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KAKAYNES

Kaynes Tech Q3 FY25 results (Oct–Dec 2024) and concall

Capital Goods · Concall AI · Call held 28 Jan 2025

Company page: Kaynes Tech share price, financials & guidance record

Source transcript

Management summary

Kaynes Technology reported strong Q3 FY25 results with 30% YoY revenue growth and expanded EBITDA margins. The order book saw a significant surge, driven by high-yielding sectors like aerospace and medical. The company is progressing with its OSAT and HDI PCB projects, which are expected to contribute substantially from Q4 FY26, and remains confident in exceeding 15% EBITDA for FY25 despite some execution delays in certain segments.

Highlights

  • Q3 FY25 total revenue of INR6,612 million, representing 30% YoY growth.

  • Q3 FY25 operational EBITDA of INR940 million at 14.2%, a 50 bps increase YoY.

  • Order book surged from INR54,228 million at Q2 FY25 to INR60,471 million at Q3 FY25.

  • Monthly order inflow grew from INR3,188 million in Q2 FY25 to INR4,285 million in Q3 FY25.

  • Net working capital days improved to 107 days at Dec-end from 117 days YoY.

  • OSAT and HDI PCB projects are underway, expected to yield significant revenues from Q4 FY26.

  • Acquired majority stake in AI-based railway network safety solution company, Sensonic.

Concerns

  • Rail segment and smart meter execution experienced some delays in Q3 FY25 due to election-related slowdowns and factory production issues, though expected to catch up.

  • Initial production stages for new facilities (like Hyderabad) may not maximize margins immediately, impacting blended margins in FY26.

Key financials

4 periods

Headline

  • Net Working Capital Days (Dec-end)
    107 days
  • Inventory Days
    117 days

Q3 FY25

  • Total Revenue
    6,612 Mncurrency not stated
    YoY +30%
  • Operational EBITDA
    940 Mncurrency not stated
    YoY +35%
  • EBITDA Margin
    14.2%
  • PAT
    665 Mncurrency not stated
    YoY +47%
  • PAT Margin
    10.1%

9M FY25

  • Operating Revenue
    17,373 Mncurrency not stated
    YoY +49%
  • Operational EBITDA
    2,431 Mncurrency not stated
    YoY +53%
  • EBITDA Margin
    14.2%
  • PAT Margin
    10.1%

9M FY25, adjusted

  • ROE
    17.3%
  • ROCE
    17.7%

What they filed

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25
Revenue433 396
EBITDA73 49
Net profit63 38
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

₹60,471 Mn

as of 2024-12-31 quantified

11.5% QoQ

Inflow this quarter

₹12,855 Mn

Execution

execution is spread over a time frame, depending on the kind of business

Composition

  • Industrial & EV (segment)
  • Aerospace & Defense (segment)
  • Smart Meters (segment)
  • Automotive (Exports) (segment)
  • Medical (segment)
  • IT (segment)
  • Exports (geography) ₹800 Mn

Cancellations & deferrals

  • deferred: Impact of earlier delays of ordering and projects went on slow during election time in rail segment.
  • deferred: Small delays in smart meter factory production and shipments.
The order book has grown significantly, driven by high-yielding sectors, and execution is a continuum, with some one-off delays expected to catch up in the coming quarters.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹48,000 Mn (till FY28-29) planned EMS business is self-funded. Semicon and HDI PC board projects are funded by 50-75% government subsidy and remaining equity, with small debt bridging initial phases.
    • EMS business capacity expansion ₹2,000 Mn
    • Semicon project ₹33,000 Mn
    • HDI PC board project ₹14,000 Mn
    As far as the EMS business is concerned, I think it's a kind of self-funded now, and we expect at least capex anywhere between the range of INR200 crores, INR300 crores per annum... As far as the capex for semicon is concerned, the total capex is about INR3,300 crores, out of which 70%, 75% comes from central and state government, remaining is our equity... And similarly, for HDI PC board, we have a capex of about INR1,400 crores. And this also will consume fully by about FY '28-'29. And here also close to about 50%, 60% is the state and central government's share in terms of capital subsidy.
  • Debt Debt disclosed
    we may not have we have less than proportional increase in our borrowings, etcetera, and make sure that we are able to improve the ROCE much better than what we have this year.
  • M&A Sensonic Acquisition · Integrated

    Acquired majority stake in an AI-based railway network safety solution company, which operates globally, opening new range of solutions and design focus.

