Shagrir in 2025: A.Z.M Carried Profit, but the Cash Stayed in Fleet and Debt

Getting to Know the Company

At first glance, Shagrir looks like a roadside-assistance and towing company. That is only a partial read. In practice, the group now sits on three very different layers: a subscription and transport-services engine sold mainly through insurers, a repair and vehicle-adaptation engine centered around A.Z.M and the service-center network, and an asset layer that includes Shnapp, Wilshire, and a smaller holding in Goto. Anyone reading 2025 as one clean auto-services story misses the main point: profit no longer sits where it used to sit, but cash has not followed it yet.

What is working is easy to see. Revenue rose 19.3% to NIS 437.5 million, operating profit rose 20.7% to NIS 32.4 million, and net profit reached NIS 17.5 million. But the combined number hides a real shift in profit mix: the transport-services segment grew, yet its profitability weakened; the adaptation and body-repair segment moved sharply higher and became the main profit engine. That matters because the new profit engine comes with heavier dependence on National Insurance eligibility, more industrial and logistical weight, and a few support factors that still need to prove they are repeatable.

The active bottleneck is not demand. It is financial flexibility. Shagrir is generating profit, but 2025 showed that cash is being pulled into fleet renewal and expansion, into heavier working capital, and into new activities before they contribute in a meaningful way to revenue. That matters even more because the share is barely liquid. On April 3, 2026, turnover in the stock was only NIS 8,171. Even if the operating story improves, the market may take time to price it when the stock hardly trades.

The superficial reader can miss two things. First, Shagrir did not end 2025 as a cleaner roadside-services company. It ended the year as a group where A.Z.M and related activities carried the earnings improvement. Second, the balance sheet is already funding part of that shift: bank debt moved higher, supplier balances expanded, and year-end cash fell to only NIS 10.4 million. That is why 2026 does not read like a clean breakout year. It reads like a cash-conversion test year.

The Real Economic Map

This chart matters because it makes clear that the group is no longer mainly a roadside-services story. By 2025 the two operating segments were almost equal in size, but not in quality. In transport services the company runs a broad service network, a fleet of 1,142 vehicles, and a digital arm that already handles more than half of service-call openings. In adaptation and repair, the company operates vehicle-service centers alongside the A.Z.M activity, with production capacity that is still not near full use and with greater exposure to vehicle availability, parts, and eligibility-driven regulation.

That mix says two things at once. There is no single customer above 10% of revenue, but there is still clear channel concentration: insurance companies accounted for 58% of transport-segment revenue in 2025, exactly as in 2024. The risk here is less about one customer and more about the bargaining power of the channel itself.

Events and Triggers

2025 and early 2026 changed the Shagrir story across several layers, and not all of them are of the same quality.

The tariff reset: In July 2025, a roughly 6.17% increase in the vehicle-adaptation price list came into effect. The company explicitly says this move stopped the erosion in profitability that had characterized the activity. That is a major trigger because it explains why A.Z.M entered the year with a tailwind it did not have before. But it is not a free gift. It also means that 2026 comparisons will already be against an improved base, so another sharp jump will require real operating progress.

SteerLinq is becoming commercial: By the report date, A.Z.M had received cumulative orders of about NIS 20 million in remotely controlled vehicle systems, had already supplied and assembled systems worth about NIS 13 million, and recognized about NIS 7.8 million of revenue from the activity in 2025. On March 15, 2026, an additional order was received, with A.Z.M’s share standing at about NIS 5.2 million and deliveries expected to start in the coming weeks and continue through the end of the third quarter of 2026. This is no longer just a concept. It is still small relative to the group, but it is now a real commercial proof point.

S.K Electric Vehicles is still a balance-sheet bet: In November 2025, Shagrir completed a 50.01% investment in the company, through about USD 393 thousand of equity, a USD 1.065 million capital note, and a shareholder loan of about EUR 207 thousand. By the report date, sales from the activity were still not material, yet vehicle inventory had already reached NIS 11.0 million. In other words, the cash went out, the inventory came in, and the revenue contribution has not really arrived yet.

