- Revenue jumped 48.7% YoY, driven by mobility and industrial segments.
- EBITDA margin slipped 80bps to 11.5% but is projected to expand by 120bps by FY28.
- Guidance lifted to 40% top‑line growth for FY26, with gross margin steady at 33‑35%.
- US tariff cut to 18% boosts export potential and aligns with ISM 2.0 policy.
- Analyst consensus: BUY with a target of ₹1,175 (≈40x FY28 earnings).
You missed Avalon’s 48% sales jump, and you might be leaving money on the table.
Why Avalon’s Revenue Explosion Beats the Sector Curve
In FY25‑26, Avalon posted a 48.7% year‑over‑year revenue surge, outpacing the Indian semiconductor equipment market, which grew roughly 20% on a comparable basis. The bulk of this lift came from the mobility and industrial verticals, expanding 72% and 59% respectively. Those sub‑segments are beneficiaries of two macro forces: the rollout of electric‑vehicle (EV) platforms across Indian OEMs and the government’s “Integrated System Manufacturing (ISM) 2.0” push that subsidises high‑value equipment for factories.
For investors, the takeaway is simple: Avalon is not just riding a wave; it’s positioning itself at the crest. The company’s equipment wins are tied to projects that are expected to run for 5‑7 years, creating a recurring revenue stream that smooths earnings volatility.
Margin Dynamics: Why a Small Contraction Might Be a Signal of Scale
EBITDA margin fell 80 basis points to 11.5% year‑over‑year. At first glance that looks like a red flag, but the dip is largely attributable to the onboarding of new, high‑volume contracts that carry lower upfront margins. As the order book matures, the forecast shows a margin expansion of roughly 120 bps by FY28, driven by learning‑curve efficiencies and higher mix of premium equipment.
Technical note: a basis point (bp) is one‑hundredth of a percent (0.01%). An 80 bp contraction means the margin moved from 12.3% to 11.5%.
How the US Tariff Reduction Rewrites Avalon’s Export Playbook
The United States slashed semiconductor equipment duties from 50% to 18% in the latest trade revision. For an exporter‑heavy firm like Avalon, the tariff cut translates to an immediate cost advantage of roughly 30% on every dollar of US‑bound sales. That improves the competitive positioning of Indian‑made test and packaging gear against Taiwanese and Korean rivals, whose factories still face higher tariff headwinds.
In practical terms, the lower tariff expands Avalon's addressable market in North America by an estimated $150 million over the next three years, assuming a modest 5% market‑share capture.
Competitor Landscape: Avalon vs. Tata Electronics and Adani Power‑Tech
Tata Electronics has been expanding its analog‑IC portfolio but remains a downstream player with limited equipment capabilities. Adani Power‑Tech, meanwhile, is still building its semiconductor footprint and has not yet secured comparable mobility contracts. Avalon’s dual‑segment exposure—mobility (27% of revenue) and industrial (37%)—gives it a diversification edge that rivals lack.
Historically, firms that spread risk across multiple high‑growth verticals have delivered higher total‑shareholder‑return (TSR) in the Indian tech space. For example, Wipro Infra’s 2014 diversification into data‑center equipment preceded a 3‑year CAGR of 23% for its hardware division.
Historical Parallel: The 2012‑2014 Indian Chip‑Equipment Upswing
During 2012‑14, a handful of Indian equipment makers captured a surge in domestic fab upgrades, propelled by the “Make in India” policy. Those companies saw revenue CAGR of 30‑35% and subsequently enjoyed a valuation premium of 2‑3x earnings multiples versus the broader market. Avalon’s current trajectory mirrors that pattern, but with added tailwinds of EV adoption and lower US tariffs, suggesting an even larger upside.
Investor Playbook: Bull vs. Bear Cases
Bull Case: Continued EV roll‑out accelerates mobility equipment orders; ISM 2.0 subsidies remain intact; US tariff cut fuels export growth; margin expansion reaches 12.7% by FY28; EPS CAGR of 36.5% drives valuation to 45x FY28 earnings, implying a price target above ₹1,300.
Bear Case: Delays in EV policy implementation; resurgence of US protectionism raising tariffs; supply‑chain bottlenecks in semiconductor-grade silicon; margin pressure persists, limiting EBITDA to sub‑12% levels, capping upside at current target.
Bottom line: With a 40x FY28 earnings multiple already baked into the current price, the bull case hinges on the company’s ability to sustain above‑average revenue growth and deliver the projected margin expansion. The bear case, while plausible, requires a convergence of macro‑economic headwinds that are currently not evident.
For disciplined investors, Avalon offers a high‑conviction entry point at the current level, provided you monitor the EV policy calendar and US trade negotiations closely.