    We have acquired majority stake in an Al-based railway network safety solution company, called Sensonic, which operates globally... The other uses could be something like an ODM. We are enthused by investment into companies like Sensonic, etcetera. So that opens out the whole new range of solutions for us, wherein design becomes our key focus area, and that helps us to shore up the margins also.
  • M&A US/North America companies Acquisition · Pending regulatory

    Extend footprint into bigger geographies like U.S., North America, by acquiring good companies with reasonable profitability and similar businesses.

    That means we want to extend our footprint into bigger geographies like U.S., etcetera, North America, so and that's not possible by organic growth and starting up. So we need to acquire some good companies with reasonable profitability and similar businesses and maybe a good price point.
  • Liquidity Liquidity disclosed QIP proceeds are being used to fund strategic initiatives, and the company is exploring recourse-less financing from customers to manage working capital.
    So whatever income comes out of unused QIP proceeds is showing up as other income here, essentially... Second thing is we're also talking to many customers in terms of recourse-less financing from their side.

Guidance & targets

Revenue

  • Annual Operating Revenue Growth Revenue · FY25 · High confidence > 55%
    we expect to pick up the revenue growth rates such that the annual operating revenue growth would exceed 55% on year-on-year basis

    — Ramesh Kannan

  • Annual Revenue Revenue · FY25 · High confidence INR2,800-2,900 crores
    So revenue guidance will be somewhere between INR2,800 crores and INR2,900 crores.

    — Jairam Sampath

  • Smart Meters Revenue Revenue · next 12 months · Medium confidence INR1,000 crores
    And we can definitely, on our next running 12-month period, do almost INR1,000 crores kind of number in the smart meters alone, that's a clear possibility.

    — Jairam Sampath

  • OSAT and HDI PCB Revenues Revenue · Q4 FY26 · High confidence Significant revenues
    Both projects are will start yielding significant revenues from the Q4 of FY '26 as planned.

    — Jairam Sampath

Profitability

  • Annual Operating EBITDA Margin Profitability · FY25 · High confidence > 15%
    for the year, we are confident of exceeding 15% EBITDA based on these 2 trends.

    — Jairam Sampath

  • Annual Operating Margins Profitability · FY25-26 · High confidence 15-16%
    Yes, that's the target, 15% minimum, 15% is the standard margin that we talked about. We are hoping that some more leverage of expenses will happen. And so some percentage of expenses will come down because all of these new businesses that we have acquired will start also firing up on revenues. So yes, we are thinking of between 15% and 16% of EBITDA, which is on operating income basis.

    — Jairam Sampath

Export

  • Export Share of Business Export · FY26 · Medium confidence 20-25%
    And next year, by fourth quarter, the other 2 businesses, which is PC board and semicon assembly is also start-up, which will primarily have exports. So from that perspective, next year for FY '26, you can expect 20%, 25% of business being export.

    — Jairam Sampath

Working Capital

  • Net Working Capital Days Working Capital · FY25 end · Medium confidence Smaller number

    From 85 days (last year) today

    So we had also projected an increase in net working capital days from last year's 85 days to average net working capital to a smaller number. We are attempting to do that.

    — Jairam Sampath

Market context

  • Operating Cash Flow Cash Flow · Q4 FY25 · High confidence Positive
    I'm confident that by fourth quarter, we will have definitely positive cash flows. OCF will be certainly positive.

    — Jairam Sampath

What to watch in Q4 FY25

Annual Operating Revenue Growth (FY25)

FY25 end (Q4 FY25 results)
Current 49% (9M FY25)
Target Exceed 55% YoY

Why it matters

This is a key growth target for the full fiscal year, indicating the company's ability to accelerate revenue in Q4.

we expect to pick up the revenue growth rates such that the annual operating revenue growth would exceed 55% on year-on-year basis

Find out whether KAYNES delivers this. Inve re-checks your case every morning.

Risks & concerns

  • Execution delays in Rail and Smart Meter segments

    medium

    Delays in ordering and project execution due to election time slowdowns and small factory production issues, impacting Q3 FY25.

    Analyst acknowledged

  • Initial margin pressure from new factory ramp-ups

    low

    New facilities like Hyderabad may not maximize margins immediately during initial production stages, potentially affecting blended margins in FY26.

    Management acknowledged

  • Government capex cycle slowdown due to focus on consumption

    low

    Management believes essential infrastructure investments (railway safety, telecom) will continue, with any cuts likely in non-essential areas.

