KDDL - KDDL Ltd Share Price

Management of KDDL Limited provided an optimistic outlook for the upcoming fiscal year FY '26, projecting a revenue growth of 15% to 20%. This growth is anticipated to be driven by a recovery in the international watch market, expansion in the precision engineering business, and increased capacity utilization in both the bracelet and packaging divisions.

Key forward-looking points highlighted by management include:

1. Growth Drivers: The watch component business is expected to see a revival, particularly in the second half of FY '26, following a notable decline in demand across major markets, primarily China and Hong Kong, where watch markets contracted by 25.8% and 19%, respectively.

2. Precision Engineering: For FY '25, KDDL's precision engineering division recorded a 55% year-on-year revenue growth, reaching INR 147 crores. Management sees continued strong momentum and expects this division to grow at rates exceeding overall company expectations.

3. New Facilities: A new 28,000-square-foot facility in Bengaluru is under development, reflecting KDDL's commitment to support future demand and operational efficiency. This facility is expected to be operational in the second half of FY '26.

4. Market Expansion: Management is keen to expand their market reach beyond Switzerland to other European countries and emerging non-Swiss customers, broadening their client base for watch components and exploring high-margin growth opportunities.

5. Capacity Utilization: Current utilization in the bracelet division is at 50% and projected to increase to about 65% in FY '26. This division is seen as a key contributor to the export portfolio moving forward.

6. Revenue Composition: The total revenue from the watch component business fell by 20%, with domestic market revenue growing by 13%. The company aims to enhance its product mix and is focusing on higher-margin segments.

Management remains optimistic and believes that effective strategies will allow KDDL to navigate current challenges, ensuring sustainable, export-led, diversified growth in the upcoming fiscal years.

Here's a summary of the major questions asked during the Q&A section of the KDDL Limited earnings conference call and their respective answers:

1. Question: "Can you share some visibility of revenue mix and order, like from the precision engineering segment?"

• Answer: Last year, our precision engineering segment generated a revenue of INR 147 crores. We are projecting a long-term growth rate of around 25% for this segment. Currently, our order positions align with this growth expectation, and we anticipate maintaining EBITDA margins in the range of 19%-20%.

2. Question: "Where does Favre Leuba sit? What are the plans for '26?"

• Answer: Favre Leuba is a strategic business that allows us to control the entire value chain. We anticipate strong demand in India, already facing supply challenges due to underestimating the market response. Our goal is to establish a global presence and eventually expand our brand mix with more options post-launch, likely to take 12-18 months for robust supply.

3. Question: "Could you explain the confidence behind your revenue growth guidance of 15%-20%?"

• Answer: The 15%-20% growth forecast is based on our expectation of beginning a recovery in the international watch market and our focus on expanding into less impacted geographies. We also anticipate stronger contributions from our precision engineering, bracelet, and packaging businesses.

4. Question: "What is the status of the jewelry segment contribution to company revenue?"

• Answer: Currently, we do not directly manufacture jewelry; however, our packaging segment for jewelry is growing quickly and is expected to become a significant contributor as market demands rise.

5. Question: "What is the current and expected loss position for Silvercity Brands?"

• Answer: While we anticipated a loss during FY '25, we managed to remain below our budgeted loss expectations. For FY '26, we expect a diminished loss, as we ramp up operations. No significant capex is planned for the subsidiary this year.

6. Question: "What is the demand trend in domestic and international packaging?"

• Answer: There is strong demand for luxury packaging from the watch and jewelry segments, and we anticipate a CAGR of over 20% in this area over the next 5-10 years due to local brand growth and shifting production from overseas.

7. Question: "What segments contributed the most to precision engineering growth?"

• Answer: The main contributors include the alternate energy segment and aerospace, the latter showing a recovery post-COVID. We continue to expand our customer base within these segments.

8. Question: "How is the pricing structured for the Favre Leuba brand?"

• Answer: Favre Leuba is positioned in the CHF 2,000 to CHF 4,500 range. Our offerings provide superior value, utilizing high-quality movements, and are priced competitively compared to similar brands, which typically cost 20%-25% more.