KAYNES - KAYNES TECHNOLOGY INDIA LIMITED Share Price

In the earnings call for Q4 FY2025-26, management provided several key insights regarding the company's outlook and future plans. Total revenue for FY26 reached INR 3,626.4 crores, a growth of 33.2% year-on-year. EBITDA for the year was INR 5,741 million with a margin of 15.8%, and profit after tax was INR 3,639 million, reflecting a PAT margin of 10%.

Management highlighted that the Mysore facility crossed INR 10,000 million in revenue, demonstrating strong operational capabilities despite geopolitical disruptions impacting near-term performance. Acknowledging that actual revenue fell short of market expectations, management attributed this to delayed customer project approvals and supply chain issues, not to structural demand deterioration.

Looking ahead, management emphasized commitment to strengthening execution capabilities, improving operational efficiencies, and expanding product-driven revenues. The OSAT business was particularly highlighted, with projected revenue visibility exceeding INR 25,000 million over the next five years. They are also focused on enhancing the contribution of new product development to nearly 30% of total revenue in the coming years.

Management's strategy is to diversify across multiple sectors including automotive, EV, industrial, aerospace, and railway segments to mitigate risks associated with market volatility. They reiterated a cautious approach to guidance, opting for qualitative commitments rather than specific revenue targets due to uncertainties in the market environment.

Overall, they expressed confidence in their resilience and alignment with long-term growth plans, affirming that the company's order book remains robust and non-cancelable.

Q&A Section Summary

Question 1:

"Sir, my first question is on guidance, sir. At the start of the year, sir, we had guided that we are looking to close the year with revenues of INR4,500 crores, which was subsequently toned down to INR4,000 crores, and we ended the year with close to INR3,600 crores of revenue. Sir, how should, as investors, we look at this guidance? And what is the sanctity of the guidance that we are providing, sir?"

Answer: We acknowledge the aggressive revenue growth projections given from an INR4,500 crores target to INR4,000 crores, then reaching INR3,626 crores. External factors like major customer delays, especially from a key electric vehicle client, impacted our ability to meet projections despite an overall revenue increase of 33%. We're focusing on improving execution and reducing these disruptive impacts in the future.

Question 2:

"Sir, but sir, OCF INR600 crores negative, I think that is a bigger disappointment, especially when you guided that you will be just about neutral or slightly negative, sir. So, you would have not guided, sir, why have we not been able to turn that around, sir?"

Answer: The negative operational cash flow was due to delays in projects affecting our cash position. The metering business model, being relatively new, introduced complexities. However, our stand-alone EMS business remained cash positive, and we are devising strategies to improve cash flow moving forward while evolving towards a more product-based approach.

Question 3:

"Just to expand the previous question, if you could talk from a production value perspective, the earlier guidance of INR1,000 crores for OSAT, INR500 crores for PCB. Does that stay intact? Or is there any risk to that number?"

Answer: We have not set firm guidance for OSAT and PCB revenues. For PCB, we're targeting INR300-400 crores and for OSAT, about INR250-300 crores. These will primarily focus on export initially. Strategies on localization and further guidance will be communicated as we assess the market and our capabilities further.

Question 4:

"How are we scaling up in terms of new applications on the power supplies and other aspects, including EV within the industrial business?"

Answer: We're actively diversifying our product offerings in the EV sector, experiencing 28% growth this year, aside from a major drop from one client. We aim to move beyond component supply towards assemblies, enhancing value-add across sectors including EV, railway, and aerospace, to mitigate dependency on any single revenue stream.

Question 5:

"Can you share the current status on your Kavach rail solutions and any potential headwinds from government budgets this year?"

Answer: Kavach has received initial approvals and trial orders, and we expect substantial orders post-approval completion this year. While government budgets may face constraints, we are positioned to capitalize on secured contracts and ongoing commitments, expecting a 20-25% growth in the rail segment due to these developments.