Azad Engineering Limited

Industrials — Specialty Industrial Machinery · NSE

₹2,737.00−₹12.80 (−0.47%)

DalalBaazaar Score

62 / 100

🟢 Good

Verdict

NEUTRAL

Risk

Moderate

Driven by negative free cash flow, small-cap size, which brings sharper price swings, a very high earnings multiple, which leaves little margin for disappointment.

In simple words: Reasonable but unspectacular business quality, with both sales and profits growing well. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:09 pm

Caution warranted. Multiple fundamental metrics — flagged in red below — point to either valuation stretch, leverage risk, or weakening profitability. This doesn't mean avoid the stock outright, but it does mean the burden of proof is on the growth story to justify the current price.

Understanding the Business

Company site ↗

The 60-second version of Azad Engineering Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Azad Engineering Limited manufactures and sells precision-engineered components for energy and power generation, aerospace and defence, and oil and gas industries in India and internationally.

IndustrySpecialty Industrial Machinery

SectorIndustrials

Employees2,168

Annual revenue₹595 Cr

How does it make money?

Turns over ₹595 Cr a year. Of every ₹100 of sales, about ₹22 reaches shareholders as profit, with ₹44 left at the operating level before interest, tax and depreciation. Each of its 2,168 employees supports ₹27.4 lakh of revenue a year, the signature of a people-led business.

EBITDA margin44.2%

Net margin22.4%

Revenue / employee₹27.4 lakh

Who are its competitors?

The closest listed comparisons in its industry are SIEMENS LTD, ABB INDIA LIMITED, LARSEN & TOUBRO LTD., HAVELLS INDIA LIMITED. These are the companies its valuation and returns are measured against elsewhere in this report.

SIEMENS LTDP/E 88.8x · ROE 10.5%

ABB INDIA LIMITEDP/E 92.6x · ROE 19.1%

LARSEN & TOUBRO LTD.P/E 30.1x · ROE 15.2%

HAVELLS INDIA LIMITEDP/E 43.5x · ROE 17.1%

What is its competitive advantage?Little sign of one

Returns on capital of 11.0% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

ROCE11.0%

ROE8.7%

Peer median ROE17.1%

What is the outlook?

6 analysts covering the stock expect revenue to grow about 36.8% and earnings to grow about 42.8% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+36.8%

Est. earnings growth+42.8%

Analysts6

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +146% while net margin moved +537% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+146%

Margin effect+537%

DalalBaazaar Score

62/ 100

Good

Weighted across six categories. Every point is explained below.

✗ P/E of 127.4x is demanding — it needs sustained high growth to justify
• P/E is close to its own historical median of 139.1x
✗ P/B of 11.57x is a steep premium to book

Quality vs. Valuation

Company Quality

70/ 100

Good

How good the business is, ignoring the share price entirely.

Valuation

42/ 100

Expensive

What you are being asked to pay, ignoring how good the business is.

A good business, but the price already reflects that. The quality is real; the question is whether you are overpaying for it today.

Historical Valuation

Current P/E

127.4x

3Y Median

139.1x

36 monthly readings · mean 306.8x · range 100.5x–1324.2x

Sector Median

66.2x

median of 4 sector peers

🟡Currently trading close to its 3y median of 139.1x — the market is paying about what it usually pays for this company.

⚠️Against its sector it trades 92% above the peer median of 66.2x.

vs. its own history

Fair

139.1x median over 36 months · -8%

vs. sector peers

Expensive

66.2x median of 4 peers · +92%

vs. generic bands

Expensive

Above 35x

P/E (Trailing)

127.4x

P/B

11.57x

EV/EBITDA

69.0x

PEG

0.85

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well4

Margins are improving
EBITDA margin is up from 24.3% to 44.2% over 3 years.
Return on equity is rising
ROE has improved from 4.2% to 8.7%.
Return on capital is rising
ROCE has improved from 9.0% to 11.0%.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention3

Debt is rising
Total debt is up 58% over 3 years — worth checking what it funded.
Free cash flow is negative
The business is not currently covering its capital spending from operations.
Inventory building faster than sales
Inventory is up 282% against revenue growth of 146% — stock may not be moving.

