aviation demand and supply chains from geopolitical risks (the situation in Ukraine, the Middle East situation, and US tariff policy)
• Possibility of limited profit levels in the fourth quarter, as the progress rate of operating profit against the full-year forecast has already reached 94.1% by the end of the third quarter