---
title: "Azad Engineering — Deep Dive Analysis"
ticker: "AZAD"
date: "2026-10-09"
tags: ["deep-dive","fundamental","manufacturing","aerospace"]
summary: "Revised deep dive: the stock is up 44% to Rs 2,910 since our 27 June note while TTM profit sits below FY26, FIIs and DIIs both cut holdings, and the working capital cycle widened to 344 days. Includes the full 25-point technical checklist and updated levels."
model: "deepseek-v4-flash"
watchlist: true
priceAtAnalysis: 2910
support: 2716
resistance: 3128
supports: [2636, 2505]
resistances: [3209, 3455]
verdict: "CAUTION — PRICED FOR PERFECTION"
---

**Date:** 9 October 2026 — first published 27 June 2026, fully revised and re-scored
**CMP:** ₹2,910.20 (NSE close, 9 Oct 2026)
**NSE:** AZAD
**Model:** deepseek-v4-flash

---

## Quick Snapshot

| Metric | Value | Metric | Value |
|--------|-------|--------|-------|
| CMP | ₹2,910.20 | Mkt Cap | ₹18,784 Cr |
| P/E (Trailing TTM) | 135.2x | Industry P/E | 33.7x |
| Forward P/E (FY27E) | 130-148x | PEG | 0.90 |
| BV | ₹237 | Debt/Equity | 0.31 |
| ROCE | 11.9% | ROE | 9.09% |
| Sales (TTM) | ₹638 Cr | PAT (TTM) | ₹139 Cr |
| EPS (TTM) | ₹21.52 | Earnings Yield | 1.15% |
| 52W H/L | ₹3,127.90 / ₹1,360 | Debtor Days | 189 |
| Piotroski | 4/9 | Dividend | Nil |

---

## What Changed Since 27 June 2026

This article was first written on 27 June 2026 at ₹2,020 with a rating of *Favorable with Caution*. It has been revised in place rather than published as a separate note, because the underlying story is continuous.

| Metric | 27 Jun 2026 | 9 Oct 2026 | Change |
|--------|-------------|------------|--------|
| CMP | ₹2,020 | ₹2,910.20 | +44.1% |
| Market cap | ₹13,046 Cr | ₹18,784 Cr | +44.0% |
| Trailing P/E | 98.2x | 135.2x | Re-rated |
| 52-week high | ₹2,350 | ₹3,127.90 | New all-time high |
| FII holding | 14.75% | 13.30% | -1.45pp |
| DII holding | 11.71% | 10.32% | -1.39pp |
| Institutional total | 26.46% | 23.62% | -2.84pp |
| Public / retail | 17.69% | 20.53% | +2.84pp |
| Avg delivery (15 sessions) | 42.9% | 32.94% | Weaker |
| Avg volume | 503,000 | 1,244,000 | 2.5x |
| Working capital cycle (CARE) | 287 days (FY25) | 344 days (FY26) | Worsened |
| Inventory days | 1,085 (FY25) | 2,067 (FY26) | Worsened |
| FY26 operating cash flow | -₹123 Cr | -₹123 Cr | Unfixed |
| Analyst view | Buy, PT ₹2,177 | ICICI BUY ₹3,200; Goldman ₹3,315 | Upgraded |

The headline is simple and uncomfortable: **the stock re-rated 44% while earnings did not move.**

---

## Business Overview

Azad Engineering is a global Tier-1 supplier of highly-engineered, mission and life-critical precision forged and machined components for **Aerospace & Defence**, **Energy** (gas, steam and nuclear turbines), and **Oil & Gas**. Headquartered in Hyderabad and incorporated in 1983.

**Customers:** 6 major aerospace OEMs (GE, Honeywell, Rolls-Royce, Pratt & Whitney, Eaton, Safran) and 5 of the world's largest turbine manufacturers (GE Vernova, Siemens Energy, Mitsubishi Heavy Industries, Baker Hughes, MAN Energy Solutions).

**Key stats:**
- Around 88-93% export revenue
- Portfolio of 1,700+ qualified parts across 45+ manufacturing processes
- Tier-1 supplier status for critical engine components
- Four dedicated lean manufacturing facilities commissioned in FY26; eight planned in total

---

## Financial Performance

### Annual P&L (₹ Cr)

| Metric | FY22 | FY23 | FY24 | FY25 | FY26 | TTM |
|--------|------|------|------|------|------|-----|
| Sales | 194 | 252 | 341 | 457 | 603 | 638 |
| OPM% | 32% | 29% | 34% | 35% | 37% | 38% |
| Other Income | 5 | 10 | 32 | 11 | 46 | 41 |
| Interest | 14 | 52 | 47 | 18 | 31 | 35 |
| Depreciation | 13 | 17 | 21 | 29 | 53 | 61 |
| PBT | 40 | 13 | 81 | 124 | 187 | 184 |
| PAT | 29 | 8 | 59 | 87 | 134 | 139 |
| EPS (₹) | 194.69 | 51.28 | 9.91 | 13.52 | 20.58 | 21.52 |

