Avalon Q1 FY27: Strong growth, steady gross margins, and a bigger box-build mix

Avalon Technologies opened FY27 with a strong quarter, extending its run of sequential improvement. In Q1 FY27, revenue came in at 484 crore, up 49.8% year on year and marginally higher than Q4 FY26. Profitability improved sharply: EBITDA rose to 58 crore at a 12.0% margin and PAT reached 35 crore at a 7.2% margin.

The quarter also showed that the company’s core strategy is showing up in the mix. Box build or full system integration accounted for 60% of revenue in Q1 FY27. Management reiterated that Avalon typically starts with a narrower scope such as PCBA, cables, metals, or plastics and then expands wallet share over time toward complete box build solutions.

Growth across verticals and geographies

Avalon’s revenue remained diversified across end markets. In Q1 FY27, Industrials led at 32% of revenue, followed by Clean Energy at 29% and Mobility and Transportation at 25%. Medical and Others contributed 10%, while Communication was 4%.

Geographically, the split was 41% India and 59% US in Q1 FY27. The company also highlighted its hybrid manufacturing model: while customers may be onboarded in the US, larger scale production is typically transitioned to India over time to leverage cost structure and depth of capabilities.

Financial summary

Margins: steady gross margin range, operating leverage below the line

Management emphasized that gross margin is expected to stay within the 33% to 35% band, with quarter-to-quarter movement driven by mix. Q1 FY27 gross margin was 34.7%, within that stated range.

On operating costs, management noted that around 45% to 50% of expenses below gross margin are semi-fixed or fixed. As revenue scales, the company expects operating leverage to continue. This was visible in Q1 FY27, where EBITDA margin expanded to 12.0% from 9.2% a year ago.

The company also mentioned that adjusting for a tariff pass-through impact, EBITDA margin would have been about 0.9% higher, but the reported numbers already show meaningful improvement.

Order book visibility and working capital progress

As of June 30, 2026, Avalon reported an order book of 2,208 crore, up 23.4% year on year, with an average execution period of 14 months. Long-term contracts, with execution timelines ranging from 15 to 36 months, stood at 1,256 crore.

Working capital improved on a year-on-year basis. Net working capital days reduced to 117 in June 2026 from 142 in June 2025. Inventory days were 94, receivable days 74, and payable days 51, indicating improvements across all three buckets.

On capital efficiency, asset turns remained strong at 9.9 times. ROCE improved to 23.4% in Q1 FY27, continuing a multi-year rise.

Footprint and capability build: Chennai expansion, certifications, and leadership hiring

On manufacturing footprint, the company indicated that its Chennai expansion for domestic demand is complete. Management said the new plant will commence commercial production from Q2 FY27.

Avalon also stated it is in the process of acquiring a large parcel of land in Chennai to support growth over the next decade, particularly as it deepens its presence in semiconductor equipment manufacturing and advanced electronics. The company framed this as a step toward building world-class infrastructure.

On capabilities, the presentation highlighted EN 15085-2 certification, aimed at strengthening railway welding applications.

Management also described organizational investments. It is adding VP-level leadership across business units and capabilities and investing in process automation, IT systems, and AI-enabled capabilities across functions. The stated intent is to prepare the organization ahead of the next phase of growth.

US operations: losses narrowing, role remains strategic

The US manufacturing unit remains loss making, but the trend is improving. Management disclosed a PAT loss of about 4 crore in Q1 FY27, versus around 9 crore a year ago and about 14 crore two years ago.

Management reiterated the role of US manufacturing: it acts as a customer entry point for onboarding and validation, after which production is transitioned to India where margins are structurally better. Over time, the company expects US manufacturing contribution to settle around 20% of total revenue.

Guidance and the near-term watchlist

After a strong Q1, management revised FY27 revenue growth guidance upward to 26% to 30% from the earlier 24% to 27%. It also stated that it has already crossed its earlier milestone of doubling revenue from FY24 to FY27 on a trailing twelve month basis, nearly a year ahead. The next stated aspiration is to reach about 3,200 crore revenue by FY29 from FY26 revenue of 1,603 crore.

At the same time, management repeatedly highlighted that program ramps can shift across quarters, affecting near-term timing. This remains one of the key variables for investors to track, especially as newer programs in areas such as semiconductor equipment scale up.

Avalon’s Q1 FY27 performance suggests a combination of strong demand, improving execution, and operating leverage. The strategic narrative remains consistent: win complex, long lifecycle programs and increase box build share through vertical integration, while using the hybrid footprint to onboard globally and scale in India.