Ladies and gentlemen, good day, and welcome to Avalon Technologies Limited Q1 FY 2027 Earnings Call hosted by DAM Capital Advisors. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tanay Shah. Thank you, and over to you, sir.
Hi, Satarva. Good afternoon, everyone, and a warm welcome to the Q1 FY 2027 Earnings Call of Avalon Technologies. To take us through the results today, we have with us from the management, Mr. Kunhamed Bicha, Chairman and Managing Director, Mr. Suresh VR, Chief Financial Officer, Mr. Shriram Vijayaraghavan, Chief Operating Officer, and Mr. Venky Venkatesh, Chief Sales Officer. Mr. Bicha will give us an overview of the business performance, and he will be followed up by Mr. Suresh's remarks on the financial performance, post which we will open up the floor for Q&A. As we move forward, it is important to bear in mind that any forward-looking statements made during the call are subject to potential risks and uncertainties, both known and unknown. Now, without any further delay, I will hand over the floor to Mr. Bicha for his initial remarks. Thank you, and over to you, sir.
Thank you, Tanay. Good afternoon, ladies and gentlemen, a very warm welcome to Avalon Technologies Q1 FY 2027 Earnings Call. I want to begin by thanking our investors for your continued trust and support. Your confidence has enabled us to stay focused on what really matters, consistent execution, disciplined investments, and building a long-term profitable business. We are grateful for your trust, and our commitment to deliver has only grown stronger. Q1 FY 2027 was another strong quarter. This marks our eighth consecutive quarter of improvement in performance and growth across key metrics. What stands out is the quality and the breadth of this growth. Our revenue growth is well-diversified across geographies and industry verticals. Our profitability metrics has improved. Our ROCE has moved up to 23.4%, reflecting that we are scaling with discipline.
Net working capital has improved, and our order book continues to provide good visibility on quarters ahead. Our three growth engines are existing business, new program wins, and our expanding opportunity pipeline are all gaining momentum together. Based on this strong momentum across our business and the visibility we have on programs ramping through the year, we are revising our FY 2027 revenue growth guidance upwards from 24%-27% - 26%-30%. Moving to the financial highlights, revenue for Q1 FY 2027 was INR 484 crore, up 50% year-on-year from INR 323 crore in Q1 FY 2026. Q1 revenues are marginally ahead of Q4 FY 2026. A positive start for FY 2027. During the quarter, India contributed 41% of the revenue, and export business contributed 59%.
India business grew 53% year-on-year, and export business grew 48% year-on-year, with both geographies contributing to the growth. Our industry vertical revenue contribution. Industrial contributed 32% of our revenues, growing 52% year-on-year. Mobility contributed 25%, growing 36% year-on-year. Within mobility, rail accounted for approximately 15% and aerospace 8%, growing 37% and 47% respectively. Clean energy contributed 29%. Our gross margins for the quarter came in at 34.7% within our guided range of 33%-35%. EBITDA margins came in at 12%, up from 11.8% in Q4 FY 2026, reflecting continued operating leverage as revenues grow. Profit after tax was INR 35 crore with a PAT margin of 7.2%, a meaningful improvement year-on-year.
As of June 30, 2026, our order book grew 23.4% year-on-year to INR 2,208 crore with an average execution period of 14 months. Long-term contracts with execution timelines ranging from 15-36 months stand at INR 1,256 crore. Order book growth remains well-diversified across industry verticals and geographies. Net working capital days improved to 117 days in June 2026 versus 142 days in June 2025, an improvement of 25 days year-on-year. Within this, inventory days improved from 104 days to 94 days. Receivable days reduced by 13 days, and payable days improved by two days over the same period. Asset turns are at 9.9 x, and return on capital employed stands at 23.4%.
India manufacturing operations, which serve both domestic and global customers, accounted for 72% of our revenue in Q1 FY 2027, generating healthy profitability at an EBITDA margin of 16.7% and a PAT margin of 11.1%. U.S. operations contributed the remaining 28%. Moving on to our U.S. operations. Losses in U.S. manufacturing has continued to narrow, coming in at approximately INR 4 crore in Q1 FY 2027. Our U.S. manufacturing plant has a clear and deliberate role. It is where new customers come in, validate our capabilities, and get comfortable with Avalon as a partner. Once that comfort is established, production progressively transitions to India manufacturing, where customers benefit from our cost structure, depth of capabilities, and scale. Our manufacturing presence in both geographies gives customers the flexibility to start in the U.S. or come directly to India, and we are well-positioned to support both.
As India manufacturing continues to scale over the coming years, we expect U.S. manufacturing contribution to naturally settle at around 20% of our total revenue. On revenue guidance, we have previously committed to double revenues from FY 2024 to FY 2027, a target of approximately INR 1,734 crore. Our trailing 12 months revenue have already crossed that milestone, nearly a year ahead of our commitment. As highlighted earlier, reflecting on the strong Q1 performance, we are now focused on the next doubling from INR 1,603 crores in FY 2026 to approximately INR 3,200 crores in FY 2029. The products we manufacture and the verticals we build are long-term in nature. Program life cycles run for years, sometimes decades. Our customer relationships deepen over time, and our revenue compounds accordingly. We encourage you to evaluate our progress over a multi-year period.
