Aerospace and energy component maker’s calibrated growth strategy and peak utilization by FY28 drive buy ratings despite near-term moderation, Q3 EBITDA margin hits 39.2%
India’s deepening integration into global aerospace has driven Azad Engineering into the frontline. Brokerages are upgrading or maintaining buy ratings based on a Rs 6,500 crore order book that provides multi-year revenue visibility and structural margin expansion to 39% in the December quarter.
The Hyderabad-based precision component manufacturer, which supplies to marquee global OEMs including Safran, Pratt & Whitney, GE, Mitsubishi, and Siemens, delivered a strong third-quarter performance marked by 45% year-on-year EBITDA growth and continued execution discipline despite FY26 being a stabilization year for newly commissioned facilities.
Precision Manufacturing
Azad Engineering operates in highly regulated, precision-critical industries requiring stringent qualification and zero-defect manufacturing standards. The company manufactures highly engineered, complex, and mission-critical components for global OEMs in the energy, aerospace and defence, and oil and gas sectors.
For the nine months ended December 2025, the revenue mix stood at approximately 93% from exports and 7% from domestic markets, reflecting the company’s deep integration into global supply chains. This 85-95% export exposure positions Azad favorably amid deepening India-US and India-EU industrial cooperation, according to Choice Broking.
The company currently holds market share of just 1-1.5% in a large and growing addressable market, suggesting significant runway for growth as global aerospace and energy OEMs continue outsourcing to qualified suppliers.
Q3FY26 Performance: Margin Expansion Despite Stabilization Phase
Azad delivered what Choice Broking termed “a strong operational quarter” in Q3FY26, with revenue growing 31.7% year-on-year and 9% quarter-on-quarter to Rs 158.7 crore, marginally missing estimates of Rs 159.5 crore.
The standout performance came on the profitability front. EBITDA surged 45.3% year-on-year and 18.4% quarter-on-quarter to Rs 62.2 crore, significantly ahead of estimates of Rs 57.8 crore. EBITDA margin expanded a substantial 366 basis points year-on-year to 39.2%, well above the estimated 36.2%.
“This reflects favourable product mix, disciplined long-term contracts, fixed cost absorption and supply chain optimisation,” ICICI Direct noted in its report dated February 16.
Profit after tax grew 46.4% year-on-year and 6.5% quarter-on-quarter to Rs 34.7 crore, marginally below estimates of Rs 35.4 crore. PAT margin improved 219 basis points year-on-year to 21.9%.
For the nine-month period, EBITDA margin stood at approximately 37%, up from around 32% in FY22, despite FY26 being positioned as a stabilization year for capacity expansion. This margin trajectory demonstrates structural improvement rather than one-time benefits.
Order Book Provides Multi-Year Visibility
The company’s consolidated order book as of December 2025 stood at over Rs 6,500 crore, representing approximately 11.7 times trailing twelve-month revenue and providing exceptional multi-year revenue visibility.
“Visibility is exceptionally strong owing to a robust order book of approximately Rs 65 billion, around 14.2 times FY25 revenue,” Choice Broking stated, noting consistent quarter-on-quarter accretion in the order book.
The growth is supported by long-cycle aerospace engine programs with global OEMs and established relationships across multiple sectors. Importantly, ICICI Direct emphasized that “capacity expansion is fully linked to firm customer contracts, with no speculative capex,” reducing execution risk.
Azad plans to establish multiple sub-facilities at Hyderabad in two phases—phase one covering approximately 73,000 square meters and phase two covering 67,267 square meters—dedicated to specific customers. The phased approach is pending but fully backed by customer commitments.
Management has provided clear guidance on the utilization trajectory: stabilization in FY26, steady-state operations in FY27, and peak utilization by FY28. “As programmes move from qualification in FY26 to anticipated peak utilisation by FY28, we expect volume-led operating leverage to structurally lift earnings,” Choice Broking explained.
This measured ramp-up reflects what the brokerage termed “calibrated scaling up rather than aggressive ramp-up,” with management guiding for approximately 35% top-line growth trajectory despite the large backlog.
Structural Tailwinds
Several structural factors support Azad’s medium-term outlook. The company has approximately 75% progress in India’s first indigenous jet engine program with the Gas Turbine Research Establishment (GTRE), which provides significant optionality for future revenue streams.
The easing US-India trade environment is another catalyst. “Easing US-India trade environment supporting global supply chains, AEL remains well positioned to capture incremental global outsourcing opportunities,” ICICI Direct noted. Choice Broking added that “easing of tariffs on critical raw materials should support cost-efficiency” going forward.
ICICI Direct projects revenue and EBITDA CAGR of approximately 29% each over FY25-28, with PAT CAGR at around 33%. This implies robust earnings growth as operating leverage kicks in from peak capacity utilization.
The company’s balance sheet remains healthy with FY25 gross debt of Rs 244 crore offset by cash of Rs 697 crore, resulting in a net cash position. This financial flexibility supports the ongoing capacity expansion without significant leverage.
ICICI Direct has maintained a buy rating with a Rs 1,900 target based on 60 times FY28 estimated earnings. At the current market price of approximately Rs 1,600, this implies 19% upside over a 12-month period.
Choice Broking upgraded the stock to Buy from Add following the recent correction, setting a Rs 1,900 target based on 45 times FY28 estimated earnings—down from a previous 50 times multiple reflecting “moderated near-term growth expectation” given management’s calibrated approach. This implies 20.3% upside from the current price of Rs 1,579.
The company’s market capitalization stands at Rs 10,333 crore with an enterprise value of Rs 9,880 crore after adjusting for net cash. The stock has traded in a 52-week range of Rs 1,128 to Rs 1,899.
ICICI Direct flagged three key risks: dependency on limited customers, raw material unavailability, and significant revenue concentration from exports. The export dependence, while providing access to larger markets, also exposes the company to currency fluctuations and geopolitical trade tensions.