The rental-car merger does not create new value, but it does simplify the structure: The decision to merge Shagrir Rental Car, which started operating in February 2024, was made on December 31, 2025, and the merger was registered on February 24, 2026. The company makes clear that the move has no impact on assets or liabilities in the consolidated statements because the target was already fully consolidated. So this is an operating trigger, not an accounting one: fewer legal layers and more centralized fleet management.

Insurance remains an active arena: From 2024 through the report date, Shagrir renewed agreements with some insurers, updated commercial terms, and signed with a new insurer. At the same time, in November 2025 the capital-markets regulator required insurers to lower car-insurance prices. Shagrir does not say this already had a direct financial effect, but the reason to watch it is obvious: when the main distribution channel is under pricing pressure, the surrounding service supplier does not remain untouched forever.

The fourth quarter matters because it gives the market its first read into the next year. Revenue still held above NIS 110 million, but operating profit fell to only NIS 5.7 million, down from NIS 8.4 million in the third quarter and NIS 9.3 million in the first quarter. That tells us the annual improvement was not linear.

Efficiency, Profitability, and Competition

Profit shifted by segment, not just up in total

The key number in 2025 is not that operating profit rose. The key number is where it rose. The transport segment increased revenue by 13.4% to NIS 227.8 million, but operating profit fell 22.2% to NIS 13.5 million and the operating margin dropped from 8.7% to 5.9%. The company attributes this to heavier traffic, higher service volume that extended service time, and weather effects that included flooding and raised service demand. That is not a technical footnote. It is an admission that the operating network worked harder and earned less on each shekel of revenue.

The adaptation and repair segment moved in the opposite direction. Revenue rose 27.1% to NIS 215.9 million, and operating profit jumped 100.4% to NIS 18.8 million. Here the improvement came from several layers at once: better vehicle deliveries, SteerLinq activity, growth in repair revenue, the July tariff reset, and also two factors that need to be marked with an asterisk. The first is a working-capital settlement with the previous controlling owners of A.Z.M. The second is lower amortization of acquisition-related excess cost. So not all of the profit jump is clean, recurring operating progress.

That chart is the center of the 2025 reading. In 2024 transport services were more profitable than adaptation. In 2025 the relationship reversed. Anyone who does not split Shagrir into those two engines will get the wrong checklist for 2026.

Once accounting noise is cleaned out, the improvement is still real but less dramatic

The company also discloses adjusted operating profit, excluding amortization of acquisition-related excess cost. That makes the picture more accurate. In transport services, adjusted operating profit fell 21.2% to NIS 15.1 million. So even without the amortization layer, the erosion is real. In adaptation and repair, adjusted operating profit rose 49.6% to NIS 21.6 million. That is still a strong improvement, but it is not a doubling. That matters. A.Z.M improved for real, but less dramatically than the raw headline suggests.

The economic implication is that Shagrir’s new profit base relies more on a segment that combines real improvement with a few non-recurring and regulatory supports. From an earnings-quality standpoint, that is still positive, but it is less clean than the combined operating line alone suggests.

Not all growth is of the same quality

There is also a difference between volume growth and quality growth on the revenue side. In the transport segment, subscription-based service revenue rose to NIS 158.6 million, but revenue per subscriber itself rose only 2.11% versus 2024. That means the improvement came mainly from a larger subscriber base, more volume, and better pricing discipline, not from a sharp jump in the economic value of each subscriber.

In the service-center activity, the picture is even more nuanced. The company itself says that over the last two years parts prices moved higher because of a global shortage, and that this increase was passed through to insurers paying for the repairs. That means some of the revenue growth in the repair centers may also reflect higher parts prices, not only better productivity or cleaner operating leverage. This is exactly the kind of point the market tends to miss on a first read.

At A.Z.M, there is a real moat on one side: long-standing relationships with leading suppliers, production and installation licenses, and a strong position in mobility adaptation. On the other side, there is structural concentration: about 85% of A.Z.M revenue comes from private customers who are National Insurance eligible. The company receives payment through the end customers rather than directly from National Insurance, but the eligibility framework, tariff list, and replacement cycle still form the backbone of the activity. That is a source of strength, and a source of risk.