*EPS is split-adjusted for IPO bonus shares — FY22 and FY23 had fewer shares pre-IPO.*

**The single most important line in this table:** trailing twelve-month PBT of ₹184 Cr is now **below** FY26's full-year ₹187 Cr. Profit has stopped growing in absolute terms even as revenue continues to rise.

### Quarterly Trend (₹ Cr)

| Period | Sales | OPM% | PAT | EPS (₹) |
|--------|-------|------|-----|---------|
| Mar'25 | 127 | 36% | 25 | 3.91 |
| Jun'25 | 137 | 36% | 29 | 4.60 |
| Sep'25 | 146 | 36% | 33 | 5.07 |
| Dec'25 | 159 | 39% | 35 | 5.34 |
| Mar'26 | 162 | 38% | 37 | 5.57 |
| **Jun'26 (Q1 FY27)** | **173** | **37%** | **35** | **5.54** |

Revenue grew 26.3% year on year in Q1 FY27, in line with the guided 25%+, but **PAT of ₹35 Cr came in below the preceding quarter's ₹37 Cr**.

---

## Q1 FY27 in Detail (Quarter Ended June 2026)

Reported 7 August 2026, earnings call 8 August 2026.

**Standalone** — revenue ₹170.5 Cr, up 26.8% year on year and 8.3% sequentially. EBITDA ₹64.07 Cr, up 32.1%, margin 37.6%. PAT ₹36.35 Cr, up 21.2%, EPS ₹5.63.

**Consolidated** — revenue ₹172.6 Cr, up 25.9%. EBITDA ₹64.4 Cr, margin 37.3%. PAT ₹35.2 Cr, up 19.5%.

Two items sit underneath that revenue beat:

- **Profit before tax actually fell year on year**, to ₹40.1 Cr from ₹42.4 Cr. Other income collapsed to ₹4.0 Cr from ₹9.1 Cr on forex normalisation, depreciation rose to ₹17.9 Cr from ₹9.6 Cr, and finance cost rose to ₹10.1 Cr from ₹5.6 Cr.
- **Segment mix is unchanged.** Energy and Oil & Gas contributed ₹138.4 Cr, or 81.2% of revenue, up 26.7%. Aerospace and Defence contributed ₹28.7 Cr, up 24.7%. Exports were 88% of revenue, up 21.2%, while domestic revenue more than doubled to ₹20.5 Cr.

**Guidance from the call:** long-term revenue growth of 25%+ reiterated. EBITDA margin guided at 32-35%. Substantive contribution from the four new dedicated plants expected only from H2 FY27, with the "major breakthrough" in Q3-Q4 FY27. Working capital around 200 days in H1 FY27 easing to 160-180 days by H2. Debtor days of 170-180 targeted down to about 90 through bill discounting. A full natural hedge of export receivables by Q4 FY27.

One detail in that guidance deserves emphasis. Bill discounting converts receivables to cash, so it improves the cash conversion cycle — but the discounting charge sits in finance cost. **Cash improves before profit does.** Anyone expecting the working capital fix to show up as a profit improvement will be disappointed.

---

## Balance Sheet (₹ Cr, Mar'26)

| Item | Value | Notes |
|------|-------|-------|
| Equity Capital | 13 | |
| Reserves | 1,516 | Up from ₹1,381 Cr |
| Borrowings | 474 | Up sharply from ₹263 Cr |
| Other Liabilities | 197 | |
| Total Liabilities | 2,200 | |
| Fixed Assets | 779 | Heavy capex mode |
| CWIP | 257 | Up from ₹80 Cr |
| Other Assets | 1,164 | Includes inventory and receivables |
| Total Assets | 2,200 | |

Gross borrowings rose to ₹474 Cr while the QIP proceeds were being drawn down against capex. **₹589.42 Cr of the ₹700 Cr QIP had been utilised at 30 June 2026**, with ₹110.58 Cr unutilised and the project timeline flagged as extended to March 2027.

