Shagrir Vehicle in the First Quarter: Cash Flow Recovered, but AZM and the Fleet Still Limit Flexibility
Shagrir opened 2026 with a strong recovery in operating cash flow and a clear improvement in transportation services, but operating profit fell as AZM weakened and S.K. Electric Vehicles remained loss-making. The quarter shifts the proof path toward SteerLinq order conversion and cash flow after fleet investment, debt and dividends.
The first quarter at Shagrir Vehicle does not close the question that 2025 opened, but it does change the order of importance. Operating cash flow recovered to NIS 17.3 million after only NIS 0.3 million in the comparable quarter, and the transportation services segment showed a real margin improvement. At the same time, consolidated operating profit fell 13.3% despite 10.2% revenue growth, because the vehicle adaptation and body repair segment moved from NIS 4.7 million of operating profit to only NIS 1.6 million. SteerLinq continues to advance, with a NIS 5.2 million order in March and another NIS 3 million Ministry of Defense order after the balance-sheet date, but it is still not large enough to offset weaker disabled-vehicle deliveries and a NIS 1 million loss at S.K. Electric Vehicles. The current read is mixed: the quarter improves the cash position relative to the annual concern, but it does not prove that AZM's new profitability base has stabilized. The next reports need to show three things together: sustained transportation margins, AZM recovery without one-off agreement items, and cash that stays positive after fleet investment, leases, debt and dividends.
Company Map
Shagrir Vehicle sits between a service business and a fleet business. One side provides roadside assistance, replacement vehicles, tracking and protection services to insurance companies, leasing companies, rental companies, vehicle importers and direct customers. The other side is AZM, which includes vehicle body repair, adaptations for people with mobility limitations, SteerLinq remote-controlled vehicle systems, and S.K. Electric Vehicles, which entered consolidation only in the fourth quarter of 2025.
This is not an asset-light service company. To generate revenue it holds a vehicle fleet, finances inventory, extends customer credit, relies on suppliers, and receives part of its cash through prepaid subscription fees. That makes accounting profit less important than the cash left after fleet investment, debt repayment and lease payments. That was also the focus of the 2025 annual analysis: AZM led profit, but cash remained tied to the fleet and debt.
The company's latest market screen showed a market cap of about NIS 207 million, while short interest was negligible at about 0.01% of the float. That means any change in the thesis is more likely to come from basic business evidence than from a crowded short setup: more cash after actual cash uses, less dependence on one-off profit items, and clearer order momentum at SteerLinq.
The Quarter Swapped Profit Engines
The accounting headline looks acceptable: revenue rose to NIS 114.5 million and net profit was almost unchanged at NIS 4.9 million. The quality is less clean. Gross margin fell to 20.5% from 21.2%, operating margin fell to 7% from 9%, and adjusted operating profit declined to NIS 9.2 million from NIS 10.4 million. This is not simply "growth with stable net profit". It is growth where one engine improved and another weakened the operating line.
| Activity engine | First-quarter 2026 revenue | Change vs. prior year | Operating profit | Why it matters |
|---|---|---|---|---|
| Transportation services and products | NIS 63.5 million | 17.8% | NIS 6.5 million | The service core recovered margin through activity growth and efficiency measures |
| Vehicle adaptation and body repair | NIS 52.4 million | 1.8% | NIS 1.6 million | AZM and S.K. weakened profit despite SteerLinq and electric-vehicle sales |
The transportation segment provides a clear positive signal. Revenue rose 17.8%, and operating profit rose 39.6% to NIS 6.5 million. Segment operating margin improved to 10.2% from 8.6%, exactly where the company needed to show that the 2025 erosion was not necessarily structural. If the efficiency and activity improvement continue in the next quarters, transportation can again become a profit anchor rather than only a volume platform.
AZM tells the opposite story. Revenue in the vehicle adaptation and body repair segment rose only 1.8%, while operating profit fell 65.6%. Even on the adjusted operating-profit measure, which excludes amortization of acquisition-related surplus cost, the segment fell to NIS 2.4 million from NIS 5.4 million. The business explanation matters more than the percentage move: S.K. Electric Vehicles lost NIS 1 million, the working-capital settlement with AZM's former controlling shareholders no longer supported profit as it did in the comparable quarter, and AZM vehicle deliveries declined. That weakens the overly positive read on AZM after 2025, even if it does not erase it.
