Kaynes Technology India Ltd Q1 FY25 Earnings Conference Call Insights

Key highlights from Kaynes Technology India Ltd (KAYNES) Q1 FY25 Earnings Concall

• Financial Performance
  • Achieved revenue of INR5,040 million in Q1 FY25, representing 70% year-on-year growth.
  • Operational EBITDA margin, excluding other income, was 13.3% for the quarter.
  • PAT margin stood at 10.1%.
  • The order book grew from INR 41,152 million in Q4 FY24 to INR 50,386 million in Q1 FY25, a 22% sequential increase.
  • Consolidated EBITDA for the quarter was INR699 million, showing a 66% year-on-year increase.
  • Consolidated PAT for the quarter was INR508 million, up by about 106%.
• Expansion Plans
  • Company’s Telangana facility is almost ready and will be active soon, focusing on smart media.
  • Land has been acquired in Gujarat for a new facility, with construction to begin shortly.
  • Keynes is in the final stages of obtaining government approval for new investments.
  • The HDI Printed Circuit Board project is proceeding as planned.
  • OSAT and PCB businesses are expected to generate revenue in FY26.
• Government Initiatives
  • Keynes is working on gaining traction in railways through the on-board electronic train pollution avoidance system.
  • The company is making significant investments in developmental activities related to rail safety.
  • The company anticipates positive outcomes from government support for electronics manufacturing in India.
  • Explicit government approvals for new projects expected soon.
• Future Outlook
  • Expects to meet and exceed its FY25 revenue estimate of INR30,000 million.
  • Targeting an EBITDA margin of 15% for FY25.
  • Plans to expand into other key verticals to improve both top-line and bottom-line performance.
  • Expects to become a truly integrated electronics company with the addition of PCB and OSAT businesses.
• Order Book Growth
  • The company experienced a strong uptick in order intake during the quarter.
  • Major areas contributing to order inflow include aerospace and defense.
  • Current order book nearly sufficient to cover the company’s execution targets for the year.
  • For 70% of orders, KAYNES has a window period of 4 to 6 years.
• Industrial Sector Performance
  • Industrial sector, including EV, experiencing significant growth.
  • Smart meters are a key product driving growth in both domestic and international markets.
  • Management expects the industrial sector to grow at a rate similar to or slightly higher than the company’s overall growth rate.
  • Anticipates more export orders in this area, which could be significant in nature.
• Medical Equipment
  • Segment has been relatively soft over the past couple of years.
  • Kaynes recently secured a contract from the medical sector, indicating potential growth.
  • The company expects this new large customer to help increase the percentage of medical business in its portfolio.
• Margin Guidance
  • EBITDA margin expected at 15% for the year.
  • The increase is expected to be driven by a favorable change in product mix.
  • Higher-margin segments like aerospace, outer space, and strategic electronics are anticipated to contribute more.
  • Expects the mix between industrial and aerospace sectors to drive margins positively.
• Kavach System Update
  • Investing in R&D for the Kavach system, an anti-collision device for railways.
  • Plan to invest around 40 crores in R&D for this project.
  • Company expects the Kavach system to be in the market by the first quarter of FY 2025-26.
  • Investing in anticipation of orders, given the expected large-scale implementation in India.
• Export and Box Build
  • Currently, exports account for about 15% of the order book.
  • Expects exports to increase to 20-25% by FY 2025-26.
  • Box-build orders are increasing, particularly in medical electronics and certain industrial segments.
• OSAT Business Outlook
  • In the final stages of obtaining approval for its OSAT business.
  • Expects sales per employee in the OSAT business to be around 1.15 to 1.35 crore per annum.
  • The OSAT business is expected to take 2-5 years to reach 80% capacity utilization.
  • The company aims for 55% of OSAT business in the legacy semi-con assembly area and 75% in advanced packaging.
• CapEx Plans
  • CapEx plans remain unchanged.
  • Major CapEx projects include investments in OSAT and PCB businesses.
  • The total OSAT CapEx is planned at around 3,000 crores.
• Revenue Projections
  • The company targets reaching $1 billion in consolidated revenue by FY28.
  • EMS business is expected to contribute 70-75% of the total revenue.
  • Current plant capacity utilization is expected to reach 70-80% by the end of the year.
• Component Sourcing
  • In the existing EMS business, approximately 60% of materials are imported.
  • Some components like PCBs are expected to be increasingly indigenized in the future.
  • Certain components will continue to be imported due to global supply chain dynamics.
  • The company estimates that about 10% of currently imported components may become indigenized in India.
• Debt Levels
  • This increase in debt level was partly due to a delay in payments from a couple of customers.
  • Expects debt levels to decrease going forward.
• New Business Segments
  • The company is developing high-tech, complex products in industrial electronics.
  • The PCB business is targeting a CAPEX of 1400-1500 crores by FY30.
  • The company plans to offer silicon assembly services through its OSAT business.
  • These new segments are expected to be margin-accretive compared to the existing EMS business.