Creative Newtech Q4 FY26 earnings call

Creative Newtech Limited reported a robust financial year, with total income for FY26 reaching INR2,717.51 crores, marking a significant 50.85% year-on-year growth. EBITDA for the full year stood at INR104 crores, a 41.7% increase, with a margin of 3.83%. Profit After Tax (PAT) also saw substantial growth of 32.35% to INR70.29 crores, achieving a 2.59% PAT margin. The fourth quarter alone demonstrated exceptional growth, with total income up 81.16% YoY to INR740.44 crores, driven by healthy business activity across its portfolio.

The company deepened its presence across high-growth technology segments including surveillance, AI, IoT, cybersecurity, drones, data center solutions, high-performance computing, and connected infrastructure. Partnerships with Sparsh, Matrix, Dahua, Kaspersky, and PDRL strengthened its position. A key development was the entry into mission-critical professional display solutions through a partnership with EIZO. The company also expanded its brand portfolio and widened its reach into emerging markets, aligning with the evolving technology landscape.

The brand business, including Honeywell, contributed INR369.61 crores to the total revenue in FY26, representing 14.1% of the overall business. Management aims for this segment to grow by 50-60% annually, with Honeywell itself targeted for 50% growth this year. The long-term vision is to separate the brand business from market entry in 2-3 years, aiming for 3-4 brands, each generating over INR1,000 crores. The EBITDA margin for the brand business is currently 13% and is expected to reach 18-19% EBIT once it scales past INR1,000 crores.

Creative Newtech is launching its own brand, 'Vertual', initially in the US and India, focusing on categories like air purifiers and data centers. This move is driven by the desire for greater flexibility, higher profitability, and access to markets not covered by licensed brands. The US air purifier market alone was INR28,000 crores last year, with INR8,000 crores sold on Amazon. The company anticipates an initial marketing spend of INR10-12 crores and expects its own surveillance brand to generate INR80-100 crores in revenue within 12-14 months.

Receivable days increased to approximately 20% of turnover in FY26, up from 13.41% in the prior year, primarily due to the significant Q4 growth and extended credit offered in new business areas like AI and surveillance. Management is committed to normalizing this to 13-14% going forward^⏳. The company's debt profile includes INR171 crores in short-term loans from supply chain finance via the MSME platform, carrying an interest cost of 8-9%, which is reflected as debt on the balance sheet.

The Middle East conflict has posed significant challenges, particularly impacting logistics costs. Freight charges for material movement from China to the Middle East via the Red Sea have surged from $1,500-$1,700 to $7,500-$8,000. This situation could lead to a 50% reduction in business in the affected region and impact product pricing and consumer sentiment. Additionally, raw material costs for components like memory, storage, and CPUs have increased by 30-40%, presenting a challenge in passing on these costs to customers.