Nomura highlights the one stock to play the EMS theme, projects 30% upside

Shares of Avalon Technologies Ltd. surged as much as 5% on Wednesday, May 20, after brokerage firm Nomura initiated coverage on the stock with a “buy” rating.

The brokerage set a price target of ₹1,772, implying an upside of about 30% from Tuesday's closing levels.

Nomura said Avalon Technologies is well-positioned to benefit from the global industrial electronics manufacturing services (EMS) upcycle, driven by strong demand tailwinds from emerging sectors such as artificial intelligence, high-voltage direct current (HVDC) systems and semiconductors.

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Avalon appears favourably placed to capitalise on structural global demand trends, supported by its diversified manufacturing capabilities and increasing opportunities in high-value electronics outsourcing, Nomura's note said.

The brokerage expects Avalon Tech's revenue to grow at a Compounded Annual Growth Rate (CAGR) of 31% over financial year 2026-2029, while EBITDA margins may improve to 13.2% by financial year 2029 from 10.8% currently. It also expects an earnings per share (EPS) CAGR of 41% over the same period.

At 28 times its financial year 2029 estimated Earnings Per Share, Avalon Tech's current valuations are "attractive" as per Nomura.

Nomura added that emerging technology-driven sectors such as AI infrastructure, semiconductor equipment and energy transition-related electronics are likely to support long-term order visibility for the company.

However, the brokerage highlighted slower growth and delays in the turnaround of the company’s US operations as key risks to its outlook.

Among the 18 analysts who cover the stock, 10 of them have a "buy" rating, while four each have a "hold" and "sell" rating.

Shares of Avalon Technologies have gained over 31% in the last month and nearly 62% over the last 12 months. The stock has more than tripled from its issue price of ₹436. The stock made its Dalal Street debut in April 2023.