That is how we manage this business, and that is the length through which our strength, performance, and value will most meaningfully be perceived. Now moving to our key growth drivers. Our existing business continues to provide a strong and steady foundation with long product life cycles, mission-critical programs, and recurring revenues across rail, aerospace, industrial, clean energy, and communication. On new business wins, the programs we have been building for the last two or three years are now progressing well. Aerospace cabin sub assemblies are moving towards volume. Production of locomotive engine subsystems is underway. The Kavach anti-collision system is on track for commercial production. On Semiconductor Equipment, we have increased our allocation with one of our world's leading wafer fabrication equipment suppliers, expanding from power box assemblies into other products with production ramping over the next few quarters.
In aerospace, we have secured incremental box build business with a leading aerospace company, further strengthening our engagement in the export market. On the opportunities pipeline, we continue to see a healthy expanding set of opportunities across geographies and verticals. Southeast Asia and Europe continue to add a new dimension to our geographical reach. All three growth engines are gaining momentum together. On our manufacturing footprint, our new manufacturing plant focused on domestic demand in Chennai is now complete and will commence commercial production from Q2 FY 2027. As we deepen our presence in Semiconductor Equipment and advanced electronics, the need for world-class infrastructure becomes increasingly important. We are in the process of acquiring a large parcel of land in Chennai that will support Avalon's growth over the next decade, catering to both domestic and export opportunities. We shall share more details as it crystallizes.
We are now building the organization for the next phase of growth. We are investing in leadership, process automation, IT systems, and AI-enabled capabilities across functions. Some of these investments are being made now ahead of the growth. As I close, let me offer a broader perspective. Global supply chains are being realigned. Customers are looking for reliable manufacturing partners beyond traditional geographies. India is emerging as a credible and competitive destination. We are well-placed in this environment. Avalon is building a global integrated electronics manufacturing business focused on complex box build solutions for mission-critical applications across high-growth industries. Our continued goal is to build an enduring institution that customers trust. That is deep in engineering capability and that is built to last. We remain committed to efficient capital allocation, strong governance, disciplined execution, and of course, profitable growth.
With that, I hand over to our CFO, Suresh Veerappan, for a detailed overview of our financial performance. Thank you.
Thank you, KB. Good afternoon, everyone. Let me take you through the financial performance in detail. Revenue for Q1 FY 2027 was INR 484 crore, up 49.8% year-on-year from INR 323 crores in Q1 FY 2026, and up 0.9% sequentially from INR 480 crore in Q4 FY 2026. Our average revenue growth over the last eight quarters has been 46%. WOSM contribution has increased from 44.5% in FY 2022 to 59.9% in Q1 FY 2027, reflecting our continued focus on complex high-value manufacturing. Gross margin for Q1 FY 2027 was INR 358 crore at a margin of 34.7% within our guided range of 33%-35%, representing year-on-year growth of 46.3% from INR 115 crore in Q1 FY 2026.
EBITDA for Q1 FY 2027 was INR 58 crore with a margin of 12%, up from 9.2% in Q1 FY 2026 and 11.8% in Q4 FY 2026, reflecting operating leverage as revenues scale. Adjusting for the parent pass-through impact, our EBITDA margin would have been approximately 0.9% higher. PAT for Q1 FY 2027 was INR 35 crore with a margin of 7.2%, up from 45.3% year-on-year from INR 14 crores in Q1 FY 2026. We continue to invest in talent, capacity and inventory to support upcoming growth in new programs. These initiatives strengthen our foundation for long-term growth and are expected to enhance operating efficiency as business volumes continue to scale. Moving on to the balance sheet.
Net working capital improved to 117 days in June 2026 from 142 days in June 2025, an improvement of 25 days year-on-year. Within this, inventory days improved from 104 days to 94 days. Trade receivable days reduced from 87 days to 74 days. Trade payable days improved from 49 days to 51 days. On a sequential basis, net working capital moved from 112 days in March 2026 to 117 days in June 2026. Cash flow from operations was positive at INR 32 crore in Q1 FY 2027, an improvement from INR 16 crore in Q4 FY 2026. As of June 30th, 2026, total debt was INR 196 crore, with cash and investments of INR 171 crore, resulting in a net debt position of INR 24 crore.
Net debt to equity ratio stands at 0.03, a comfortable position. CapEx for Q1 FY 2027 was INR 16 crore. Asset turns remained strong at 9.9 x. Return on capital employed improved to 23.4% from 10% approximately two years ago. A consistent and meaningful improvement. With improved business visibility, we have revised our FY 2027 revenue growth guidance upwards to 26%-30% from the earlier guidance of 24%-27%. To summarize, Q1 reflects continued progress across our key operating and financial metrics, demonstrating the strength of our execution. As we move forward, our focus remains on delivering sustainable profitable growth, improving operational efficiency, and strengthening long-term customer relationships. With that, I request the moderator to open the floor for questions. Thank you.
Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, please wait for a moment while the question queue assembles. The first question comes from the line of Santosh Seshadri from Avendus Spark. Please go ahead.
Good evening, sir. Congratulations for a great set of numbers. My first question is on long-term steady-state gross margin. We have been historically talking about 33%-35% kind of margins. Just as we think about some of these newer businesses like Semiconductor Equipment and the power modules and Kavach that we are working on, as it scales up, how should we think about the structural impact of these businesses on margin profile? Do you think of these businesses like inherently higher on the margin go and any scope for margin improvement? That's my first question. I have a follow-up.
Okay. Thank you, Santosh. That's an interesting question. If you look at in the last five years or so, we've always maintained this range. Sometimes we are a little bit higher and sometimes a little bit lower, but this is a comfortable range. Certain set of our industries and products have much higher margins, and certain industries have lower margins. What you see is a blended rate. As you see the higher margin business kick in, you will see some difference. But as of now, this rate is at 33%-35%, with a few quarters being up or down.
Got it. So there is scope for improvement in the long run, but as of now, we are maintaining at 33%-35%. Is that particular?
That is our aspiration. As you are very well aware.
Got it. My second question is on the cost structure below the gross margin line items. Here we have been talking about roughly 50/50 split between fixed and variable costs. My question here is, given the strong revenue growth and the kind of ongoing investments that we have in the manufacturing footprint that you mentioned in the opening remarks, at what stage do you think some of these fixed costs become semi-variable in nature? What would be the implication on operating leverage over the medium term, next for FY 2027 and FY 2028?
Hi, Santosh, Suresh here.
Hi, yes.
You are right in saying that between 45% and 50% of the expenses below the gross margin are semi-fixed or fixed in nature. Some of the expenses, most of the expenses are semi-fixed in nature. What we believe is with scale in revenue, with growth in revenue, we believe the operating leverage will continue to play out. If you look at our India manufacturing business, it has delivered an EBITDA of 15.7%, and it is a continuing delivery in terms of profitability over the last few quarters. We expect the operating leverage to play out. We will not give any particular guidance per se for EBITDA margins. Otherwise, I would add to what KB said, that we have consistently maintained our gross margin percentage in the range of 33%-35%. We believe we can continue that.
Thank you. Just one last question. Some of the peers have recently spoken about opportunities in the data center space and ramping up business starting from FY 2027. Could you share your perspective on this particular opportunity? Are you currently in talks with any of the potential customers? Also, where do you see yourself positioning within this value chain? Will it be mostly in the servers or rack systems or power management? Any thoughts on that?
As you know, Santosh, one piece is the world is going through a super cycle in power. We have the AC/DC systems and all that. We are playing with some of the leaders. We started production with a couple of them. That is going to be a part of that. Saying that, we are also working with multiple customers who supply power, off-grid power into the data centers. That is bound to grow. Also, now into the future, you will see us work more towards the rack and the cooling systems. Which we have not won the business yet, but we are still working towards that. Of course, all the growth comes with the Semiconductor industry. Equipment industry. We are well-positioned for that in the near future. We are not going to make server boards as of now.
Not saying that we will not do that in the future. But anything around it, which is probably the fastest growing element, we intend to play and we are playing in some of those areas. Does that answer your question, Santosh?
Absolutely. Thank you very much, sir, and also very best.
Thank you. Thank you, Santosh.
Thank you. The next question comes from the line of Siddharth Bera from Nomura. Please go ahead.
Hi, sir. Thanks for the opportunity and congrats on a great set of numbers. Sir, first question is on the two segments, HVDC and Semiconductor Equipment. Where are we in terms of the other billing cycle? When should we expect that to come through for us this year? Second is on the clean energy side, we did have seen a very strong growth in this quarter on a year-over-year basis. Is there any new customer addition or it is more from higher share of business from the existing customers? If you can throw some more light there.
Yeah. On the first piece, the full revenue is not started, but revenue has started for both the sectors. For HVDC as well as Semiconductor Equipment , revenue has started, it will gradually grow. It is not a switch on and off because there are multiple systems, multiple products. So it started. It started this quarter, and we will see the ramp in the following quarters. On your second part of your question, clean energy has been fluctuating for us over the years, and this has been a great quarter for that. We will continue to see the growth, but certain quarters you may see clean energy up. That is why we are diversified. Certain quarters you will see the mobility up. Certain quarters industrial. Industrial has always been up.
It is not that since everything is growing and certain patterns and certain production happen at various time frames, you will continuously see growth in all sectors. What we are happy is that every sector is growing, except for communication, we are against.
Got it. Would you be able to share the U.S. loss for this quarter? Have you already turned around or where are we in terms of the plan?
In terms of U.S. manufacturing, we have reported PAT losses of approximately INR 4 crore in Q1 FY 2027.
Okay.
It is largely narrowed down. Two years ago, it was approximately around INR 14 crore. One year ago, it was around INR 9 crore losses, and now it has narrowed down to INR 4 crore losses at PAT level.
Got it.
Thank you, Siddharth.
