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    Avalon Tech

    AVALONGood
    Capital Goods·6 Nov 2025
    Management Summary

    Avalon Technologies delivered a strong Q2 FY26, marked by robust revenue and profit growth, leading to an upward revision in full-year revenue guidance. The company demonstrated broad-based growth across geographies and verticals, supported by a healthy order book and improved capital efficiency. Strategic investments in new programs and a dual-shore manufacturing model are positioning Avalon for sustained long-term growth, despite temporarily elevated working capital.

    Highlights

    8

    • Revenue for Q2 FY26 stood at ₹382 crore, reflecting a 39% year-over-year increase and 18% sequential growth.

    • H1 FY26 revenue reached ₹706 crore, growing 48.7% over the same period last year.

    • EBITDA for H1 FY26 was ₹68 crore, an increase of 98.5% YoY, with Q2 FY26 EBITDA at ₹39 crore (up 28% YoY).

    • PAT for H1 FY26 was ₹39 crore, an increase of 158.3% YoY, with Q2 FY26 PAT at ₹25 crore (up 42.9% YoY).

    • Gross margin for H1 FY26 was 34.9%, within the guided range of 33-35%.

    • Full-year FY26 revenue growth guidance was revised upwards to 28%-30% from the earlier 23%-25%.

    • Order book as of September 30, 2025, stood at ₹1,863 crore (short-term) plus ₹1,168 crore (long-term), totaling over ₹3,000 crore.

    • Net working capital days improved by 11 days sequentially to 131 days as of September 2025.

    What Changed3

    vs Q3 FY26

    Guidance items3 → 5 (+2)Risks discussed2 → 3 (+1)Q&A highlights8 → 3 (-5)

    Key financials

    Single quarter

    13 metrics
    1. 01Revenue₹382 Cr+39%YoY
    2. 02H1 Revenue₹706 Cr+48.7%YoY
    3. 03EBITDA₹39 Cr+28.0%YoY
    4. 04H1 EBITDA₹68 Cr+98.5%YoY
    5. 05PAT₹25 Cr+42.9%YoY

    Segment breakdown

    India Manufacturing Operations
    81% Revenue Contribution14.1% EBITDA Margin10.9% PAT Margin
    US Manufacturing Operations
    19% Revenue Contribution₹-5 Cr EBITDA (Q2 FY25)₹-13 Cr EBITDA (Q1 FY25)
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Revenue
    Full-year revenue growth
    28%-30%
    		High
    Revenue
    Revenue doubling
    Double
    		High
    Working Capital
    Net working capital days
    120-130 days
    		Medium
    Profitability
    US operations margin
    Improvement
    		Medium
    Revenue Mix
    India vs US revenue contribution
    50-50
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Tariff implications and customer acceptance of tariff costs

    While 99% recovery is achieved, the complexity of 50+ unique tariff rates and the need for a dual-shore strategy highlight this as an ongoing management focus. — Both acknowledged

    medium

    Temporarily elevated working capital and inventory levels

    Net working capital at 131 days (Sept 2025) is higher than March 2025 (124 days), but improved sequentially from June 2025 (142 days), explained as strategic investment for growth. — Management acknowledged

    medium

    Project execution timing uncertainty

    Growth depends on when new programs kick in, which is customer-controlled, but management is confident in overall growth trajectory. — Management acknowledged

    low

    Areas of Evasion(2)

    • Specific granular breakdown of cost differential between US and India beyond labor content
    • Precise timing of project cut-ins beyond 'next few quarters'

    Q&A highlights

    3

    “So, we're very positive because we have a solution for customers to come to India because otherwise it is very difficult for customers to see how can I come to India with a 50% tariff, right? So, this dual model helps us a great deal to make that happen.”

    Addresses a key industry concern (tariffs) and explains Avalon's strategy to mitigate it through a dual-shore model, maintaining high tariff recovery and enabling future India transfers.

    asked by Tanay Shah

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q2 FY26 Performance and Upgraded Guidance

    Avalon Technologies reported a robust Q2 FY26, with revenues reaching ₹382 crore, marking a 39% year-over-year increase and an 18% sequential growth. For H1 FY26, revenue stood at ₹706 crore, up 48.7% YoY. Profitability also saw significant improvement, with H1 FY26 EBITDA at ₹68 crore (up 98.5% YoY) and PAT at ₹39 crore (up 158.3% YoY). Reflecting this strong momentum and demand visibility, the company upgraded its full-year FY26 revenue growth guidance to 28-30% from the earlier 23-25%.

    02

    Diversified Growth Across Geographies and Verticals

    The company's growth was broad-based, with India business growing 44% and US business growing 52% in H1 FY26. India manufacturing operations contributed 81% of total revenue in Q2 FY26, delivering healthy EBITDA and PAT margins of 14.1% and 10.9% respectively. The dual presence in the US and India allows Avalon to localize production for customers while leveraging cost-effective manufacturing in India, with a long-term goal of achieving a 50-50 revenue mix between exports and India.

    03

    Expanding Order Book and Strategic Programs

    As of September 30, 2025, Avalon's order book stood at ₹1,863 crore for the next 14 months, a 25.4% YoY increase, complemented by ₹1,168 crore in long-term contracts (15-36 months). Key growth drivers include energy storage systems, aerospace (H1 FY26 revenue up 59% YoY), and railway (H1 FY26 revenue up 58% YoY) programs. The company is also making progress in the advanced technology segment, with volume ramp-up expected in FY27 for its semiconductor box-build manufacturing partnership.

    04

    Working Capital Management and Capital Efficiency

    Net working capital days improved sequentially by 11 days to 131 days in September 2025, from 142 days in June 2025. Management attributes temporarily elevated inventory levels to strategic investments for upcoming production and growth, aiming to bring working capital within the 120-130 day range over the next few quarters. Capital efficiency remains strong, with ROCE improving to 18.4% from 8.2% a year ago, and asset turns healthy at 8.7x.

    05

    Tariff Management and US Operations Improvement

    Avalon has effectively managed tariff implications, recovering over 99% of tariff costs from customers due to its long-standing US presence and strong relationships. The US manufacturing operations, which contributed 19% of Q2 FY26 revenue, are showing signs of improvement, with EBITDA losses reducing from negative ₹13 crore in Q1 FY25 to negative ₹5 crore in Q2 FY25. Operating leverage is expected to further support margin improvement in the US in the latter half of FY26 and into FY27 as volumes ramp up.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.