KAYNES - KAYNES TECHNOLOGY INDIA LIMITED Share Price

The management of Kaynes Technology India Limited provided a cautious yet optimistic outlook for the company during the Q3 FY '26 earnings call. For the nine months ending December 2025, total revenue reached INR 23,837 million, representing a 37% year-over-year growth. The operational EBITDA was INR 3,778 million, marking a 55% increase with an EBITDA margin expansion to 15.9%. Profit after tax stood at INR 2,726 million, correlating to a PAT margin of 11.4%.

Management highlighted an order book amounting to approximately INR 90,000 million, emphasizing that the current phase represents consolidation while preparing for accelerated growth in the upcoming periods. They expressed commitment towards executing their growth strategy, especially in the semiconductor and PCB segments, where they have taken significant operational strides. For instance, the OSAT facility in Sanand has become operational, and the approval of the FSA under the ISM framework has been secured.

Management reiterated its revenue guidance of around INR 40 billion for FY '26, expecting a strong final quarter driven by significant orders in aerospace, defense, and industrial sectors. They anticipate substantial contributions from their HDI PCB facility, projected to yield INR 15,000 crores in business potential from a total investment of INR 1,500 crores. Future growth is expected to come from a diversified customer base, with no single customer contributing more than 6% of the total turnover.

Key takeaways include the commitment to reducing working capital days to between 70 to 85 days and targeted revenue growth pathways reflected in stable month-on-month order inflows of about 11.5% for the quarter. The management expressed confidence in achieving a substantial operating cash flow by the end of FY '26, with projections indicating a desire to reach a revenue milestone of $1 billion by FY '28.

Major Questions and Answers from the Earnings Call

1. Question: "Can you just talk us through some of these things? How long does the current order book get executed? And where have you seen some delays?"

Answer: Our order books are not cancellable; they depend on customer project alignments. Delays occur mainly due to customers holding inventories when project statuses misalign. Additionally, certain approvals are pending, leading to a shortfall of around 20% against our execution plans. However, we remain confident about our position and execution capabilities going forward.

2. Question: "In terms of the execution for the next few years, how should we think about the ramp-up in revenues?"

Answer: The order book is growing at about 50% yearly, with a significant portion being EMS orders. We expect monthly order inflows to support a revenue ramp-up beyond existing levels. The typical order book represents a 12-month rolling basis, equivalent to about 1.5 years of orders available for execution. Thus, we foresee continued revenue growth.

3. Question: "What is the reason for the elevated working capital this quarter, and how do you plan to bring down net working capital?"

Answer: The increase in working capital, about 23 days higher versus September '25, reflects our custom orders, which require securing materials amid uncertainty. We aim to reduce net working capital to 85 days by March '26 through enhanced execution in Q4, focusing on improving inventory management and receivables through supply chain finance.

4. Question: "Regarding receivables, how do you plan to bring down those days?"

Answer: To reduce receivable days, we are involving banks in supply chain financing. We're also improving collection efficiency to manage outstanding debts. We expect improvements in cash flows as we approach year-end since the bulk of our sales occurs in the final quarter, which will positively influence working capital metrics.

5. Question: "Given that the order book is INR90 billion, how is the concentration across sectors?"

Answer: Our order book is well diversified with no significant concentration in any sector. The top customer does not exceed 6% of total turnover, mitigating risks associated with dependency on a single sector. This diversification is instrumental in stabilizing our revenue streams.

6. Question: "Can you clarify your guidance for the $1 billion target in FY '28?"

Answer: We reaffirm our $1 billion target, which includes growth from existing EMS, PC Board, and OSAT segments. We anticipate significant contributions from upcoming projects in defense, railways, and other sectors, and we expect indigenization trends to further bolster our growth trajectory.

7. Question: "What steps are being taken to address the deferred INR3 billion Kavach order?"

Answer: The Kavach order has been deferred due to safety revisions. We're refining design aspects to ensure better field performance. The delay is strategic to ensure a robust product before resuming orders, which positions us for better market performance in the future.

8. Question: "What is your current capex plan and what are the allocations for specific segments?"

Answer: Our capex plans include INR3,200 crores for OSAT and INR1,400 crores for PCB. We'll continue to monitor and invest thoughtfully to enhance our throughput and production capabilities across all segments, ensuring that cash flows begin to improve as our projects mature.

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