Thank you. The next question comes from the line of Sumit Sinha from Macquarie. Please go ahead.
Yes. Thank you very much, and congratulations on another incredible quarter. I guess a couple of questions here. KB, I was really happy to see about how you spoke about bolstering your operations and leadership. Because usually, when smaller companies grow at this pace, you do a great job with execution, but at some point things start to fall by the wayside. If you can just provide a little more color about what you are doing with leadership positions you are hiring for, I think that will be really helpful.
Secondly, historically, most of your products have been PCBA and box build. Do you think you have an opportunity to go into new product categories, or you would rather just service with these products? Because demand obviously is there and you are executing on the pipeline. Or maybe you will tell me that defense and aerospace and all have different new products.
I would like to know more about the SKUs that you have. My third question is, generally, your business, the second half of the year, your business does better than the first half. With 50% growth in Q1, how should we think about the second half? I know the guidance implies it is kind of 25% growth in the next three quarters, but if you can provide some clarity more around the second half versus first half dynamic. Thank you.
Hi, Sumit. Nice to talk to you again. If I missed out any part of your questions just remind me once. The first part was leadership. As we grow each of our divisions and capabilities and verticals, we need leadership. These are growing from $20 million-$ 100 million , however you want to look at it. We have taken a dedicated or a very focused approach to get leadership. I believe, the first level of leadership is there already with our CEO, CFO, CSO. We are adding probably five or six new candidates at the VP level to either lead a BU or lead a capability. Okay. That work has already started. We are trying to plan for the next three years of growth, at least, who are the right leaders.
The same thing we did three years back when we started with the C-levels to get the company going in the right direction. We are looking for the right candidate. We are not going to rush to it because that candidate is very important to us. Okay. You want to add something, Shriram?
Yeah. Thanks, KB. Sumit, so covering three pieces of fundamental building blocks of growth. One is people. Second, I think what KB touched upon are processes internally. And third is automation. So the focus is to build the capability in all three areas, and that work is underway. I think KB has given you the highlights on the leadership. I just want to make sure that it's across all three areas.
And the second question, if you could remind me, Sumit.
Yeah. It was more around the products. So historically you've done PCBA, box build.
Okay. Got it. So we are vertically integrated. So that's why you see our box build move from what, 43% - 59% in a year or so. So we are building a lot more metal, we're building a lot more cables, we're building a lot more plastics, we're building a lot more magnetic to get into our own final product. And that's why you see a box build ratio going up. Saying that, there's one or two areas, actually one which we may announce. I don't want to pre-set that. We will enter into one area which is well within our capability, and that I think in the next two quarters, we'll make that announcement. So there's one area we'll add, because we see a lot of opportunity in that, and will add to our box build capabilities, Sumit .
Just to add to that, we are getting into newer industrial verticals as well as newer geographies like Europe, Southeast Asia. In terms of getting our increasing our target market, the work is already underway, and we will start seeing the results of that in the coming quarters.
Got it. One last question about the guidance.
Sumit, you know we are conservative. The problem we have, to be honest, is when we get these into these large programs, for example, it may happen in February of next year. Or the customer may delay to April. So we're trying to be conservative. If it comes in February, everything is well and good. If it comes in April, it's a next year thing. But look at us from a three-year lens, right? Like we said, our business is not quarter to quarter, because the customers look at us over a multi-year period and are we a good partner over the next 10 years, right? But we're trying to kind of get that all together and try to give you a feel of what we can be.
In a three-year period, as we have done in the last time, we said we'll double it into a three years within two years. The aspiration is always to do it faster. So you need to look at us from that rather than what's going to happen next quarter or the following quarter.
Got it. Thank you very much. All the best.
You are welcome, Sumit. Thank you.
Thank you. The next question comes from the line of Bala subramaniam from Arihant Capital. Please go ahead.
Good evening, sir. Thank you so much for the opportunity. A follow-up on the previous participant on the guidance side, sir, we are doing INR 50 crore-INR 60 crore annual CapEx with a 10x effect term. Is it a right way to understand every year, INR 500 crore-INR 600 crore additional revenue. I think if you are adding that, it will come nearly INR 3,100 crore-INR 3,400 crore top line change by FY 2029. And secondly, these sunrise sectors like clean energy and aerospace and defense, and these also are same kind of 10x effect term?
Hi, Suresh here. Bala. Firstly, on the CapEx side, last year we did CapEx of INR 56 crore and Q1 of INR 56 crore. Like what KB highlighted in his opening remarks, we are looking at expanding our manufacturing footprint in Chennai. Whenever that happens, we will do it in a modular fashion and that will involve incurring additional CapEx to an extent there. Having said that, we are focused on capital efficiency. If you look at our ROCEs a couple of years back, approximately 2.5 years back, it was around 10%. Today it is 23.4%. Our goal is to improve that even further. Every new asset, new plant that comes into picture, it will take its own time frame for it to reach its optimum capacity in terms of utilization. It will gradually get to that.
Our focus is to improve our ROCE.
I will add to this, as we go into these bigger box build solutions, space is a premium. We are building up land and buildings before we actually put machines, so that we are comfortable with that, and then we will add the machines when required.