---

## Cash Flow and Working Capital — Still the Red Flag

| Metric (₹ Cr) | FY24 | FY25 | FY26 |
|---|---|---|---|
| Cash from Operating Activity | -7 | 54 | **-119** |
| Cash from Investing Activity | -55 | -918 | -71 |
| Cash from Financing Activity | 71 | 877 | 174 |
| Net Cash Flow | 9 | 13 | -16 |
| Free Cash Flow (Screener) | -78 | -240 | **-691** |
| CFO / Operating Profit | 7% | 44% | **-31%** |

No quarterly cash-flow statement is published in India, and neither the Q1 FY27 filing nor the August investor presentation discloses one, so **FY26 remains the latest hard evidence** and it is negative.

**Working capital, from the credit rating agency's own numbers:**

- CARE Ratings (press release, 22 June 2026) put the FY26 working capital cycle at **344 days, up from 287 days in FY25**.
- Inventory holding: **262 days**, up from 209.
- Collection period: **163 days**, up from 157.
- Creditor period: 80 days, against 79.
- On Screener's consolidated data, inventory days went from 1,085 to **2,067**, and the cash conversion cycle from 804 to **1,720 days**.

**Supporting evidence:**

- Q1 FY27 finance cost rose about 80% year on year to ₹10.1 Cr — the price of funding the cycle.
- ICICI Securities (29 September) models FY27E operating cash flow at +₹106 Cr but free cash flow still at **-₹119 Cr**. It expects the operating turn only in FY27, and it has not been reported.
- The roughly **₹100 Cr of accumulated GST credit** was reiterated on the call as realisable in H1 FY28 — unchanged, and not accelerated.

The June analysis named working capital normalisation as the single factor the entire thesis rested on. Three months later, no published statement shows it turning. The turnaround remains a promise, now pushed further out, and it is being financed with debt that carries a visible P&L cost.

---

## Shareholding Pattern

| Holder | Mar'23 | Mar'25 | Mar'26 | **Jun'26** | Trend |
|--------|--------|--------|--------|-----------|-------|
| Promoters | 65.90% | 60.32% | 55.84% | **55.84%** | Flat for 4 quarters |
| FIIs | 4.68% | 14.23% | 14.75% | **13.30%** | Peaked and falling |
| DIIs | 5.71% | 8.23% | 11.71% | **10.32%** | Falling |
| Public | 23.70% | 17.21% | 17.69% | **20.53%** | Rising |
| Shareholders | 1,35,090 | 1,24,539 | 1,26,786 | **1,33,221** | Rising |

This is the change the June note could not have anticipated, and it undermines the strongest plank of its bull case. The June article said "FIIs and DIIs both aggressively accumulating" and treated it as institutional validation. In the June quarter **both categories sold**, and retail absorbed the supply — public holding rose by almost exactly the amount institutions gave up.

Two mitigating details worth stating:

- **The number of FII holders rose from 112 to 123** even as their aggregate share fell. That is consistent with trimming at higher prices rather than a considered exit.
- **Promoter holding has been unchanged at 55.84% for four consecutive quarters, with zero pledge and no reported selling.** The June concern about 10% promoter dilution over three years has, at least for now, stopped getting worse.

---

## Order Book and Revenue Visibility

| Metric | Value |
|--------|-------|
| Total order book | ~₹6,500 Cr (unchanged; no new orders announced since) |
| Revenue coverage | ~10x FY26 revenue |
| Energy segment | $400M+ |
| Aerospace & Defence | $200M+ |
| Oil & Gas | $100M+ |

**No new contract or order win was announced between 27 June and 9 October 2026.** The book is being consumed at roughly ₹170 Cr a quarter, so coverage drifts down unless new long-term agreements are signed. ICICI Securities says it expects more large orders from GE, but none had been disclosed by 9 October.

### Major Contracts (unchanged from the original note)

| Customer | Value | Details |
|----------|-------|---------|
| MHI | LTCPA | 8-year single-source for hot section nozzle vanes |
| GE Vernova | USD 112 Mn | Advanced gas turbine airfoils |
| GE Vernova | USD 53.5 Mn | Nuclear/industrial/thermal airfoils |
| GTRE/DRDO | Strategic | Complete ATGG engine assembly and integration |
| BHEL | - | Advanced rotating airfoils for supercritical turbines |
| Arabelle Solutions | USD 40 Mn | Rotating and stationary components |
| Baker Hughes | Extended to CY2030 | Turbomachinery plus Saudi MOU |
| Honeywell | USD 16 Mn (Ph1) | Aviation components |
| Rolls-Royce | Life of engine | Civil aircraft engine components |
| Siemens Energy | USD 90 Mn | Combustion commodities, cold blades |
| Mitsubishi | USD 83 Mn (5yr) | Airfoils for gas and thermal turbines |

