Avalon Technologies Q2 Results: Profit More Than Doubles, Share Price Jumps 20%

Avalon Technologies Ltd.'s profit more than doubled in the second quarter of fiscal 2025, pushing share prices up nearly 20% on Thursday.

The integrated electronic manufacturing services player's net profit jumped 140% year-on-year to Rs 17 crore in the quarter ended September 2024, according to an exchange filing. Revenue rose 36% to Rs 275 crore, while Ebitda surged 139% to Rs 30.1 crore.

The outlook for the second half of the current fiscal holds significant importance for the company, which offers services ranging from full stack printed circuit board design and assembly to end-to-end box build of electronic systems.

There are two key differentiations of the company, as it stands out as the only EMS player to have a manufacturing presence in the US. The other key differentiation is the company's strategy for segmental performance. NDTV Profit takes a look at how these two differentiations help the company stand out with respect to its peers.

Avalon Tech Q2 Results Key Highlights (Consolidated, YoY)

• Revenue up 36% at Rs 275 crore versus Rs 201 crore.

• Ebitda up 139% at Rs 30.1 crore versus Rs 12.5 crore.

• Margin up 470 basis points at 10.9% versus 6.2%.

• Net profit up 140% at Rs 17 crore versus Rs 7 crore.

Avalon Tech: Sector-Wise Contribution

The company mainly operates in five sectors. The industrial division is the biggest revenue contributor, with 29% of total revenues. This segment includes power and automation products.

Mobility and Transportation, which includes products for sectors such as railways, automotive, and aerospace, contributes 26% of total revenues. Avalon has onboarded two auto-component companies as well as secured significant contracts with two major industrial companies in the first quarter of fiscal 2025.

Clean energy includes products for solar, electric vehicles, and hydrogen, contributing 20% to the revenues. The company has onboarded key clients like Lunar Energy, Ohmium, and FTC Solar in this vertical.

The company is expanding into new areas such as solar and servers, while preparing to meet increasing demands with two new facilities in Chennai.

Key Differentiation With Peers

Avalon Technologies distinguishes itself from its peers in two key ways.

First, it is the only EMS company with a manufacturing presence in the USA. Currently, 11% of its manufacturing in terms of revenue is from the USA. While this has historically been a competitive advantage for the company, recent economic headwinds in the country have posed challenges. However, according to Motilal Oswal, the company is successfully navigating these issues with a well-defined recovery plan for its US business, alongside continued growth in its domestic operations.

The business is recovering with a shift in stance from destocking to restocking. In their quarterly conference call, the company expressed their belief that the destocking phase has now reached its lowest point.

The second differentiation is that the company is not present in the consumer electronics business. While revenue growth is strong for most players in this segment, margins are lower, which affects overall performance. While revenue growth in Q2 has been higher for players like Dixon (80%), Kaynes (65%), and Amber Enterprises (81%), compared to Avalon (36%), this is due to their strategy of low volume, high margins business, according to the company.

Shares of Avalon Technologies jumped 19.55% to Rs 705 apiece, before paring gains to trade 15.65% higher at Rs 682 apiece as of 12:30 p.m. That compares with a 1.06% decline in the benchmark Nifty 50