Okay.
Is your question answered, Mr. Subramanian?
Yes, sir. The qualitative perspective has been answered. My second question, I think we have in Q1 nearly 50% top line growth, order book also increased nearly 43%. But if you look at our working capital, the deficits came down to INR 140 crore - INR 217 crore. Generally, with growing order book and revenue, it leads to working capital strain. For example, building inventory for new programs. I am just trying to understand how we managed to improve the working capital days and how do you look at in coming years.
Thank you for that, Bala. That was a consistent and continuous effort over the last two, three years on each bucket, inventory, receivables, and payables. Inventory days, it actually improved to 94 days from 104 days. Same is the case with receivable and payable. Again, what we said in the opening remarks and the previous quarters, we are also having some new programs growing parallelly. For new programs, we may have higher networking capital at the start, and we will find our efficiency over a period of time. For existing businesses, we would have already found our efficiency in networking capital. Overall, what was our guided range in the previous quarters were around 120- 130 days. We are well within that range.
Okay, sir. My last question, take U.S. loss, it is around INR 4 crore in this quarter. Last year it was INR 9 crore. I am trying to understand what is the minimum revenue run rate required to achieve a breakeven, whether we can expect by Q3 or Q4?
We have not given any particular quantum at which we will reach the breakeven. What we have highlighted in the earlier calls also is by the end of this fiscal year, we would like to see a steady state EBITDA breakeven and then following that, a PAT breakeven. What I would like to highlight here, Bala, is the important way to look at our U.S. businesses, U.S. manufacturing operations is that is our plan to deal in the customers, make the customers comfortable, and then as it ramps up, transition it to India manufacturing. It is our beachhead from that perspective. Who will answer the question now?
Okay, sir. Thank you.
Thank you.
Thank you. The next question comes from the line of Praveen Sahai from PL Capital. Please go ahead.
Yeah. Hi. Thank you for the opportunity. My first question is related to the box build. As from the last report quarter, we are continuously seeing the increase in the contribution from the box build, and also you have highlighted the way forward also, we will see this trend continue. How you are seeing the gross margin profile with this box build contribution to increase the way forward?
Yeah. We are always in our business model to get to the box build, right? We may start with the PCB, we may start with the metal, we may start with the cable. But our goal two to three years from where we start with the customer is to do the whole box, if he doesn't give it to us in the beginning. Of course, the gross margins are better in box build. Okay. And it takes time for the gross margins to improve. It's over a period of time. It's not as soon as you start. When the program starts, the gross margin may be a little lower. Okay. But over a period of time, it does increase as we process these and our quantum buys help. The other piece is, with the tariffs, we're still maintaining gross margins. Okay. It does have an effect.
Though not a big effect, it does have an effect. In spite of that, we have maintained the gross margins.
If you maintain the contribution of 60%, we may see the improvement in the gross margin. Is it fair understanding?
The way to understand it is, if you ask, do we anticipate our box build percentage to go up? The answer is yes, because that is one of our strength points, building complex boxes. But on one side, we will have new programs, which would start maybe at a lower percentage, and on the other side, we will have existing business, which may be at higher percentage. What you see as that 33%-35% is a blended mix of both of that. I think it is best to assume and estimate a broad term percentage of 30%-35% to continue.
Right. Next question is related to the order book. Out of your INR 2,100 crore, can you give some indication that how has been mix of segments?
It is broadly based on the segments and the growth or the percentages we have declared. It is across verticals. Some certain quarters, some may be higher than the others. We always aspire to be around 25%. The industrial right now is around 30%-32%. Our total order book, if you look at it, we only look at a three-year window. We have orders from 3- 10 years. We do not count that. That itself is INR 3,465 crore. In the short term, which is the order book for the next 12 months or so, it is INR 2,208 crore. We are very comfortable on what we need to do in the near term. We have long-term contracts, which we do not count in this.
Right. Lastly, one clarification. In the international business, which now the U.S. has 60% of your business, is that majority is from the clean and the mobility businesses?
No, it is across. A lot of the clean is done in the U.S., but the rest of it is done in India. A lot of it is industrial. We do not have rail in the U.S. Aero, industrial, communications, as well as clean, a big chunk is there because of the subsidies in the U.S. Again, the sub parts of these U.S. build is done in India. Okay. So it is a mix.
Praveen, even in U.S., we have a very balanced and diversified growth across verticals.
Okay. Got it. Thank you, sir, for all the details.
Thank you.
Thank you, Praveen.
Thank you. The next question, from the line of Vipraw Srivastava from PhillipCapital. Please go ahead.
Hi, Good evening. Great set of results . Just two quick questions. Firstly, on the order book side. For the last three quarters, your order book has been hovering around INR 2,000 crore. This quarter also it's around INR 2,200 crore. In that sense, given that your revenue growth is exceeding order book growth, any reasons for that? Why is this order book growth slow? Or am I missing something?