---

## Management Commentary

### Rakesh Chopdar (CEO) — May 2026 concall
- "Nature of our growth is cumulative payoff of long hard work, not short-term tailwind"
- "70-80% of infrastructure build-out complete"
- On working capital: "WIP inventory will come down to ~200 days in H1, 160-170 days in H2"
- Single-source for MHI hot section: "Compete head-on with Howmet Aerospace / PCC"
- Growth is "conservative" — OEMs are under massive pressure to scale

### Q1 FY27 call — August 2026
- Long-term 25%+ revenue growth reiterated
- EBITDA margin guided at 32-35% (note: Q1 actual came in at 37.6%, above the band)
- Four new plants contribute substantively only from H2 FY27, with the "major breakthrough" in Q3-Q4 FY27
- Working capital around 200 days in H1 FY27, easing to 160-180 days by H2
- Debtor days of 170-180 targeted down to about 90 via bill discounting
- Full natural hedge of export receivables by Q4 FY27
- Turbojet engine volumes undisclosed pending DRDO weapon-integration testing; the programme is **not** in the 25% guidance
- Rolls-Royce first qualification batch pulled forward to Q2 FY27
- MHI hot-section facility around 7-8 months from ready

---

## What Went Right

Being fair to the company, several things improved, and two are strategically significant.

**Two more dedicated facilities for GE Vernova (28 September 2026).** Azad inaugurated two 7,600 sqm lean manufacturing facilities for GE Vernova's Gas Power business at Tunikibollaram, taking GE Vernova to three dedicated plants and making it the company's largest single-customer footprint. One caution: these were built against the **existing** contract book and the filing discloses no new order value or volume commitment. It is capacity, not a new order.

**India's first indigenous expendable turbojet engine delivered to DRDO and the Ministry of Defence (22 July 2026).** A milestone under the GTRE programme. Management is explicit that the programme is not part of the 25% revenue guidance, that volumes remain undisclosed pending DRDO weapon-integration testing, and that the first five to six engines are expected within three to four months. Strategically valuable, financially unquantified.

Also positive:

- **EBITDA margin of 37.6% in Q1 FY27**, at or above the top of the guided 32-35% band.
- **CARE Ratings reaffirmed CARE A / A2+ with a stable outlook** on 22 June 2026, while enhancing limits — long-term bank facilities raised to ₹336.55 Cr from ₹208.32 Cr.
- **Analyst sentiment reversed.** ICICI Securities upgraded from ADD to BUY and raised its target to ₹3,200 from ₹2,610 on 29 September; Goldman Sachs remains BUY at ₹3,315. Eight of nine covering analysts are positive.
- **The technical picture flipped.** In June the price sat below all short-term moving averages. It now trades above every major average from the 10-EMA to the 200-SMA.

---

## Technical Analysis (TradingView, 9 October 2026)

**Summary: BUY** — Sell 1 / Neutral 10 / Buy 15
- Oscillators: Sell 0 / Neutral 9 / Buy 2
- Moving Averages: Sell 1 / Neutral 1 / Buy 13

### Key Oscillator Values

| Indicator | Value | Signal |
|-----------|-------|--------|
| RSI(14) | 55.0 | Neutral |
| Stochastic %K(14,3,3) | 63.8 | Neutral |
| CCI(20) | 49.7 | Neutral |
| ADX(14) | 24.3 | Neutral |
| MACD(12,26) | 65.7 | Buy |
| Momentum(10) | 231.9 | Buy |
| Stochastic RSI Fast | 58.0 | Neutral |
| Williams %R(14) | -47.3 | Neutral |
| Awesome Oscillator | 129.9 | Neutral |

### Moving Averages

| MA | Value | Signal |
|----|-------|--------|
| EMA(10) | 2,903.0 | Buy |
| EMA(20) | 2,850.9 | Buy |
| EMA(50) | 2,716.5 | Buy |
| EMA(100) | 2,505.6 | Buy |
| EMA(200) | 2,229.3 | Buy |
| SMA(200) | 2,076.8 | Buy |
| Hull MA(9) | 2,987.1 | Sell |

Price sits above every major moving average, and all are rising — a complete reversal from June, when price was below all short-term averages.