Red Flags

4 items require attention · 4 high

🔴Debt has risen sharplyFinancial
Total debt is up 58% over 3 years, from ₹301 Cr to ₹474 Cr.
🔴Free cash flow negative for 4 yearsFinancial
The business has not covered its capital spending from operations for several years running, which has to be funded externally.
🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🔴Inventory building faster than salesFinancial
Inventory up 282% against revenue up 146% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 24.3% to 44.2%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

A premium to the sector to defend
It trades 92% above the peer median. That premium needs a reason that persists, or it closes.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Small Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.
Several serious flags at once
4 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 26% a year✓ 35.0% CAGR
Latest reported year was 25.9%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 42%✓ 44.2%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹691 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.8x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✓ 11.0%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

8 / 12 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✓ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✗ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Analyst consensus isn't majority-sell
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 4 neutral · 3 weak

Market Cap

₹17,676 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

127.4x

Expensive

Expensive — verify against sector peers

P/B Ratio

11.57x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹21.49

Profitable

Profitable on a per-share basis

ROE

8.7%

Moderate

Moderate capital efficiency

ROCE

11.0%

Moderate

Moderate return on the capital in the business

Debt/Equity

0.31x

Low

Conservative leverage

Revenue Growth (YoY)

25.9%

Healthy

Healthy top-line growth

Profit Growth (YoY)

21.3%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹691 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹2,737

P/E (Forward)

74.0x

Improving

Below the trailing multiple — the street expects earnings to grow into the price

Operating Margin

26.5%

Good

Healthy core-business profitability

Net Margin

21.8%

Good

Strong bottom-line conversion

Current Ratio

3.27

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.64

Defensive

Steadier than the market

52W Range Position

78%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

2853.0 / 2784.1

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

50.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹242 Cr	₹328 Cr	₹444 Cr	₹595 Cr	+35.0%
EBITDA	₹59 Cr	₹107 Cr	₹164 Cr	₹263 Cr	+64.9%
EBITDA Margin	24.3%	32.5%	37.1%	44.2%	—
PAT (Net Profit)	₹8 Cr	₹59 Cr	₹87 Cr	₹133 Cr	+150.3%
EPS	₹1.43	₹11.2	₹14.66	₹20.57	+143.0%
ROE	4.2%	9.1%	6.3%	8.7%	—
ROCE	9.0%	16.2%	8.3%	11.0%	—
Total Debt	₹301 Cr	₹39 Cr	₹263 Cr	₹474 Cr	+16.4%
Free Cash Flow	-₹96 Cr	-₹82 Cr	-₹240 Cr	-₹691 Cr	—

🟢 Revenue has grown at 35.0% a year over 3 years.

🟢 EBITDA has grown at 64.9% a year over 3 years.

🟢 EBITDA Margin has risen from 24.3% to 44.2% over 3 years (+19.9 pts).

🟢 PAT (Net Profit) has grown at 150.3% a year over 3 years.

🟢 EPS has grown at 143.0% a year over 3 years.

🟢 ROE has risen from 4.2% to 8.7% over 3 years (+4.5 pts).

🟢 ROCE has risen from 9.0% to 11.0% over 3 years (+2.0 pts).

🔴 Total Debt has grown at 16.4% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹2,200 Cr

Total Liabilities

₹671 Cr

Total Debt

₹474 Cr

Cash & Equivalents

₹25 Cr

Operating Cash Flow

-₹119 Cr

Capex

-₹572 Cr

Shareholding (proxy)

Institutional Holding

19.7%

Insider Holding

55.8%

Analyst Consensus

Recommendations

6 Buy · 0 Hold · 1 Sell

Target Price (Mean)

₹2,617.86

-4.4% vs CMP

Target Range

₹2,050 – ₹3,315

Peer Comparison

Company	P/E	ROE
SIEMENS LTD	88.8x	10.5%
ABB INDIA LIMITED	92.6x	19.1%
LARSEN & TOUBRO LTD.	30.1x	15.2%
HAVELLS INDIA LIMITED	43.5x	17.1%

Recent News

2 mixed4 general

Azad Engineering delivers first indigenous turbo jet engine to DRDO

scanx.trade, 18 Oct

Azad Engineering (NSEI:AZAD) Stock Forecast & Analyst Predictions

Simply Wall Street, 05 OctAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

Azad Engineering zooms 111% in six months; hits new high on heavy volumes

Business Standard, 30 Sept

Azad Engineering Share Price: Goldman Sachs gives target price of Rs 3,315; check key details here

India.com, 14 OctAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

Top stocks in focus tomorrow: Investors must watch HCL Tech, RBL Bank, Azad Engineering shares on Tue, 13 Oct | Triggers

Livemint, 12 Oct

Azad Engineering Share Price near 52-week high, valuation

Univest, 07 Oct

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🟢Business QualityStrong14.5/20

🟢Financial HealthStrong13/20

🟢GrowthStrong14.9/20

🟢ProfitabilityStrong10/15

🔴ValuationDemanding5.3/15

🟡RiskModerate4.5/10

Good business, demanding price

The quality is real and the price already reflects it. Buying here is a bet that the business keeps compounding for long enough to grow into the multiple — which good businesses often do, but it removes the margin for error that a lower price would have given you. 4 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 26% a year35.0% CAGR
✓EBITDA margin holds above 42%44.2%
✗Free cash flow remains positive-₹691 Cr
✓Debt / EBITDA stays below 2x1.8x
✓ROCE stays above 8%11.0%