Shares of Avalon Technologies, an electronics manufacturing services (EMS) company, ended Monday’s trade, 7 September, with a sharp 7% gain at ₹2,352, as investors responded positively to Nomura’s bullish view on the stock.
The Japanese brokerage retained its ‘Buy’ rating on Avalon Technologies and raised its target price to ₹2,767.32 per share from ₹2,211.24 earlier. The revised target implies an upside of nearly 26% from Friday’s closing price of ₹2,196.60, CNBC TV-18 reported. Mint could not independently verify the report.
Nomura’s positive stance is largely driven by Avalon’s proposed joint venture with Zollner, which the brokerage expects could strengthen the company’s presence in advanced electronics manufacturing in Europe while also improving its long-term growth prospects and broadening its global customer base.
According to the brokerage, the proposed partnership could deepen Avalon’s footprint in Europe and open opportunities in segments such as healthcare, life sciences, and test and measurement. These businesses typically involve complex manufacturing requirements and longer product cycles, which could support more sustainable growth for Avalon, Nomura noted.
The proposed joint venture is expected to require an investment of $30–50 million. Assuming an investment of $40 million, Nomura estimates that asset turns of 10x, combined with an EBITDA margin of 15–17%, could potentially lift Avalon’s FY29 earnings per share by 21%.
Strong Q1 numbers drive stock rally
The shares have been on a strong winning run lately, with the majority of the rally coming after the company reported a strong set of numbers for the June quarter. So far this year, the stock has soared 168%.
Avalon Technologies reported a strong Q1, supported by robust revenue growth, operating leverage benefits, and narrowing losses at its US manufacturing base, along with strong profitability from its India manufacturing operations.
The company reported a 50% YoY rise in Q1 revenue, driven by strong growth across its clean energy, industrials, and mobility segments. EBITDA jumped 94% YoY, with the margin expanding 270 basis points to beat estimates.
Q1 PAT surged 145% YoY to ₹34.9 crore, while the backlog rose 23% YoY to ₹2,200 crore, with order inflows up 41% to ₹500 crore.
Following its Q1 performance, the company raised its FY27E revenue growth guidance to 26–30%, from 24–27% earlier. Avalon remains on track to double its revenue between FY26 and FY29E to around ₹3,200 crore, while retaining its gross margin guidance of 33–35%.
The strong performance also boosted brokerage confidence in the company. However, with the stock’s recent sharp run-up stretching valuations, some brokerages have remained cautious on the upside.
JM Financial retained its ‘Buy’ rating on the stock but cut its target price to ₹1,640. Prabhudas Lilladher maintained its ‘Reduce’ rating, citing elevated valuations, while raising its target price to ₹1,470 from ₹1,374. The brokerage values the stock at 45x FY28 earnings.
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