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.