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Long-Term Growth Engines Continue to Accelerate

Avalon Technologies (AVALON IN) has reported robust revenue growth of 49.8% YoY mainly driven from Clean Energy/Mobility/Industrial segments (grew by 141%/44%/~50% YoY). EBITDA margin expanded by 270bps to 12.0%. AVALON has revised FY27 revenue growth guidance upward to 26–30% from 24–27%, while maintaining gross margin guidance of 33–35%. US manufacturing losses narrowed to ~INR 38mn from ~INR 141mn in Q1FY26, with management expecting the business to breakeven during FY27 and contribute around 20% of total revenue over the long term. AVALON achieved its earlier target of doubling revenues from FY24 to FY27 nearly one year ahead of schedule and has set a target to further double revenues between FY26 and FY29. We have revised our FY27/FY28 EPS estimates upward by 5.1%/7.0%. We estimate Revenue/EBITDA/PAT CAGR of 31.8%/38.6%/38.9% over FY26-28E, with EBITDA margin expansion of 110bps. We maintained our ‘REDUCE’ rating (mainly due to higher valuation) with a TP of INR 1,470 (earlier INR 1,374), valuing at 45x FY28 earnings.

Q1FY27 financial performance:

Revenues grew by 49.8% YoY at INR 4.8bn (PLe: INR 4.1bn 18.0%. Gross margins contracted by ~80 bps to 34.7% (PLe: 34.0%). EBITDA grew by ~94% YoY to INR 580mn (PLe: INR 391mn). EBITDA margins expanded by 270bps to 12.0% (PLe: 9.5%). PBT stood at INR 487mn (PLe: INR 323mn). PAT stood at INR 349mn (PLe: INR 241mn).

Segmental Overview:

Clean Energy/Mobility& Transportation/Industrials/Medical segment grew by 141%/44%/~50%/7.0% YoY, whereas Communication segment declined by 40.1% in Q1FY27. India: US contributes 41:59 to the revenue in Q1FY27. Boxbuild revenue grew by 60.5% YoY, contributes 60% revenue (vs 56% in Q1FY26).

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