If you look at it's always consistent and it grows. Year- to- year it's grown 23.4%. We are very well covered for the next 12 months to 36 months. In the sense of what we want to achieve, if you look at it, we are saying we're going to do INR 3,200 crore in three years. More or less that order book is covered, right? If you look at it from INR 2,208 crore in 12 months and INR 1,256 crore in 14 months to 36 months. Again, we have five-year contracts, we have 10-year contracts. It's easy to add them, but it's not the right message to give that these orders are there for years. Right?
We'd like to keep it in this range, which is 14 months to 36 months, so that you get a realistic perspective rather than a high perspective of orders worth so much. Because some of these, if you multiply this into 10 years what we do in one year, it's a huge number. We don't want to put that out.
Another important perspective to have on this is some of the new programs may be on pilot stage. Whenever they move from pilot stage to ramp up production, the larger sum of orders will come in for them. For us, the benefit and advantage what we see in our business is the annuity sale of orders what we receive, the long-term nature of the lifecycle of the product as well as the customer relationship with us. Hope that answers your question as well.
Sure. Just a quick follow-up on this. A gain, please correct me if I am wrong. Given that your current order book is around INR 2,200 crore and your average execution period is 14 months, that is very close to what the guidance you have given. Is this understanding correct?
See some.
The order book is one quarter, basically.
Yeah. The way to look at it is our order book is executable over an average period of 14 months. So for some customer, it may be three months, some customer it may be six months.
Fair enough.
Some customer it may be 18 months. So it is not a straightforward straight line number over there. But yeah, you can have that kind of assumption.
Fair enough, sir. Last question from my end on the clean energy side. So obviously that has seen a very rapid growth in Q1. So going forward for FY 2027 and 2028, obviously, since the IRA incentives for solar projects in U.S. ends on December 31, 2027. So you expect that growth to continue for next couple of years, or you plan to offset that by onboarding new clients, new projects? Any thoughts on that?
Shriram here. Just a quick point here. The subsidies and the support continues until 2032 because this is a storage solution. These have a longer subsidy support in the U.S. at this point. Suresh, have at it, sir.
Suresh here. Like we have discussed in the last four, five quarters, we are not in a solar panel business. We are in the energy storage solutions business. That is number one. Number two, if you look at the growth across verticals, industrials has grown by 52%, aero has grown by 47%, rail has grown by 37%, medical has grown by 15%. The growth is across verticals. It is just that in some quarters, one vertical may have a lumpy growth and it goes on like that. For us, the comfort from where we derive is the long-term annuity sale of business. That is where it is the kind of business what we are having.
Sure, sir. Just a quick follow-up on what Shriram, sir said. Sir, you rightly mentioned the battery energy storage incentive is till 2032, but as far as I know, again, please correct me if I am wrong, majority of battery installations in U.S. happens along with solar. It is not in isolation. That is what the data says. Even if the incentives continue till 2032, if a panel is not being installed, what are your comments on the future of the battery energy storage industry?
We are happy to answer this offline. There is a nuance.
Sure.
To this situation. We are happy to take this offline and.
Fair enough, sir.
Okay.
For us, over the last two years, even this vertical has grown along with all the other verticals.
Sure. Thank you. No worries.
Thank you, Vipraw.
Thank you. The next question comes from the line of Bhavik Mehta from JP Morgan. Please go ahead.
Hi. Thank you. Sir, one question again, going back to the guidance. Obviously, after a very strong 1Q, one would have assumed that the guidance would have been upgraded to at least more than 30%. But given the range is more 26%-30% right now, just trying to understand what are the various scenarios you are baking into that guide. Is this new guide like the worst possible outcome? Even if everything goes wrong, could you deliver on this guidance? Hence, this is like the worst case where you might not put some upside to it if the other predictions what you are hoping to convert comes true.
Bhavik, this is Kunhamed. The way we look at this, I know everybody loves quarter- to- quarter, but as a business, when we plan, we plan on a three-year horizon. That is what we try to deliver. Okay? Some quarters may be huge, some quarters will be lower. But saying that, we are conservative. To answer your question, we are conservative. Some of the reasons are when these new projects will fit in into volume, right? Like I explained before, it could be in February of this year, or it could be in April of next year. It is two months. It does not matter to a customer, but it does matter to us. We do have some conservatism in this. That is what we are comfortable with, to be honest, rather than go out with flying numbers and chase that thing.
We have demonstrated that in the last seven, eight quarters.
To add to that, Bhavik, Suresh here. To add to that, the kind of new programs what we have gotten, whether it is coming from equipment or in the industrial sector or in the power vertical or in terms of new geographies, getting into Southeast Asia or into Europe, that is an exciting place for us because it may not be fully reflected in the P&L today, but it is there either as a pipeline or a proto or waiting to get into a commercial ramp perspective.
Bhavik, just to kind of echo on what Suresh said. I think we have never been this excited on the possibilities. It may not show in the P&L. The type of products which are coming in and the type of geographies which are coming in. At least in 35 years of doing this, I have not seen that. On the long term, we are very, very Midterm and long term, we are very, very positive.
Okay, got it. That is helpful. Thank you.
Thank you, Bhavik.
