Avalon Technologies Rises on Rail Kavach & Semiconductor Push

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Bullish guidance for FY26 propel Avalon Technologies’ stock higher; semiconductor and railway safety ventures seen as key growth drivers

By S JHA

MUMBAI, August 7, 2025 — Shares of Avalon Technologies Ltd surged over 9% on Thursday following the company’s strong Q1 FY26 earnings and a confident outlook for the remainder of the financial year. The stock rally came after Avalon reported a 62% year-on-year (YoY) jump in revenue and a sharp 700 basis point improvement in EBITDA margin, driven by high-value product additions and operating leverage.

The fully integrated electronic manufacturing services (EMS) firm posted Q1 revenue of ₹323 crore, compared to ₹199 crore in the same quarter last year. EBITDA soared to ₹30 crore from ₹4 crore YoY, with margins expanding to 9.2%. The company also turned profitable, reporting a PAT of ₹14 crore, reversing a ₹2 crore loss in the previous year.

The performance boost comes amid Avalon’s strategic expansion into semiconductor equipment manufacturing through a key global partnership. Pilot production is expected to begin in the next quarter, with management anticipating a meaningful revenue contribution from this vertical over the next two years.

Strong Order Book and Raised Guidance

Avalon’s order book now stands at ₹1,793 crore, offering 14 months of execution visibility, with ₹1,157 crore tied to long-term contracts. Management raised its FY26 revenue growth guidance to 23–25%, up from the earlier 18–20%, citing robust demand in verticals like railways, aerospace, communications, industrial, and mobility, all of which posted 100%+ YoY growth.

“We see significant long-term upside driven by our semiconductor foray, the upcoming ‘Kavach’ railway safety deployment, and scale-up in clean energy and mobility,” said the company in its post-earnings investor call.

Key Highlights from Avalon’s Q1 FY26:

Gross margin stood at 35.5%, above earlier guidance.
Box-build solutions now make up 56% of revenue (vs 46% YoY).
Zepco JV gaining traction in drone motors and power electronics.
India and US businesses both posted 62% YoY growth.
US revenue contribution rose to 20%, despite the facility still incurring a ₹9 crore loss — breakeven expected soon.
Working capital days improved to 142; Capex stood at ₹9.6 crore; Net debt at ₹34 crore.
Asset-light model intact, with asset turnover at 8x; aiming for 10x.
Chennai Phase-2 expansion progressing well, expected completion by Q3 FY26.
FY26 Capex budget is ₹45–50 crore to support scale-up.

The company’s proprietary ‘Kavach’ railway safety system, which is in its final stage of regulatory approval, is also seen as a future growth lever. Management expects deployment to begin within the next year, opening a new vertical in rail tech.

Outlook: Growth Momentum Intact

Avalon is confident that EBITDA margins will improve further in H2 FY26, as high-margin projects scale and fixed costs stabilize, particularly at the US facility. The management acknowledged tariff-related uncertainties in the US but noted that exposure is limited to 10–20%, and India remains the dominant revenue source going forward.

With its semiconductor pilot ramping up, continued traction across diversified verticals, and operational execution on track, Avalon Technologies appears well-positioned for sustained growth, say analysts at LNPR Capitals, who flagged the company’s asset-light model and strategic focus on high-margin verticals as key positives.

The stock closed at a 9% gain for the day, reflecting strong investor confidence in Avalon’s execution capabilities and ambitious long-term roadmap.

Shares of Avalon Technologies are trading at PE multiple of 79.4, while the face value of stock is ₹2. The market valuation of the company is ₹6352 crores.

Disclaimer: This article makes no recommendation for buy or sell of shares of any company.

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