### Key Levels (Classic Pivots)

| Level | Value | Level | Value |
|-------|-------|-------|-------|
| R3 | ₹4,027.80 | S1 | ₹2,636.20 |
| R2 | ₹3,454.90 | S2 | ₹2,309.10 |
| R1 | ₹3,209.10 | S3 | ₹1,736.20 |
| Pivot | ₹2,882.00 | | |

### Performance

| Period | Return | Period | Return |
|--------|--------|--------|--------|
| 1 Week | -2.41% | 6 Months | +73.23% |
| 1 Month | +3.11% | YTD | +76.06% |
| 3 Months | +15.48% | 1 Year | +73.83% |

---

## 25-Point Swing Trading Checklist

Run in full on NSE data as of the 9 October 2026 close (₹2,910.20).

| # | Point | Reading | Score |
|---|---|---|---|
| 1 | Price position | 7.0% below the 52-week high of ₹3,127.90, within 25% | Pass |
| 2 | Trend | Clear uptrend; successive highs into a new all-time high on 30 Sep; 1Y +73.8% | Pass |
| 3 | Volume characteristics | Average volume expanded 2.5x to 1.24 mn shares, but the two heaviest days carried the weakest delivery | Caution |
| 4 | Clean price action | Sharp reversals: ₹2,678 on 24 Sep to ₹3,127 on 30 Sep, then ₹2,910. Hull MA(9) is the lone sell | Caution |
| 5 | EMA alignment | EMA10 > EMA20 > EMA50 > EMA200, all rising, price above all | Pass |
| 6 | Chart pattern and base | Breakout from the April-June base at ₹1,950-2,350 into a new all-time high | Pass |
| 7 | Base quality | The base was tight, but the advance is extended and already 7% off its high | Caution |
| 8 | Average daily range | Daily ranges around 4% — ample movement for swing trading | Pass |
| 9 | Primary uptrend | Intact; price well above the 100 and 200 period averages | Pass |
| 10 | One trading model | Setup fits a breakout-and-retest model | Pass |
| 11 | Sector strength | Aerospace, defence and capital goods remain a leading complex | Pass |
| 12 | Tailwind | Defence indigenisation, gas turbine and nuclear capex, GE Vernova expansion | Pass |
| 13 | IPO consideration | Listed December 2023; post-IPO base completed, stock in trend | Pass |
| 14 | Price action strength | 6-month return +73.2%, YTD +76.1% | Pass |
| 15 | Sector and government boost | Direct beneficiary of indigenisation; GTRE/DRDO turbojet delivery in July | Pass |
| 16 | Fundamental quality | Strong revenue growth but negative operating cash flow, ROE 9.09%, debtor days 189 | Caution |
| 17 | Quarterly earnings growth | Revenue +26.8% YoY but PAT +21.2% and PBT down YoY; below the 30-50% band | Caution |
| 18 | Delivery percentage | 15-session average 32.94% against a ~37% baseline; the ATH-forming sessions printed 19.47% and 11.94% | **Fail** |
| 19 | News and institutional activity | News positive, but both FIIs and DIIs reduced holdings in the June quarter | Caution |
| 20 | Risk management | Levels defined below: entry on support retest, stop below ₹2,505, first target ₹3,128 | Pass |
| 21 | Market environment | The Nifty fell to a 52-week low of 22,216 on 8 October; the broad market does not support aggressive buying | **Fail** |
| 22 | Liquidity | Average daily volume 1.24 mn shares, roughly ₹360 Cr turnover | Pass |
| 23 | Relative strength | Strongly outperforming a falling market | Pass |
| 24 | Breakout confirmation | The breakout to a new high was not cleanly held; price slipped back and follow-through lacked delivery | Caution |
| 25 | Trading psychology | After a 74% run at 135x earnings with delivery falling, discipline says wait rather than chase | Caution |

**Total Score: 18.5 / 25** — moderate; needs a catalyst rather than a chase. Two outright fails: delivery quality (18) and market environment (21). The checklist's own warning applies directly here — a heavy-volume advance on weak delivery is churn, not accumulation.

*Previous score in the June version of this note: see the history in the comparison table above; the checklist was added in this revision, so 18.5/25 is the first full run.*

---

## Delivery Data (Last 15 Trading Sessions)

| Date | Close | Volume | Delivery % |
|------|-------|--------|------------|
| 9 Oct | ₹2,910.20 | 495,620 | 24.87% |
| 8 Oct | ₹2,883.70 | 603,234 | 42.02% |
| 7 Oct | ₹3,048.20 | 585,882 | 28.51% |
| 6 Oct | ₹3,062.60 | 1,329,869 | 23.31% |
| 1 Oct | ₹2,860.90 | 1,334,621 | 23.26% |
| 30 Sep | ₹2,963.20 | 5,708,538 | **11.94%** |
| 29 Sep | ₹2,914.20 | 5,323,693 | **19.47%** |
| 28 Sep | ₹2,723.20 | 439,192 | 43.43% |
| 25 Sep | ₹2,728.00 | 438,788 | 43.90% |
| 24 Sep | ₹2,678.30 | 194,120 | 38.54% |
| 23 Sep | ₹2,713.20 | 225,494 | 49.13% |
| 22 Sep | ₹2,776.20 | 235,668 | 34.95% |
| 21 Sep | ₹2,764.90 | 249,265 | 44.87% |
| 18 Sep | ₹2,790.30 | 700,873 | 40.39% |

**Average delivery: 32.94%** (against 42.9% at the time of the original note). Average volume 1.24 mn shares, 2.5x the June average.

