Avalon Q1 FY27: Strong Growth, Better Working Capital, and a Bigger Order Book

Avalon Technologies entered FY27 with a quarter that looked less like a one-off spike and more like a continuation of steady execution. In Q1 FY27, revenue from operations rose to INR 484 crore, up 49.8 percent year on year, while profitability scaled faster than sales. EBITDA nearly doubled to INR 58 crore, a 93.9 percent YoY increase, and PAT climbed to INR 35 crore, up 145.3 percent YoY. The company also pointed to its eighth consecutive quarter of sequential improvement in performance.

The numbers matter, but the shape of the business matters more. Avalon is positioned as a fully integrated electronic manufacturing services company with a hybrid delivery model across India and the US. It has 16 manufacturing units across the two countries and more than 615k square feet of design and manufacturing facilities. Its model is also clearly tilted toward higher value work. Box build contributed 60 percent of revenue in Q1 FY27, reinforcing management’s long stated focus on end to end system integration rather than commodity assembly.

What powered the quarter: mix, scale, and delivery

Avalon’s Q1 performance reflected a blend of scaling revenue and holding operating discipline. Gross margin in Q1 FY27 stood at 34.7 percent. This was lower by 85 bps year on year, but improved by 99 bps sequentially versus Q4 FY26. In an EMS business where component costs and pricing cycles can shift quickly, the sequential improvement signals better execution on mix and operating leverage.

Below the gross line, the quarter showed clear operating leverage. Personnel cost rose to INR 83 crore from INR 63 crore in Q1 FY26, and other operating expenses increased to INR 27 crore from INR 22 crore. Even with these increases, EBITDA margin expanded to 12.0 percent from 9.2 percent last year, a 272 bps improvement. Finance cost declined to INR 3 crore from INR 4 crore, and PAT margin increased to 7.2 percent from 4.4 percent.

The company’s business mix also provides context. Avalon operates across clean energy, mobility and transportation, industrials, communication, and medical and others. In Q1 FY27, revenue exposure was broad based, with industrials at 32 percent, clean energy at 29 percent, mobility and transportation at 25 percent, communication at 4 percent, and medical and others at 10 percent. Compared to FY26, clean energy’s share increased from 20 percent to 29 percent, while communication declined from 8 percent to 4 percent. The shift suggests that growth is coming from sectors where electrification and new investments are currently strongest.

A key operational signal was working capital. Net working capital days improved from 142 days in Jun 25 to 117 days in Jun 26. In a scaling manufacturing business, this matters because it frees cash for growth without increasing balance sheet stress.

Orders, customer reach, and why the book matters

For manufacturing businesses, the order book often tells the story before reported revenue does. Avalon reported an order book of INR 2,208 crore as of 30 June 2026, up 25.4 percent YoY from INR 1,790 crore a year earlier. Management noted that this order book is executable over an average period of 14 months. In addition, Avalon disclosed INR 1,256 crore of long term contracts, with execution periods ranging from 14 months to 3 years.

That combination is important. A 14 month executable order book supports near term visibility, while multi year long term contracts can stabilize capacity planning and reduce volatility in utilization. It also fits with Avalon’s focus on long product lifecycle industries such as aerospace, mobility, industrial, and railways, where design wins tend to be sticky once qualified.

Geography adds another layer. In Q1 FY27, 59 percent of revenue came from US market customers and 41 percent from Indian market customers. The split is similar to FY26, when the US contributed 62 percent and India 38 percent. On the manufacturing side, 72 percent of production is in India and 28 percent in the US, which aligns with the company’s hybrid model. The stated idea is to use India for cost competitive manufacturing while using the US footprint to onboard and serve US customers locally.

Behind these numbers is a strategic point. Avalon is one of the few Indian EMS players with manufacturing facilities in the US, and it positions this as a differentiation in a period where customers are diversifying supply chains.

