Avalon Tech — Q4 FY25 earnings call

Call held 7 May 2025

Management summary

Avalon Technologies delivered strong Q4 and FY25 results, exceeding revenue guidance with significant growth across sectors and geographies. Profitability improved substantially, driven by operating leverage and better working capital management. Despite a cautious outlook for H1 FY26 due to macroeconomic uncertainties, the company remains confident in its long-term growth strategy, supported by a robust order book and ongoing capacity expansion in India and the US.

Highlights

  • Q4 FY25 Revenue: ₹343 crores, up 58.1% YoY.

  • FY25 Revenue: ₹1,098 crores, up 26.6% YoY.

  • Q4 FY25 Gross Margin: 35.1%, at the upper end of guidance.

  • Q4 FY25 EBITDA Margin: 12.1%, expanded 410 bps YoY.

  • Q4 FY25 PAT: ₹24.3 crores, up 244% YoY.

  • Order Book (as of March 31, 2025): ₹1,761 crores, with 29% YoY growth in FY25.

  • Net Working Capital Days: Improved to 124 days in March 2025 from 161 days in March 2024.

  • FY26 Revenue Growth Guidance: 18% to 20%.

Key financials

3 periods

Headline

  • Order Book (Mar 2025)
    ₹1,761 Cr
  • Net Working Capital Days (Mar 2025)
    124 days

Q4 FY25

  • Revenue
    ₹343 Cr
    YoY +58.1% QoQ +22.1%
  • Gross Margin
    35.1%
  • EBITDA Margin
    12.1%
  • PAT
    ₹24.3 Cr
    YoY +244%

FY25

  • Revenue
    ₹1,098 Cr
    YoY +26.6%
  • CAPEX
    ₹57.8 Cr
  • Asset Turns
    7.5×

What they filed

Q1 FY27: revenue up 49.8%, net profit up 150.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue275 281 343 323 382 +39%418 +49%480 +40%484 +50%
EBITDA30 35 41 30 39 +30%48 +37%57 +39%58 +93%
Net profit17 24 24 14 25 +47%33 +38%41 +71%35 +150%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • India Operations (Q4 FY25)
    ₹160 Cr Revenue14.8% EBITDA Margin9.6% PAT Margin
  • US Operations (Q4 FY25)
    ₹183 Cr Revenue16.6% Contribution to Total Revenue
  • Clean Energy (FY25 Growth)
    66% Growth
  • Communication (FY25 Growth)
    53% Growth
  • Industrial (FY25 Growth)
    35% Growth
  • Mobility (FY25 Growth)
    1.1% Growth

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY26 · Medium confidence 18% to 20%
    we are guiding for a revenue growth of 18% to 20% for FY26 and will reassess this as the year progresses in line with market developments.

    — MR. KUNHAMED BICHA

  • Revenue Doubling Revenue · next 3 years (FY24 to FY27) · High confidence double
    And we are always committed for the last year or so that we will double in 3 years. And we are still sticking to that commitment.

    — MR. KUNHAMED BICHA

Margin

  • Gross Margin Margin · ongoing · High confidence 33% to 35%
    We will still continue to say 33% to 35% and certain quarters you may see a little bit higher, certain quarters it will be in that range.

    — MR. KUNHAMED BICHA

Geographical Mix

  • India/US Revenue Split Geographical Mix · long term · Medium confidence 50-50
    The aspiration is to be 50-50 between India and US.

    — MR. SURESH V.R.

Capex

  • Annual CAPEX Capex · per year · High confidence ₹45 to 50 crores
    around Rs. 40 to 50 crores could just go over a little bit to be if like the previous example I said our factories, what we planned for 12 to 18 months was kind of sold off in 4 months, so it may be just preponed a bit, but we still maintain that, Rs. 45 to 50 crores a year.

    — MR. KUNHAMED BICHA

Capacity

  • Capacity Utilization for Expansion Capacity · ongoing · High confidence 70%
    We have always said anytime we hit around the 70% number we will expand.

    — MR. KUNHAMED BICHA

Risks & concerns

  • Evolving global trade dynamics, tariff negotiations, and macroeconomic developments.

    medium

    Management is closely monitoring evolving global trade dynamics including tariff negotiations and macroeconomic developments which could influence manufacturing flows worldwide, leading to a measured outlook for H1 FY26.

    Management acknowledged

  • US economy slowdown.

    medium

    The company is building in a conservative estimate for FY26 due to fears of a potential US economy slowdown, influencing their 'cautiously optimistic' stance.

    Management acknowledged

  • Project execution delays.

    low

    Management is cautious about specific project ramp-up timelines, stating that some programs could experience delays, which is factored into their measured FY26 guidance.