The pattern is stark. The two sessions with the heaviest volume of the period — 29 and 30 September, when the stock made its 52-week and all-time highs on the GE Vernova facility announcement — produced the **two worst delivery readings**, at 19.47% and 11.94%. Those are the days when the largest number of shares changed hands and the smallest proportion was actually taken delivery of. That is the signature of speculative churn rather than institutional accumulation, and it corroborates the June-quarter shareholding data showing institutions reducing.

For contrast, the quieter sessions show healthy delivery: 23 September at 49.13%, 21 September at 44.87%, 25 September at 43.90%, all on thin volume.

---

## Block Deals and Insider Activity

**No bulk or block deals in the period between 27 June and 9 October 2026.** Strota's live feed showed no institutional bulk or block deals in the last 30 sessions. The last headline transaction remains the ₹730 Cr block of 48 lakh shares (about 7% of equity) at ₹1,640 on 6 June 2025 — outside this window.

**No promoter selling, no pledge, and no SAST or Reg-31 change-in-shareholding filing** in the window. Promoter holding is unchanged at 55.84%.

The June SAST disclosure from Nomura India Investment Fund Mother Fund related to a 2025 purchase and does not represent new activity.

**What this means:** the institutional accumulation visible through March 2026 happened through gradual market purchases, not visible block transactions. Equally, the June-quarter reduction by FIIs and DIIs is also gradual — it does not show up on the bulk deal report, which is why the shareholding table is the better instrument.

---

## Forward PE Valuation

### FY27E Scenarios

Working from the FY26 base of ₹603 Cr revenue, with margins held at FY26/TTM levels:

| Scenario | Revenue | EBITDA | PBT | PAT | EPS | Forward P/E |
|---|---|---|---|---|---|---|
| Bear: 20% growth, 35% OPM | ₹724 Cr | ₹253 Cr | ₹144 Cr | ₹108 Cr | ₹16.62 | 175.1x |
| Base: 25% growth, 37% OPM | ₹754 Cr | ₹279 Cr | ₹171 Cr | ₹128 Cr | ₹19.68 | 147.8x |
| Bull: 30% growth, 38% OPM | ₹784 Cr | ₹298 Cr | ₹194 Cr | ₹145 Cr | ₹22.33 | **130.3x** |

**Even the bull case does not de-rate the stock.** At 30% revenue growth and a 38% margin — above the guided band — FY27 EPS is ₹22.33, which is 130x the current price.

The reason operating leverage is not reaching shareholders: depreciation has climbed from ₹53 Cr toward ₹80 Cr as four plants capitalise; finance cost is running at ₹10.1 Cr a quarter and up 80% year on year; and other income, which contributed ₹46 Cr in FY26, collapsed to ₹4 Cr in Q1 FY27 on forex normalisation. Those three lines absorb almost the entire EBITDA increase.

### What the Bull Target Actually Requires

ICICI Securities raised its target to **₹3,200** on 29 September, valued at **55x FY29E EPS of ₹58.3**. Reverse-engineer that number:

- FY29E EPS of ₹58.3 implies net profit of roughly **₹380 Cr**
- Which implies PBT of roughly ₹506 Cr
- On ICICI's own 33% revenue CAGR, FY29 revenue is about **₹1,419 Cr**
- Which implies an EBITDA margin near **48%**

Management guides EBITDA margins at **32-35%**. The bull case is not a growth case — it is a margin case requiring roughly 13 percentage points of expansion beyond anything the company has committed to.

At the current price, the target implies **+10.0%** and Goldman's ₹3,315 implies **+13.9%** — for which the holder must underwrite either execution of that margin expansion or continued multiple expansion. Our June note made the same point about ICICI's then-target of ₹2,060 (60x FY28E); the target moved up, the reasoning did not change.

### PEG with Forward Earnings

| Metric | Trailing | FY27E (base) | FY27E (bull) |
|--------|----------|--------------|--------------|
| P/E | 135.2x | 147.8x | 130.3x |
| EPS growth | ~5% (TTM vs FY26) | Flat to modest | ~8% |
| PEG | 0.90 (Screener, base-effect inflated) | Well above 1 | Well above 1 |

The headline PEG of 0.90 is misleading: Screener computes it from historical growth that included IPO-depressed base years. On forward earnings the growth is not there to justify the multiple.