SteerLinq prevents this section from becoming fully negative. The NIS 5.2 million March order, together with the NIS 3 million Ministry of Defense order after the quarter, shows that the activity continues to receive orders and is not stuck at proof-of-capability stage. Still, these orders must become deliveries, revenue and profit. As long as the whole adaptation segment reports a sharp margin decline, SteerLinq is a strengthening business option, not an immediate answer to AZM's profitability issue.
Cash Recovered, but Uses Still Absorb Flexibility
The most important improvement in the quarter is operating cash flow. The company moved from only NIS 0.3 million of operating cash flow in the comparable quarter to NIS 17.3 million. That is meaningful, but it is not enough by itself to say that the 2025 cash pressure has disappeared. All-in cash flexibility still has to include fleet investment, debt repayment, lease payments and dividends already declared.
| First-quarter cash layer | 2026 | 2025 | Economic read |
|---|---|---|---|
| Operating cash flow | NIS 17.3 million | NIS 0.3 million | Strong recovery, partly helped by working-capital timing |
| Net cash used in investing | Negative NIS 14.5 million | Positive NIS 0.6 million | Fleet renewal and expansion absorbed most operating cash flow |
| Net cash used in financing | Negative NIS 6.7 million | Negative NIS 9.2 million | Debt and lease repayments still consumed cash despite new loans |
| Change in cash | Negative NIS 4.0 million | Negative NIS 8.3 million | Cash improved, but did not turn into full free surplus |
The cash bridge here is cash flexibility after actual cash uses. Operating cash flow already includes cash taxes and interest. After that, the company invested a net NIS 14.5 million, mainly due to about NIS 13 million of fleet renewal and expansion. In financing, the company paid NIS 5.1 million of lease principal, repaid NIS 7.9 million of long-term bank debt, and received NIS 5.7 million of new bank loans. After all of that, cash fell by NIS 4.0 million.
Working-capital quality is also not one-directional. Working capital contributed NIS 4.8 million to cash flow, mainly from a decline in other receivables and an increase in deferred revenue, but customer balances still rose by NIS 7.3 million and inventory rose by NIS 2.5 million. Supplier balances fell by NIS 8.3 million, so the improvement did not come from more supplier financing but from better timing in other lines. The NIS 74.4 million working-capital deficit looks harsh at first, but it mainly reflects NIS 61.6 million of prepaid subscription revenue, which is a service obligation rather than an ordinary future cash payment. That reduces the concern, but does not remove the need for repeat cash generation after fleet investment.
Two capital layers add context. The first is Shanp, which reported, on a 100% basis, NIS 7.6 million of operating profit versus NIS 3.7 million in the comparable quarter, while the company's share in its profit rose to NIS 1.8 million. The associate also declared a March dividend, of which the company's share was NIS 2.9 million and which was paid in April, and a further May dividend, of which the company's share was NIS 0.6 million. The second is the company's own NIS 3 million dividend, declared at the end of March and paid in April. That makes the next quarter a cleaner check: whether cash from the associate and operating cash really cover distributions and fleet needs, or whether the balance sheet again absorbs the gap.
The first quarter turns 2026 into a proof year, not a breakout year. Transportation needs to show that the new margin holds even without favorable timing, because that is the clearest repair in the quarter. AZM needs to show that disabled-vehicle deliveries recover and that S.K. Electric Vehicles does not continue to erase part of the profit. SteerLinq needs to convert the March and April orders into deliveries, revenue and a recurring order pattern, otherwise it remains a positive but small business signal relative to the full segment.
The funding structure remains a checkpoint as well. The company complies with its financial covenants, has NIS 20.5 million of unused credit lines, and its bank debt is not CPI-linked. On the other hand, about 83% of bank credit carries variable interest, and every 1% increase in interest adds about NIS 935 thousand to annual finance expenses. This is not immediate covenant pressure, but it means operating profit has to remain strong enough so that improvement is not absorbed by interest, leases and fleet needs.
Conclusions
The company opened 2026 better in cash and weaker in earnings quality. Transportation gave the first answer to whether 2025 margin erosion was temporary, but AZM gave a weak answer to whether 2025 created a new profit base. The positive counter-thesis is that the quarter is a transition stage: S.K. is still early, SteerLinq received additional orders, and the associate supports cash through profit and dividends. The opposing pressure is clear: if AZM does not recover deliveries and profitability, and if cash flow does not stay positive after fleet investment, leases and dividends, the market will struggle to treat the cash recovery as a new level. Over the next 2-4 quarters, the proof needs to be less about headlines and more about conversion: SteerLinq orders into revenue, transportation operating margin around 10%, AZM moving back to higher adjusted profit, and cash covering fleet needs without another increase in debt or supplier financing.
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