Thank you. The next question comes from the line of Archit Shah from 360 ONE Capital. Please go ahead.
Thank you for the opportunity and sir congratulations for the good set of results. Sir, just one question that the growth that we are seeing, the 40% growth and the guidance that you are giving. The fundamental question that, is there any split or is it a pricing growth because of the components price that have increased so much and like tomorrow if they correct or let's say this remains stable, will our growth remain the same? Will we still be able to beat the guidance that we are doing right now?
Hi, Suresh here. Last eight quarters, the average revenue growth is 46%. Over the quarters, across verticals, across geographies, this growth has been reached. Even now, if you look at this quarter, it is well diversified in both the U.S. market as well as export market as well as India market. So if your question is if there is any one-off growth in this, the answer is no. The answer has been the same over the last past quarters also.
Just to get that, Archit. We don't have exposure to memory as much. Because we're not in the consumer space, so we're not in server space.
Okay. Let's say if other components like you said, copper and TVs and everything. If tomorrow if those prices continue to rise or increase, will it show higher growth in the numbers versus if they stay stable or maybe decline a bit? That's just what I wanted to understand.
Yeah. Archit, Shriram here. All of these components you talk about form a part of the bill of materials, right? You'll have metals, you'll have cables, you'll have PCBA, you'll have a lot of other things. On the whole, we don't believe this is driving the increase in prices, right? Ultimately, as Suresh said, this is broad-based growth. It's been driving for the last eight quarters. And the margins are holding between 33% and 35%. This is a sort of inherent business growth that we are seeing.
Yeah. Okay. That's what I was looking for. Thank you so much, sir. Thank you very much.
Thank you, Archit.
Thank you. We have the next question from the line of Tanay Shah from DAM Capital Advisors. Please go ahead.
Hi, Tanay. Are you there?
Hello, Mr. Tanay. Can you hear me?
Can we go to the next question?
Done. Okay, we move to the next question. The next question comes from the line of Siddharth S. from Nomura. Please go ahead.
Congrats on the good set of numbers. I'd just like to get some clarity on your exposure on an overall basis to the defense space. It seems to be the most underserved sector and the hottest sector at the moment. At the moment, I think the medical and defense combined comes close to 10% of your revenue as per Q1 in FY 2027. I'd just like to get some light on if you're planning to foray into that space via the PCBA or the whole EMS ecosystem or the supply chain as a whole. Do you have any plans to actively increase the focus there or what's your stance on it?
Thank you, Siddharth, for that question. We have nothing against the defense business, but it's a very lumpy business. It's a feast or famine business, right way I should say. Saying that we do defense in India as well as in the U.S. Okay? And it's one of the verticals we are looking at to focus. We have done the first set of hiring for looking at defense as a segment three years from now. Okay? Because that is the timeframe we need to spend to get the larger chunks in. Okay? Again, the whole world is at war initially, right? So the defense will grow, and I'm pretty sure we'll be a part of it, and we are taking the first steps to look at it as a vertical. Not saying that we are crazy about vertical.
We're starting to look at it, how do I expand to get into this space in a meaningful way. We are still doing quite a bit of it, but not in large numbers.
Understood. Thanks for the clarity and wish you all the best.
Thank you, Siddharth.
Thank you, Siddharth.
Thank you. The next question comes from the line of Tanay Shah from DAM Capital Advisors. Please go ahead.
Yes, sir. Am I audible now?
Yes, Tanay, you are.
Yes, sir.
You are audible.
Sorry for the confusion. I was just some mixed up. Sorry. Thank you so much for taking my question again, sir. I have two questions, right? If we look at it over the last few quarters, we have steadily increased our U.S. manufacturing, right? Almost from 18%-20% to now almost 28%.
So, and that is now, in fact, even sort of helped us, if I am not wrong, almost reach a breakeven level for our U.S. manufacturing standpoint on the EBITDA level. Is it fair to say that this is a base which now helps us sort of build on, and it becomes a base where we break even on U.S. levels? Or do you think that this is just a quarterly fluctuation and what would the ideal split be between the India versus U.S. manufacturing?
Look, Tanay, so as we grow, as the top lines grow over the next few years, our goal is to keep it, U.S. manufacturing, around 20%. The best growth for us is made in India for export and made in India for India. But to get these margins made in India, I need the U.S. manufacturing. So in the short term, we want to cap it at 20%. We will have a few quarters which goes up and down, and most of the significant growth, what we anticipate over the next two, three years is going to be made in India. Saying that, we are also opening up new geographies, which we are very excited about, which is Europe, which was a very small percentage of exports.
The next two years, we see that hopefully growing in a very meaningful way. And Southeast Asia, that is a foray which I believe will take us to the next level. So you are basically competing with the best in the world, with the best products you can make made in India. And this comes with relatively very decent margins. We are not doing commodity type stuff. We are doing complex systems. So saying that U.S. will always be there, and again, it is a threat now. I feel bad for the U.S. guys. Every time there is a good number coming there, it is always more profitable to move to India. As a group, we tend to do that. So you see certain spike. And that has helped us through the tariff situation, if you look at it.
It has given a lot of solace to our customers that we are in the U.S. And if they want to launch there, they are more than welcome to launch there at a higher cost. Does that answer your question, Tanay?
Absolutely, sir. Absolutely. That makes sense. Sir, the second question which I had is that, we are seeing a lot of supply chain disruptions, especially from a bare PCB board side, maybe for the raw materials or even the glass, the fiberglass or the high-tech TPP, which is required. Sir, any comments on that is it impacting our operations by any means, or do we expect any impact going forward, or are we well covered there?
Hey, Tanay. Shriram here. See, you have influencers and you have different commodities that go up and down. We are generally okay last quarter and this quarter. We have tried to stay a little ahead of the curve, in terms of securing some of the supplies of the commodities that you mentioned. So, for the time being with the environment the way it is, we think we are okay. But obviously we stay on high alert, and we will move quickly where we have to, if we need to.
Perfect. Great. Thank you so much for answering my questions and wishing you all the very best. Thank you.
Thank you, Tanay.
Thank you. The next question comes from the line of Mayank Pandey from Emkay Global. Please go ahead.
Hi, sir. Congratulations on a good set of numbers, and thank you for taking my question. I have two questions. Question number one is your asset turns 9.9x. Now with our ODM revenue going up to 60% of our total revenues, I would have expected that this would probably be a driver to move up the asset turns. I just want to get a theoretical understanding as to what would cause us to reach this level? Or put another way, what could be the maximum level that we can see on asset turns, with the current asset base and the current sort of growth that we are having? That is question number one. The second question is on the ODM mix itself.
If you could just walk us through the segments that we have in the ODM mix in each of those segments, if that is possible. Or what is the main driver, which segments are the main drivers for the ODM to grow further from these current levels? Those are my two questions.
Okay, great. Thank you, Mayank. First and foremost, we do not do ODM. We do box build, which is custom designed by a customer. Even if we do the design for them, the IP is owned by the customer. So we do build to print, and that is the reason why most of these complex systems are coming to us. So we do not want to have a situation where we can do our own products. End of the day, even though we do design, it is done for a customer. So the ODM piece is not there. What you are referring to is a box build solution, which is where we do the whole product for the customer. We have always tried with our vertical integration, to get this number as high as possible.
I think we've been successful so far, and we continue to strive, and I think that portion of our business will grow. Because we may start with one commodity, and then we try to, in two to three years, get the whole box filled as PCBA, cable, plastic, all in a box. So that's always been our aspiration as well as our goal. Did I miss anything?
Just want to understand it from a different lens. Is it like, can this go up to, let's say, 10x, 12x, 15x? How should I Or, what would be the incremental CapEx required in that sense for us?
Probably, even if you look at a global market, probably the best in the sector in terms of what we always commit to is 8x - 0 x. Sometimes it goes up and down when you do an investment in a building. But 8x- 10 x is what you should look at, and we want to stay in that range because we have to make investments also. So that's our goal. I think we should look at 8x - 10 x.
We are looking to improve our working
Yeah.
The answer is yeah.
Yeah.
Of course.
And if you could, sorry, I misspoke earlier on the early investor box ratio, my bad.
No problem.
If you could just help me understand which of our segments have the highest percentage of box builds, or how should we look at it from a segment-to-segment perspective?
I think most of the segments except for aero, we cannot do that line. But we build boxes, yeah.
It is spread across various verticals.
All verticals.
It is not focused on just one industry vertical.
For example, railways, we do the interlocking systems, braking systems, the complete box. In clean energy, we make different types of inverters, battery storage. It is all complete boxes. Only in the aero field where we do sub-assemblies.
Got it. Sir, just one last question. The ISM 2.0 scheme came out. I know you must have been getting a lot of questions on that, but any chance you see that we could be one of the beneficiaries from it, given that it specifically calls our equipment suppliers and we might be part of that value chain now with your wins in that space. Any possible benefits you see to Avalon from that scheme?
We believe so, but we are yet to look at the final details of that ISM 2.0. Definitely Semiconductor Manufacturing Equipment is one of the key verticals for us over the coming years. When the final details come, then we will have more details to share with everyone.
So in short, yes, we are looking at it.
Right. Would you be open to incremental CapEx for that as a separate carved-out sort of structure? Not carved-out structure, but let's say the separate CapEx to that effect. Or would you want to continue with the current business model?
In the opening remarks, we had highlighted about acquiring a large piece of land in Chennai for our future growth, for the next phase of growth, whether it is with respect to Semiconductor Manufacturing Equipment or advanced electronics. Both of them. Yes, the answer is yeah.
Okay. Thank you. Thank you so much.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, in the interest of time, that was our last question. I would now like to hand the conference over to the management for the closing comments. Thank you, and over to you.
With a healthy order book, expanding customer engagement, and a flexible global manufacturing model, we remain focused on delivering profitable growth. We thank our investors for their continued support and look forward to updating you in the coming quarters. Thank you. Thank you very much.
Thank you.
Thank you. On behalf of DAM Capital Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your line.