Avalon Technologies: 40% revenue CAGR, 27% share price upside and order book growth; what else MOFSL says

Brokerage firm MOFSL said Avalon Technologies Ltd is shifting towards higher-value, engineering-intensive electronics manufacturing services segments, with semiconductor equipment and battery energy storage systems emerging as key growth drivers. It said the semiconductor opportunity is being supported by rising outsourcing by global OEMs, growing demand linked to AI, high bandwidth memory, advanced packaging and ISM 2.0-led localisation, while the energy storage systems opportunity is being driven by structural growth in BESS, renewable integration and grid modernisation.

MOFSL said Avalon, backed by a healthy order book, is positioned to deliver sustained growth across energy storage systems, aerospace, rail and satellite communication. It added that the company’s order book rose 25 per cent year-on-year to Rs 2,200 crore in FY26, including long-term contracts, giving it revenue visibility, and estimated a CAGR of 40 per cent in revenue, 47 per cent in EBITDA and 56 per cent in adjusted PAT over FY26 to FY29.

The brokerage said Avalon’s entry into semiconductor equipment marks a strategic move into a higher-value and higher-complexity segment, supported by rising investments in AI, HBM, graphic processing units and packaging. After about two years of development, the company has started commercial production of electronic power boxes for a leading global wafer fabrication equipment supplier. MOFSL said Avalon plans to set up semiconductor equipment as a standalone vertical within 18-24 months, with scope to expand further into other components for semiconductor equipment.

It said the segment has the potential to make a meaningful long-term contribution to revenue and profitability, supported by dedicated infrastructure in Chennai, increasing localisation and outsourcing, and policy support under ISM 2.0. In clean energy, MOFSL said Avalon’s segment has expanded at a 21 per cent CAGR over FY21-26, with BESS emerging as a key growth driver, especially in the US.

It said the global BESS market is expected to grow at a 16 per cent CAGR through CY30, supported by higher renewable penetration and grid modernisation. Avalon operates across power conversion systems, EMS and system integration, with a focus on high-value, complex power and energy management solutions.

MOFSL said that with the US as Avalon’s main market and renewable and data centre investments increasing, BESS is expected to ramp up strongly and become a major growth and profitability driver for its US operations.

It said production ramp-up across ESS, aerospace, Kavach, locomotive subsystems and satellite communication should support growth, while long-duration contracts, stringent certifications, mission-critical applications and complex engineering requirements create high barriers to entry and strengthen customer stickiness.

The brokerage also pointed to the rising share of box-build solutions, which increased from 47 per cent in FY25 to 54 per cent in FY26, along with improving customer quality and a wider global presence, and reiterated its Buy rating on the stock with a target price of Rs 2,740, based on 50 times September 2028 estimated earnings per share.