The said target price implies an upside potential of 19% from the current market price of Rs 378.40 and a P/E of 38x FY27E.
Over the past one year, the stock has declined by 15.10%, and in the last six months, it has dropped 26.90%. However, over a longer horizon, the stock has delivered strong returns, gaining 133.28% over two years and 394.76% over three years.
In its note, ICICI Securities said that the risk-reward is favourable at current levels, especially after the steep correction in the stock price. Despite expectations of a weak Q1FY26, the brokerage has retained confidence in AVL’s long-term growth strategy, brand positioning, and store expansion plans.
According to the brokerage firm, Aditya Vision is expected to deliver revenue and profit after tax (PAT) CAGRs of 17.3% and 19.2%, respectively, over FY25–27E. The firm also expects operating cash flows to remain strong, with return ratios forecast to stay above the company’s cost of capital.
Q1FY26 likely weak but not a structural concern
The brokerage expects AVL to report a revenue decline in Q1FY26 due to poor performance of summer products like refrigerators, fans, coolers, and room air conditioners (RACs).This weakness has been attributed to unseasonal rainfall and an early onset of monsoon, which adversely impacted sales during peak summer months. RACs typically contribute 45–50% of Q1 sales, and ICICI Securities anticipates flattish or negative growth for these categories.However, the brokerage observed healthy demand in early April and June, which partially offset the Q1 softness. Further, OEM brands and RAC companies rolled out consumer-centric offers like free installation and 3–4% discounts, helping support offtake to some extent.
Other product categories hold strong
While summer products underperformed, washing machines, water purifiers, and televisions witnessed strong demand, according to ICICI Securities. Television sales were supported by the Indian Premier League (IPL) and early travel restrictions due to the monsoon, driving stay-at-home consumption.
Expansion, debt reduction on track
AVL continues to follow a steady store expansion plan, with a target to open around 30 stores in FY26. The company is expected to add 4–6 new stores in Q1FY26 alone, with further acceleration expected in H2 to align with the festival and wedding season. Importantly, ICICI Securities does not see any material deviation in AVL’s expansion roadmap due to Q1 weakness.
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The company had raised debt in H2FY25 to support working capital and store rollouts. ICICI Securities models a gradual reduction in debt in H1FY26 as RAC inventory gets liquidated, although it notes that the pace may be slower than initially expected, along with higher interest costs in the interim.
Margin outlook and cost initiatives
Gross margin is expected to remain flat YoY in Q1FY26, but EBITDA margin may contract due to slower revenue growth and lack of operating leverage. Nonetheless, AVL has undertaken several cost-saving initiatives, including lower incentives to sales staff, reduced brand spends, and other operational efficiencies that could support margins going forward.
Despite trimming earnings estimates for FY26–FY27 by 6.1–6.8%, ICICI Securities sees no material change in AVL’s long-term growth story. The brokerage believes the stock’s steep correction has opened up a favourable entry point for long-term investors.
Additionally, with the festive season around the corner and AVL’s continued focus on expanding its retail footprint across key markets, investors will be watching closely to see if the stock stages a comeback from its current lows.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)