KAYNES - KAYNES TECHNOLOGY INDIA LIMITED Share Price

In the earnings call for Q4 FY 2024-2025, management provided an optimistic outlook for Kaynes Technology India Limited, projecting substantial growth for the upcoming fiscal year. Key points include:

1. Revenue Growth: The company achieved consolidated revenue of INR 27,218 million for FY '25, a remarkable growth of 51% year-on-year. For Q4 FY '25, the revenue was INR 9,845 million, reflecting a 54% increase year-on-year.

2. EBITDA Performance: Consolidated EBITDA for FY '25 stood at INR 4,107 million, with a margin of 15.1%. The Q4 FY '25 EBITDA reached INR 1,679 million, showcasing a 76% year-on-year increase.

3. Future Projections: Management expects an acceleration in revenue growth, aiming for at least 60% growth in operating revenues for FY '26. This growth is supported by a robust order book, which jumped to INR 65,969 million from INR 41,152 million in the previous year, promising a healthy pipeline for execution over the next 1.5 years.

4. Segment Growth: The management highlighted that the order book primarily comprises margin-accretive orders from sectors such as aerospace, automotive, and industrial.

5. Investment in Infrastructure: Construction of OSAT and HDI PCB plants is in progress with completion expected by year-end. These facilities are anticipated to begin contributing to revenues within the new fiscal year.

6. Acquisitions: The acquisition of August Electronics in Canada aligns with the strategy to enhance North American presence and capitalize on opportunities amid increasing geopolitical trade shifts. Expected growth from this acquisition is projected at around 20% over the next 5 years.

7. Working Capital Strategy: The company aims to improve net working capital over FY '26, targeting lower inventory days and enhancing efficiencies.

Overall, the management is optimistic about sustaining profitable growth, leveraging strong demand across verticals, and enhancing operational efficiencies moving forward.

Here are the major questions and detailed answers from the Q&A section of the earnings transcript:

1. Vipraw Srivastava: "What is the issue with the 'other non-current assets' line item that caused the CFO to become negative, and how do you plan to tackle it next year?"

   • Jairam Sampath: "The increase in 'other non-current assets' relates to pre-agreed contract conditions from an acquisition. Payment terms delayed, resulting in negative cash flow. We're addressing this by securing bank funding through annuity arrangements. By year-end, we anticipate this will lessen significantly as we align with clearer payment terms."

2. Praveen Sahay: "From which segments is the order flow intake increasing, and what is the sustainability of the high margin you reported?"

   • Jairam Sampath: "The increase comes mainly from aerospace, industrial, and automotive sectors, all of which are margin-accretive. The order book requires a 1.5-year execution time, but our inflow remains robust, ensuring continued high margins moving forward as we execute higher-margin orders."

3. Deepak Krishnan: "Will you also participate in the component PLI for PCB expansion, and could you elaborate on August Electronics' financials and your space strategy?"

   • Jairam Sampath: "We have applied for PLI and focus more on capital subsidies than on PLI. August Electronics represents a CAD 57 million business with better-than-consolidated EBITDA margins. Our objective in space tech aligns with ISRO, enabling us to supply components and possibly launch satellites, aiming for significant growth in this sector."

4. Siddhartha Bera: "Can you project numbers for the EMS business over the next two years and identify key drivers?"

   • Jairam Sampath: "We forecast a minimum of 60% growth in revenues driven by smart meters, aerospace, and automotive orders. A marked improvement in our order book indicates that our EBITDA profile exceeds current metrics, all while sustaining a robust growth trajectory."

5. Nitin Arora: "What's the growth potential of the August Electronics acquisition, and do you foresee more acquisitions?"

   • Jairam Sampath: "August Electronics can achieve 20-25% growth with potential spillover from existing clients. We're actively considering further acquisitions to extend our geographical reach and enhance synergies while deploying funds from our approved QIP for strategic growth opportunities."

6. Akshay: "What led to the shortfall from your previous guidance, and how confident are you in reaching INR 4,500 crores in FY '26?"

   • Jairam Sampath: "A delay in our smart meter business execution contributed to earlier projections falling short. We're confident of maintaining a minimum 60% growth, potentially reaching INR 4,350 crores, aided by effective execution strategies."

7. Indrajit Agarwal: "How much of the capex for OSAT and PCB will come from government subsidies and what are the timelines for that?"

   • Jairam Sampath: "For OSAT, we expect 50% of INR 2,700 crores eligible capex from the central government, with a 6-month lag post-installation. For PCB, approximately 65% subsidized, with a similar timeline for receipts. We might consider bridge loans temporarily until subsidy funds arrive."

These responses provide a concise overview of the key inquiries and management's plans moving forward.