Buy Azad Engineering; target of Rs 1882: ICICI Securities

ICICI Securities's research report on Azad Engineering

Azad Engineering’s (Azad) Q1FY26 performance was 7% ahead of consensus estimates driven by better-than-expected margin profile. EBITDA jumped 49% YoY to INR 492mn (+8% QoQ) driven by strong revenue execution (+36.7% YoY) in a challenging environment. EBITDA margin jumped 230bps YoY to 35.9%. Key contributors for margin expansion include: 1) Exports contribution jumping to 92% of the revenue vs. 90.5% YoY and 2) energy, oil/gas business revenue jumped 41.7% YoY to INR 1.1bn, increasing contribution to 81.2% vs. 78.4% YoY. The company maintains its c.30% revenue growth and 33-35% margin guidance for the next few years backed by new capacity additions. We re-initiate coverage with BUY and target price of INR 1,882 (based on 50x P/E FY28E EPS).

Outlook

We re-initiate coverage on the stock with BUY rating and target price of INR 1,882, based on 50x P/E FY28E EPS (giving higher multiple to reflect above-industry growth and capture part of unexecuted OB as well).