Buy Avalon Technologies; target of Rs 680: Motilal Oswal

Buy

Motilal Oswal's research report on Avalon Technologies

Avalon’s revenue declined 18% YoY in 2QFY24 (up 1% YoY in 1HFY24.) Total revenue was dragged down by a 14% YoY decline in US business revenue in 1HFY24 (53% revenue share in 1H). The India business registered healthy growth of 16% in 1HFY24. However, the order book increased to ~INR12.4b as of Sep’23 vs. ~INR11b in Jun’23, aided by strong inflows in the clean energy and industrials (~60% order book mix) segments. As a result, 2HFY24 is expected to be strong.

Outlook

Considering the 2Q performance and a slowdown in the US business resulting in adverse operating leverage, we reduce our EPS estimates for FY24/FY25/FY26 by 9%/8%/6%. We retain our BUY rating on the stock with a TP of INR680 (30x FY26E EPS).

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Avalon Technologies - 10 - 11 - 2023 - moti