Cash Flow, Debt, and Capital Structure

The real cash picture

Precision matters here. The right framework for Shagrir in 2025 is all-in cash flexibility, not normalized cash generation. This is not a year to ask how much the business could have generated without investments. It is a year to ask how much cash truly remained after the period’s real uses.

The answer is simple: not much. Cash flow from operations fell to NIS 31.3 million, from NIS 73.2 million in 2024. The shift did not come from collapsing earnings. It came from working capital. Receivables increased by NIS 45.6 million, other debtors and prepaid expenses increased by NIS 19.5 million, and inventory rose by another NIS 3.7 million. Supplier balances rose by NIS 38.8 million on the other side. So the company funded part of its growth by extending more credit to customers and another part through more supplier financing.

This chart does not try to show a pretty version of the year. It shows the year as it was. After reported capex of NIS 48.6 million, intangible investment of NIS 2.3 million, lease-principal repayment of NIS 21.6 million, and a NIS 5.0 million dividend, internally generated cash was not enough. Even after adding the NIS 4.4 million dividend received from an associate, the gap remained material.

It is also important to be precise about leases. Lease-principal repayment was NIS 21.6 million. Total lease-related cash outflow, including interest, was NIS 25.0 million. Anyone looking only at EBITDA misses a real cash burden here.

The fleet and working capital are consuming the story

The main reason for the pressure is clear: Shagrir expanded and renewed its vehicle fleet quickly. Rental and replacement vehicles increased from 630 to 962, and the total fleet reached 1,142 vehicles. That is a rational operating move because it reduces dependence on external rental companies and can improve the economics of the service offering. But it also raises capex, maintenance cost, and financing dependence.

In 2023 and 2024 operating cash still covered a large part of the burden. In 2025 that relationship reversed, and that is before adding new investments, intangible spending, or the dividend.

Debt is up, but the covenant is not the immediate problem

Total bank debt rose to NIS 113.8 million from NIS 75.5 million at the end of 2024. Current maturities climbed to NIS 45.7 million, while long-term bank debt stood at NIS 68.2 million. There is also another NIS 11.0 million of debt from other parties, mainly around S.K Electric Vehicles. About two-thirds of the bank debt carries floating interest, and the company says that every 0.1% increase in the prime rate would add roughly NIS 91 thousand of annual finance cost.

That is the tight side. The more reassuring side is the covenant. Equity to assets stood at 30% at year-end 2025, versus a minimum requirement of 21%, and the 2026 threshold rises only to 22%. So there is no immediate covenant squeeze here. But that does not mean unlimited room. The balance sheet expanded to NIS 601.5 million, current liabilities reached NIS 275.4 million, and part of the year’s move was funded through suppliers, with supplier balances rising to NIS 92.6 million from NIS 51.0 million a year earlier.

It is also important not to misread the negative working capital. At year-end 2025 the deficit was NIS 59.8 million, but the company explicitly says that most of it comes from deferred subscription revenue of about NIS 52.7 million. That softens the risk, because this is not only a classic liquidity squeeze. Still, 2025 also contained real cash pressure, not only an accounting structure.

Outlook

Before looking ahead, four non-obvious conclusions need to be fixed in place:

• Shagrir’s profit base effectively moved from the transport segment to the adaptation and repair segment.
• Part of the improvement at A.Z.M is real, but part of it also came from tariff updates, a working-capital settlement, and lower amortization.
• The new S.K Electric Vehicles activity has already become balance-sheet-intensive before becoming materially revenue-generating.
• SteerLinq has moved beyond the concept stage, but it is still too small on its own to solve the group’s cash-flexibility problem.

From here, 2026 reads like a cash-conversion test year. For the Shagrir story to improve, four things need to happen almost together.

First, the transport segment needs to recover some of the margin it lost. The company has a broad infrastructure, strong digital tools, relationships with insurers and agents, and a service network that is not easy to replicate quickly. But in 2025 that still was not enough to protect profitability. If traffic, weather, and service-intensity were temporary pressures, 2026 should show recovery. If not, the segment may simply have become structurally heavier to serve.

Second, A.Z.M needs to show that the profit improvement is not only a function of a new tariff list and an easier comparison base. Here the market will need to watch several layers at once: vehicle-delivery pace, the ability to manage model shortages tied to the Turkish export ban, continued penetration of electric and hybrid vehicles, and whether SteerLinq keeps converting orders into revenue at a healthy pace.

