Detailed Narrative
Q2 FY25 Consolidated and Standalone Performance
Centum Electronics reported consolidated revenue from operations of INR260 crores for Q2 FY25, marking a 4.7% year-on-year increase. When adjusted for a specific contract accounted for on a net basis, revenue growth was 11% year-on-year. Consolidated EBITDA for the quarter grew 18% year-on-year to INR20 crores, achieving an EBITDA margin of 7.81%. The company recorded a minor consolidated net loss of INR0.3 crores, a substantial improvement from the INR5 crores loss in the prior year. Standalone revenue for Q2 FY25 was INR167 crores, up 4.2% YoY, with a net profit of INR10 crores, flat year-on-year.
H1 FY25 Financial Overview
For the first half of FY25, consolidated revenue from operations reached INR505 crores, representing a 2% year-on-year growth. Consolidated EBITDA for H1 FY25 was INR36 crores, experiencing an 8% year-on-year decline, with an EBITDA margin of 7.08%. The consolidated net loss for the period was INR4 crores. Standalone H1 FY25 revenue stood at INR300 crores, growing 4% YoY, while standalone net profit was INR14 crores, down 16% YoY.
Robust Order Book and Market Opportunities
The company's order book expanded to INR1,772 crores as of September 30, 2024, driven by new contract wins from domestic Built-to-Spec (BTS) customers in the defense and space sectors. Management highlighted a strong pipeline across both BTS and Electronics Manufacturing Services (EMS) segments. They noted increased order intake from export customers due to global geopolitical shifts and new customer additions, particularly benefiting from 'China plus one' and 'Make in India' initiatives in industrial equipment.
Optimistic H2 FY25 Outlook and Full-Year Guidance
Centum Electronics anticipates a significant improvement in performance during the second half of FY25, primarily due to increased BTS deliveries to defense and space clients and enhanced contributions from EMS and subsidiaries. For the full fiscal year 2025, the company targets consolidated revenue growth of 18-20% (on a gross accounting basis) and an EBITDA margin of 10-11%, aiming for approximately INR130 crores in EBITDA. If net accounting continues, revenue growth would be 14-15%.
Strategic Equity Fundraise and Capex Plans
The company plans to raise up to INR250 crores through equity over the next two years. This capital infusion is earmarked for increasing working capital and funding capital expenditures necessary for growth, rather than for inorganic opportunities. Combined capex for FY25 and FY26 is projected to be INR100 crores, equating to approximately INR50 crores per annum, to expand manufacturing lines and capacities. This strategy aims to manage existing debt and support future expansion.
Long-Term Growth and Margin Trajectory
Centum Electronics projects consolidated revenue growth exceeding 20% in the coming years, with standalone growth expected to be even higher at over 25%. The company targets a consolidated EBITDA margin of 14-15% within the next 2-3 years, driven by a stepwise improvement, particularly in subsidiary profitability. The revenue mix for FY25 is anticipated to be approximately 25% from BTS, 30% from Engineering Services, and 45% from EMS.
Subsidiary Profitability and Tax Outlook
Management expects the subsidiary to achieve a positive contribution in Q3 and Q4 FY25, with actual profitability commencing in FY26. Q2 is typically the slowest quarter for the subsidiary due to fewer working days. On a consolidated basis, the tax rate is projected to be less than 25%, as the standalone entity maintains a 25% rate, while the subsidiary is expected to offset simulated losses against future profits, potentially incurring no tax.