Capital efficiency and balance sheet discipline

Growth is easier to admire when returns improve with it. Avalon’s RoCE trend is one of the more telling parts of the presentation. RoCE increased from 10.0 percent in FY24 to 15.7 percent in FY25 and 20.6 percent in FY26. In Q1 FY27, RoCE stood at 23.4 percent. That is a sharp progression over a short period, and it aligns with management’s emphasis on profitable growth.

Asset turn remained high at 9.9 in FY26 and stayed at 9.9 in Q1 FY27. In a manufacturing context, high asset turns usually indicate either strong throughput or a capex light approach, or both. The presentation explicitly described a capex light model and also cited 9.9 as the asset turn figure.

Leverage remains moderate. Gross debt stood at INR 196 crore as of Jun 26, up from INR 183 crore in Mar 26. But net debt to EBITDA was 0.1 in Q1 FY27, suggesting that debt is not currently a limiting factor. The company also clarified that its net debt to EBITDA calculation excludes IPO cash proceeds.

Working capital still needs monitoring, even with the improvement. Inventory days rose to 94 in Jun 26 from 84 in Mar 26, while receivables days were stable at 74 and payables days improved to 51. Net working capital days increased slightly from 112 in Mar 26 to 117 in Jun 26, but remained materially better than Jun 25 levels.

The FY26 cash flow statement shows how working capital shapes cash generation. Operating profit before working capital changes was INR 154 crore, but changes in working capital were negative at INR 105 crore. Net cash from operating activities was INR 57 crore, while investing cash flow was negative at INR 64 crore, and financing cash flow was positive at INR 8 crore. The picture is of a company that is investing while also improving operational cash generation, with working capital as the main swing factor.

Strategy: hybrid manufacturing, integrated capabilities, and sector tailwinds

Avalon’s strategy is built around three balances. The first is geography. The company focuses on India and the US, described as the world’s fastest growing EMS markets. It aims to capitalize on India manufacturing and US onboarding, supported by its hybrid manufacturing model.

The second balance is technology mix. Avalon positions itself across established businesses where it can expand wallet share through up selling and cross selling, and also sunrise sectors, with clean energy as a clear example. The clean energy revenue share increased in Q1 FY27, and the broader industry context supports that direction.

The third balance is profitability and growth. Management highlighted a focus on profitable segments and complex, mission critical products, pointing to large box builds and an integrated capability set. Avalon’s end to end offering spans PCB design and analysis, PCB assembly, cable assembly, sheet metal, magnetics, machining, plastics, system integration, functional testing, logistics, repair, and reverse logistics. The logic is straightforward: start with design services, qualify into production, and scale into box build and integration, where switching costs are higher.

Industry tailwinds were also emphasized. The presentation cited increased electronification driven by Industry 4.0, IoT, robotics, and AI. It also highlighted supply chain diversification, with manufacturing moving to India and the US. The India ESDM market was described as growing at a 27 percent CAGR, from US 44 billion in 2024 to US 141 billion by 2030E, with India’s share of global ESDM rising from 4 percent in 2025 to 10 percent by 2030E.

What to watch from here

Avalon’s Q1 FY27 performance points to a company that is scaling with improving operating leverage and rising capital efficiency. Revenue grew almost 50 percent YoY, but EBITDA and PAT grew faster. That suggests that the business is benefiting from mix, utilization, and an integrated delivery model.

The order book of INR 2,208 crore and the INR 1,256 crore of long term contracts add visibility. The improvement in net working capital days versus last year is also encouraging, even though quarterly working capital movements should still be tracked, especially inventory.

The quarter’s underlying theme is disciplined execution. A hybrid India US footprint, a clear tilt toward box build, and a push for design led customer engagement are not new messages for Avalon. What changed is that the financial trajectory is now reflecting that strategy more consistently. If the company sustains its focus on profitable segments, keeps working capital under control, and converts its expanded order book efficiently, the FY27 narrative could remain anchored in both growth and returns.