Third, S.K Electric Vehicles needs to move from the balance sheet into the income statement. Right now it looks like an activity that is still consuming funding. The company has already put in equity, a capital note, and shareholder loans, and year-end inventory was material relative to the group’s cash position. If meaningful sales do not show up in 2026, this will remain an investment that weighs on the read rather than improving it.

Fourth, the group needs to show that cash coming up from held assets actually strengthens flexibility rather than being swallowed immediately by other uses. After the balance-sheet date, Shnapp announced a NIS 10 million dividend, of which Shagrir’s share is NIS 2.944 million. That is helpful, but not enough on its own if capex, lease cash, and working capital continue to rise.

In other words, 2026 is not just another growth year. It is the year in which the market will measure whether Shagrir can turn its new profit engines into real financial breathing room.

Risks

Channel dependence, not one-customer dependence. The company has no single customer above 10% of revenue, but in the transport segment 58% of revenue comes from insurers. The agreements renew automatically, yet most are already in extension periods and either side can terminate with notice. This is structural dependence on the bargaining power of the channel.

A.Z.M depends on an eligibility framework. About 85% of A.Z.M revenue comes from private customers who are National Insurance eligible. This is not a single-customer risk. It is a rules-of-the-game risk around tariff lists, eligibility, and vehicle replacement timing.

A meaningful part of balance-sheet value still rests on models. The carrying value of Shnapp was tested for impairment because market value had fallen below equity, but no write-down was recorded because value in use remained above book value. Wilshire still lost NIS 7.8 million in 2025. In addition, the group carries NIS 135.2 million of goodwill. That does not make the assets problematic, but it does mean a part of equity rests on modeled value rather than on liquid cash.

Cash pressure matters before covenant pressure does. The equity ratio is comfortably above the covenant, but cash is low, finance expense moved higher, and the business is already leaning more on bank debt, suppliers, and lease obligations. If 2026 continues to require heavy fleet and inventory funding without cash-flow recovery, the strain will be felt first in room to maneuver rather than through a formal breach.

Liquidity is also a risk. As of March 27, 2026, short interest as a percentage of float was effectively 0.00% and SIR stood at 0.06, so there is no sign of an aggressive short thesis. But on April 3, 2026, trading turnover was only NIS 8,171. That means the market can stay inefficient even if the operating thesis improves, simply because it is hard to move size in the stock.

Conclusions

Shagrir ends 2025 as a company with better earnings, but not as a simpler company to read. What supports the story today is the shift in the profit center toward A.Z.M, the tariff reset, the first commercial proof of SteerLinq, and the fact that assets like Shnapp still send cash upward. What blocks a cleaner thesis is that the improvement still has not opened real breathing room in cash, and the group continues to fund fleet growth, working capital, and new activities through debt and suppliers.

Current thesis: Shagrir became less of a roadside-services company in 2025 and more of a group where A.Z.M carries profit, but the path from that profit to real financial flexibility is still incomplete.

What really changed: The effective profit center moved from transport services to adaptation and body repair, while the transport segment remained a major revenue engine but a weaker profit engine.

The strongest counter-thesis: One can argue that the caution is too heavy because covenant headroom is still wide, A.Z.M has gained regulatory support, SteerLinq now has real demand proof, and Shnapp continues to deliver dividends.

What may change the market read in the near term: conversion of the March 2026 SteerLinq order into recognized revenue, a recovery in transport-segment margin, and proof that S.K Electric Vehicles is beginning to sell rather than mainly to carry inventory.

Why this matters: The key 2026 question is not whether Shagrir can grow. It is whether the new growth layer can also become cash that is accessible to shareholders, rather than profit that is immediately absorbed by fleet needs, leases, and financing.

Over the next 2 to 4 quarters, Shagrir needs to prove three things: that the transport segment can recover some of the margin it lost, that A.Z.M can hold profitability even after the comparison base gets harder, and that cash left after capex, leases, and debt service stops being this tight. If that happens, 2025 will look like a successful transition year. If not, it will look like a year in which earnings improved faster than balance-sheet quality.