Aurionpro Solutions order book supports data centre and H2 FY27 execution recovery

Investment View and Valuation

Choice Equity Broking retained its BUY view on Aurionpro Solutions despite a weak Q1 FY27, which was affected primarily by execution delays and elevated investment. The broker believes the order pipeline, expected data centre ramp-up and the longer-term international transaction-banking opportunity support the investment case.

Choice reduced its target price to Rs 1,100 while retaining a valuation multiple of 22 times FY28E EPS. The broker believes the prevailing valuation remains compelling, with PEG below 1 times, while its DCF valuation also supports the revised target price.

Q1 FY27 Financial Performance

Aurionpro reported Q1 FY27 revenue of Rs 3,581 million, up 6.3 per cent year-on-year and 3.6 per cent quarter-on-quarter, but below Choice’s estimate of Rs 3,907 million. EBITDA declined 9.8 per cent year-on-year to Rs 615 million, 22.1 per cent below the broker’s estimate of Rs 789 million. EBITDA margin fell 307 basis points year-on-year to 17.2 per cent, compared with the estimate of 20.2 per cent.

PAT declined 10.6 per cent year-on-year to Rs 459 million and was 29.0 per cent below the Rs 645 million estimate. Quarterly EPS was Rs 8.5. The revenue miss reflected seasonality, higher input costs, project-execution delays and geopolitical disruption in the Middle East.

Business Mix and Order Book

Banking and Fintech revenue was Rs 2,010 million, growing 4.7 per cent year-on-year, while Technology Innovation Group revenue increased 8.3 per cent to Rs 1,570 million. Software services accounted for 76.2 per cent of Q1 FY27 operating revenue, with equipment and product licences contributing the remaining 23.8 per cent.

India contributed 61 per cent of revenue, followed by APAC at 23 per cent, the US and Europe at 13 per cent, and MEA at 3 per cent. The order book reached Rs 19,500 million at the end of Q1 FY27, up 8.3 per cent quarter-on-quarter and 33.6 per cent year-on-year. The trailing 12-month book-to-bill ratio stood at 1.4 times.

The company secured several marquee wins during the quarter, including its largest-ever US contract worth more than USD 33 million. It also added 23 US customer logos, won a major transaction-banking mandate and began executing a large data centre project.

Execution Outlook and Data Centre Ramp-Up

Management said demand remains healthy and that execution, rather than demand, is the main near-term constraint. It expects revenue conversion to improve over the next one to two quarters and project execution to accelerate through Q2 to Q4 FY27, supporting a stronger second half of FY27.

Management expects the data centre business to pick up from Q2 and ramp more strongly in Q3 and Q4 as large projects progress, capacity expands and the pipeline converts. It expects growth above the business’s historical 40 to 50 per cent trajectory. However, management did not provide full-year revenue or margin guidance because of uncertainty around the MEA crisis and the timelines for large projects.

Software 2.0 Investment and Strategic Initiatives

Aurionpro is investing in an AI-native Software 2.0 stack through Aurion AI, Arya.ai and Lexsi Labs, with the objective of moving banking products from systems of record to systems of intelligence. Engineering resources diverted from billable implementation towards this build-out affected banking margins.

Management indicated that the investment impact should normalise over one to two quarters and improve the software portfolio’s long-term competitiveness. The company is deploying significant capacity and allocating 10.5 to 11 per cent of revenue towards the AI-native stack, while also building data-centre execution capacity.

Aurionpro is diversifying faster into Southeast Asia, Europe and the United States to mitigate MEA-related disruption. It is also focused on improving EBITDA-to-cash conversion.

Revised Estimates

Choice lowered its FY27E and FY28E revenue estimates by 3.5 per cent and 5.8 per cent, respectively. EBITDA estimates were reduced by 11.4 per cent and 9.4 per cent, while EPS estimates were cut by 12.0 per cent and 10.3 per cent, respectively. The revisions reflect delayed project ramps and continued investment in Software 2.0.

The broker expects EBITDA margin to decline to 18.1 per cent in FY27E before recovering to 19.2 per cent in FY28E and 21.0 per cent in FY29E, as productivity gains and operating leverage emerge.

Key Risks

• Continued project-execution delays.
• Prolonged disruption in the MEA region.
• Uncertain timelines for large projects.
• Higher-than-expected investment requirements.
• Slower-than-expected margin recovery.