    Management acknowledged

Areas of evasion (2)

  • Specifics on future stake increase in Zepco Technologies
  • Very granular breakdown of new order intake beyond broad categories

Q&A highlights

3 direct
Rationale for measured FY26 guidance (18-20%) despite strong order book, and impact of tariff uncertainty on India vs US mix. Direct
So, I think as of now we are fairly confident with all the news around, you want to be optimistically cautious, let me put it that way. But I think there is a lot of growth ahead for us, the programs which we have signed up for with customers, especially the new programs.

This question addresses the apparent disconnect between a strong order book and a conservative revenue guidance, highlighting macroeconomic caution and the dual manufacturing strategy to navigate trade dynamics.

Asked by Deepak Krishnan

Capacity utilization with increased capacity and potential risk of unabsorbed overheads given the 18-20% growth guidance. Direct
No. So, we have been planning for our growth in the sense of people and building earlier than it's coming. So, a good sign or bad sign, I am not sure. We built this new export facility which is supposed to take care of us for 12 to 18 months. But I am happy to say that in four months it's filled up and different projects have started there.

This clarifies that capacity expansion is proactive and already being utilized, mitigating concerns about idle capacity and confirming strong demand absorption.

Asked by Aditya

Q4 gross margin drop to 35.1% (from higher in previous quarters) and whether 33-35% is the new normal, and the aspiration to double revenue in 3 years with the US/India business mix. Direct
In certain quarters you will see an upside. I know where you are coming from. We always said 33% to 35%. But a few quarters we have been 37% and odd. And of course, our endeavor is to be higher, and we will try to get there. But I think you should take 33% and 35% as a range.

This provides clarity on margin expectations, confirming the 33-35% range as a baseline while acknowledging potential for higher, and reiterates the long-term revenue doubling aspiration with a balanced India-US strategy.

Asked by Jalaj

2 min read 6 chapters

Detailed narrative

Strong Q4 FY25 Performance & FY25 Overview

Avalon Technologies reported robust Q4 FY25 revenues of ₹343 crores, marking a 58.1% year-on-year growth and 22.1% sequential growth. For the full year FY25, revenue from operations stood at ₹1,098 crores, a 26.6% YoY increase. Gross margins for Q4 FY25 were 35.1%, at the upper end of their guidance, contributing to a 12.1% EBITDA margin (up 410 bps YoY) and a PAT of ₹24.3 crores, a 244% increase over Q4 FY24.

Order Book Strength & Long-Term Growth Outlook

As of March 31, 2025, the order book reached ₹1,761 crores with an average execution period of 14 months. Long-term contracts (15-36 months) grew by 18.3% YoY to ₹1,123 crores, and overall order book growth improved from 11% in FY24 to 29% in FY25. Management reiterated its commitment to double revenue in 3 years (FY24 to FY27), driven by existing US business, new US businesses, and expanding India operations.

Geographical and Segmental Diversification

The Q4 FY25 geographical revenue split was 47% India (₹160 crores) and 53% US (₹183 crores), with India operations delivering a strong EBITDA margin of 14.8% and PAT margin of 9.6%. For FY25, the split was 43% India and 57% US. The company reported significant growth across all five sectors in FY25: Clean Energy (66%), Communication (53%), Industrial (35%), and Mobility (113%).

Operational Efficiency & Working Capital Improvement

Avalon made meaningful progress in optimizing working capital, with net working capital days improving by 37 days, from 161 days in March 2024 to 124 days in March 2025, exceeding their guidance of 10-15 days improvement. Net inventory days also improved to 86 days from 118 days. Cash flow from operations for FY25 reached ₹25 crores, up from ₹17 crores in FY24, supported by better working capital management.

Capacity Expansion & Strategic Collaborations

A new export-focused manufacturing plant in Chennai is now fully operational and already filled within four months, with Phase-II of brownfield expansion also initiated. The company plans to set up two more factories in the next 6-12 months, targeting an annual CAPEX of ₹45-50 crores. Strategic collaborations, such as with Zepco Technologies for design and manufacturing in emerging areas like drones, EVs, and defense, are enhancing technical competence and funneling new production opportunities.

FY26 Guidance & Macroeconomic Headwinds

For FY26, Avalon is adopting a 'measured outlook' with a revenue growth guidance of 18% to 20%, expecting improved momentum in the second half. This cautious stance is influenced by macroeconomic developments and policy uncertainties, particularly regarding global trade dynamics and potential US economic slowdown. Despite this, management remains confident in their dual manufacturing presence in the US and India to navigate these shifts and capture growth opportunities.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls