Buy Azad Engineering: target of Rs 3100: ICICI Securities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Azad Engineering's Q2FY27 performance was in line with estimates, with revenue and EBITDA growth of 31% and 42% YoY, respectively, driven by strong execution in the energy and aerospace and defence (A&D) segments.
  • The company has completed setting up its capacities and is now in the execution phase, with a expected revenue ramp-up from Q4FY27 onwards, and a targeted annual revenue run-rate of INR 13,000mn+ by end-FY28.
  • Azad is undergoing qualification processes with global aero-engine makers, which could lead to new revenue streams and drive the next phase of growth.
  • The company's EBITDA margin expanded to 37.9% in Q2FY27, driven by operating leverage, local sourcing, and backward integration into special processes.

Thesis Validation Checklist

  • Investors should watch for the company's ability to ramp up revenue and maintain margins, as well as its progress in qualifying with global aero-engine makers and delivering its second engine to DRDO.
  • The company's working capital management and debt reduction will also be key monitorables.
  • Any delays in OEM approvals, further escalation of tariffs on India, or a slowdown in the energy/aerospace sector could pose risks to the investment thesis.