Buy Avalon Technologies; target of Rs 1330: Motilal Oswal

Motilal Oswal's research report on Avalon Technologies

Avalon Technologies (AVALON) reported a robust quarter, with revenue growing 39% YoY in 2QFY26, fueled by a strong performance in both the India (up 31% YoY) and US businesses (up 44%). However, EBITDA contracted (+90bp) due to lower gross margins YoY (down 250bp), driven by a change in the product mix. Employee costs as a % of sales also increased 130bp YoY to support the addition of new programs. This was offset by lower other expenses YoY (down 290bp), driven by favorable operating leverage.

Outlook

We estimate AVALON to post a 30%/39%/53% CAGR in revenue/EBITDA/adj. PAT over FY25-FY28 on account of strong growth and healthy order inflows. Reiterate BUY with a TP of INR1,330 (premised on 45x Sep’27E EPS).