---

## Key Risks

| Risk | Severity | Detail |
|------|----------|--------|
| Valuation | **High** | 135x trailing, 130x+ forward even on a bull case |
| Working capital | **High** | CARE cycle 344 days; inventory days 2,067; not yet turning |
| Negative operating cash flow | **High** | FY26 -₹119 Cr; turn expected only in FY27 and unreported |
| Institutional selling | **Medium** | FIIs and DIIs both reduced in the June quarter |
| Earnings plateau | **Medium** | TTM PBT below FY26; Q1 FY27 PAT below Q4 FY26 |
| Delivery quality | **Medium** | ATH sessions printed the weakest delivery of the period |
| Rising depreciation and interest | **Medium** | Absorbing the operating leverage |
| Capex slippage | **Medium** | QIP project timeline extended to March 2027 |
| No new orders | **Medium** | Order book being consumed with no refresh since April |
| Low ROE | **Low** | 9.09%; new capex not yet earning |
| No dividend | **Low** | Zero payout |
| Promoter concentration | **Low** | 55.84%, but stable and unpledged |

---

## Bull vs Bear

### Bull Case
- ₹6,500 Cr order book still provides roughly a decade of revenue visibility
- Four dedicated OEM facilities ramping, with GE Vernova now on three plants
- MHI single-source for hot-section nozzle vanes — competes globally with Howmet and PCC
- Turbojet engine delivered to DRDO; strategic and optional to the guidance
- EBITDA margin of 37.6% above the guided band
- CARE A reaffirmed with enhanced limits
- ICICI upgraded to BUY at ₹3,200, Goldman at ₹3,315, eight of nine analysts positive
- Price above every major moving average; relative strength strong
- Promoter holding stable and unpledged

### Bear Case
- **135x trailing earnings on a TTM PBT that is lower than the last full year's**
- **130x forward even on a bull-case FY27**
- Institutions cutting while retail absorbs — the validation argument has reversed
- Working capital wider, not narrower: 344-day cycle, 2,067 inventory days
- Operating cash flow still negative, and the fix is now financed with debt at rising cost
- The rally to the all-time high came on the weakest delivery of the period
- The bull target needs a 48% EBITDA margin against 32-35% guidance
- No new orders since April; the book is being consumed
- Broad market weak — the Nifty hit a 52-week low on 8 October

---

## Key Levels

| Level | Price | Basis |
|---|---|---|
| All-time high / 52W high | ₹3,127.90 | 30 Sep high |
| Resistance | ₹3,209.10 | Classic R1 |
| Resistance | ₹3,454.90 | Classic R2 |
| **CMP** | **₹2,910.20** | 9 Oct close |
| Pivot | ₹2,882.00 | Classic pivot |
| Support | ₹2,812.90 | 20-day SMA |
| Support | ₹2,716.50 | 50-day EMA |
| Support | ₹2,636.20 | Classic S1 |
| Support | ₹2,505.60 | 100-day EMA |
| Support | ₹2,309.10 | Classic S2 |
| Support | ₹2,076.80 | 200-day SMA |

The trend is intact and the levels argue for buying pullbacks rather than shorting strength. The nearest genuine support cluster is **₹2,636-2,716**, roughly 7-9% below the current price. The 200-day SMA sits at ₹2,076.80, more than 28% lower.

---

## Final Verdict: CAUTION — PRICED FOR PERFECTION

**Rating change: Favorable with Caution (June) → Caution.**

Azad Engineering is a genuinely good business executing a hard plan. Revenue grew 26.8% in Q1 FY27 on the guided trajectory, the EBITDA margin is above the top of guidance, the turbojet delivery to DRDO is a strategic milestone, and GE Vernova has just taken a third dedicated facility. The balance sheet is not stretched, promoter holding is stable and unpledged, and CARE reaffirmed its rating with enhanced limits.

None of that is the problem. The problem is what the market now pays for it:

- **135x trailing earnings on a TTM PBT that is lower than the last full year's**
- **A 130x forward multiple even if FY27 delivers 30% revenue growth and a 38% margin**
- **Institutions reducing while retail absorbs** — aggregate institutional holding fell 2.84 percentage points
- **Working capital still deteriorating**, with the operating cash turn now expected in FY27 rather than already delivered
- **The rally to the all-time high came on the weakest delivery of the period**
- **A bull target requiring a 48% EBITDA margin**, 13 points above the guided ceiling

Where this note was wrong, stated plainly: the entry zone of ₹1,800-1,900 published on 27 June was never revisited. We expected a pullback to support that never came; the stock went the other way and added 44%. Our caution on the 98x multiple was right about valuation and wrong about near-term price, because the market was willing to pay more for the same earnings. Readers who ignored the entry zone and held were right, and we should say so.

