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Avalon: EMS player tapping into high growth industry verticals

ICICIdirect Research 05 Apr 2023 DISCLAIMER

What's Buzzing? 

Avalon Technologies, an integrated EMS player having a competitive edge in exports market is set to raise Rs 865 crore through its IPO. 


Avalon is an end-to-end integrated EMS company with capabilities ranging from PCB design & assembly to end-to-end box build of electronic systems. The company has 12 manufacturing facilities across India & the US through which it serves global OEMs. The company earns ~60% of its total revenue from exports while the rest comes from the domestic market. Avalon solely caters to the B2B market and its products find usage in high-growth industries like clean energy, mobility, industrials, communication and others. Going forward, Avalon plans to – 1) Focus on selling high-margin box-build products, 2) Drive revenue from clean energy & communications segments and 3) Focus on new product development to gain market share. 

Our Perspective 

Avalon's consolidated revenue grew at a CAGR of ~14% in FY20-22 led by 30% CAGR in the clean energy segment. During the same period, PAT grew ~5.5x to Rs 68 crore tracking one-time gains and EBITDA margin expansion by 160 bps to 11.6%. On the balance sheet front, its debt to equity ratio at 3.4x in FY22 is higher due to increased working capital requirements. The company plans to repay its working capital loans through IPO proceeds. At the IPO price, Avalon is valued at 56x FY23 annualised EPS, which we believe is higher compared to its listed peers in the EMS space.

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