Where this note was right: the working capital deterioration flagged as the swing factor has not reversed. Every subsequent hard data point — CARE's 344-day cycle, 2,067 inventory days, the ₹119 Cr negative operating cash flow, the 80% jump in finance cost — reinforces it.

### Suitable For
- Long-horizon holders who already own it and accept a high multiple on an execution story
- Investors with high risk appetite and a 3-5 year horizon
- Not suitable for anyone expecting a margin of safety at this price

### For Existing Holders
The trend is intact and the news flow is positive, so this is not a call to sell strength. A trailing stop below **₹2,716** (the 50-day EMA) protects the gain without fighting the tape.

### For Anyone Looking to Buy
Wait for the working capital evidence, not the price. Either a pullback into the **₹2,636-2,716** support cluster, or Q2 FY27 results showing debtor days genuinely falling toward the guided 90, would improve the risk-reward materially. Buying strength here means paying 135x for earnings that have not yet grown.

---

## Key Catalysts to Watch Next

- **Q2 FY27 results**, likely late October to early November 2026; the statutory outer limit is 14 November. No board-meeting date had been filed as of 9 October. This is the first real read on the H2 ramp.
- **Debtor days falling toward the guided ~90** via bill discounting — the clearest evidence the working capital plan works, though it will show in cash before profit.
- **Any positive operating cash flow figure** in the FY27 accounts.
- **MHI hot-section facility readiness**, about 7-8 months out as of the August call.
- **Rolls-Royce first qualification batch**, pulled forward to Q2 FY27.
- **DRDO weapon-integration testing** for the turbojet, guided at 4-6 weeks from July, and any disclosed volumes.
- **New large orders.** None announced since April; ICICI expects more from GE. A fresh order would refresh coverage on the order book.
- **Whether the four new plants contribute** as guided from H2 FY27.

---

## Exchange Filings & Material Announcements

Recent NSE filings that can affect the price or finances:

- **28 Sep 2026 — Two dedicated lean manufacturing facilities inaugurated for GE Vernova's Gas Power business** (Tunikibollaram; takes GE Vernova to three dedicated plants). [NSE filing](https://nsearchives.nseindia.com/corporate/AZAD2356_28092026142511_Inauguration_Letter.pdf)
- **7 Aug 2026 — Q1 FY27 results** for the quarter ended 30 June 2026 (standalone and consolidated). [NSE filing](https://nsearchives.nseindia.com/corporate/AZAD2356_07082026164644_Covering.pdf)
- **7 Aug 2026 — Investor presentation** accompanying the Q1 FY27 results. [NSE filing](https://nsearchives.nseindia.com/corporate/AZAD2356_07082026183606_SEintimation.pdf)
- **22 Jul 2026 — Delivery of India's first indigenous expendable turbojet engine to DRDO and the Ministry of Defence**, under the GTRE programme. [NSE filing](https://nsearchives.nseindia.com/corporate/AZAD2356_22072026155236_SEintimation.pdf)
- **30 Sep 2026 — Change in management:** the 43rd AGM approved the re-appointment of Rakesh Chopdar as Whole-Time Director, Executive Chairman and CEO, and of Jyoti Chopdar and Vishnu Malpani as Whole-Time Directors, each for five years from 13 September 2026. [NSE filing](https://nsearchives.nseindia.com/corporate/AZAD2356_30092026152848_Covering.pdf)

---

## Disclaimer & Sources

This is not investment advice. The author's view is as of 9 October 2026 and should be verified independently before you act on it. Nothing here is a recommendation to buy or sell any security.

**Revision history:** first published 27 June 2026 at ₹2,020 with a rating of Favorable with Caution. Revised in place on 9 October 2026 with Q1 FY27 results, the June-quarter shareholding, updated working capital data, refreshed technicals and the full 25-point checklist.

**Sources:** Screener.in consolidated financials (verified logged-in session, 27 metrics), NSE bhavcopy (sec_bhavdata_full, 15 sessions through 9 October 2026), NSE corporate announcements via the nsearchives filing PDFs linked above, TradingView daily technicals for NSE:AZAD, the Q1 FY27 earnings call (8 August 2026) and its transcript (14 August 2026), the May 2026 concall, CARE Ratings press release of 22 June 2026, ICICI Securities company update of 29 September 2026, the company's August 2026 investor presentation, and the original 27 June 2026 analysis.

**Model:** deepseek-v4-flash