    Analyst downplayed

Q&A highlights

6 direct
Confidence in margin improvement and drivers Direct
So essentially, the margins have 2 drivers. One driver is, of course, the gross margins, which is depending on blend of business... The other source of margins is also the operating leverage, which has actually deleveraged in the last quarter, but we've added newer teams... So we are confident that our EBITDA margins will definitely be better than what we had projected. And for the year, we are confident of exceeding 15% EBITDA based on these 2 trends.

Analyst questioned sustainability of margin improvement given rising expenses; management provided clear drivers and reiterated confidence in FY25 EBITDA target.

Asked by Sanidhya

Execution delays in Rail and Smart Meter segments Direct
So what is happening is the impact of earlier delays of ordering and then projects went on slow during election time is being seen slowly in the last quarter... Then in our meter side also, we are new company. We have just started manufacturing. So there are some small delays in the factory doing productions and then shipments going out and all. So these are all one-off cases. It will catch up in the next 2 quarters, this quarter and the coming quarter.

Analyst identified specific segments with slower execution; management explained reasons (election, new factory ramp-up) and assured these are temporary and will catch up.

Asked by Ankur

Capex funding and government subsidy timelines for new projects Direct
So there are 2 different projects. There is a project in semicon, wherein there is a capital subsidy from the central government, it's about 50%, and it comes in pari passu, that means comes in advance of investment... As far as the PC board is concerned, both of them are linked to commencement of operation, which is like 9 months from the start of projects, typically. And so both central government and state government subsidies will come in 9 months.

Analyst probed the cash flow implications of capex vs. subsidy timing; management clarified the different models for semicon and PC board projects, highlighting advance funding for semicon.

Asked by Dhananjai

Purpose and strategy behind the potential QIP Direct
So this as far as this potential QIP that we talked about is concerned, is to help our strategy. There are three-pronged strategy that we have, which is in aid of preparing for future... So our QIP, with the potential QIP, is going to be used for strategically shoring up, a, additional geographies... B, it could be ODM; and C, it could be technology footprint deepening.

Analyst sought clarity on QIP utilization; management provided a detailed strategic rationale, including geographical expansion, ODM capability, and technology deepening.

Asked by Renu Pugalia

Impact of China's DeepSeek AI on chip manufacturing and prices Direct
So as far as the semicon manufacturing is concerned, we work with a global supply chain. So most of our customers are also global... So we don't see any changes in that. However, the implication of DeepSeek, the way it has been construed is from a different perspective than manufacturing. I think it's more in terms of technological leadership and security-related concerns that countries seem to have.

Analyst raised a macro/geopolitical concern; management clarified that it does not foresee a direct impact on their manufacturing business, viewing DeepSeek as a technology/security play rather than a manufacturing landscape shift.

Asked by Garvit Goyal

FY26 revenue guidance and inclusion of M&A Direct
So whatever projections we talked about for FY '26, right now it does not have any of the acquisitions, etcetera, because we have not earmarked for these acquisitions. We have some, let's say, in the pipeline, we are evaluating them, okay? So we are talking about our existing ESDM business plus PC board business and plus semicon business, yielding revenues and then going to whatever number that we talked about.

Analyst sought clarification on the basis of FY26 revenue guidance; management confirmed it's based on existing businesses, not speculative M&A, providing clarity on organic growth expectations.

Asked by Deepak Krishnan

Operating Cash Flow (OCF) for FY25 and working capital management Partial
So firstly, FY '25 itself, we had earlier talked about an OCF which was a significant portion of our EBITDA supposed to be. For some reason, up to third quarter, we have not been able to, but I'm confident that by fourth quarter, we will have definitely positive cash flows. OCF will be certainly positive... So we are going to make sure that we work with our suppliers... Second thing is we're also talking to many customers in terms of recourse-less financing from their side.

Analyst questioned the OCF performance and working capital strategy; management acknowledged underperformance in OCF but expressed confidence for Q4, outlining steps to improve working capital.

Asked by Keyur Pandya

3 min read 7 chapters

Detailed narrative

Strong Q3 FY25 Performance and 9M Highlights

Kaynes Technology reported a robust Q3 FY25 with total revenue reaching INR6,612 million, marking a 30% year-on-year growth. Operational EBITDA stood at INR940 million, reflecting a 35% increase YoY, with the margin expanding by 50 basis points to 14.2%. For the first three quarters of FY25, operating revenue grew 49% YoY to INR17,373 million, and operational EBITDA increased 53% YoY to INR2,431 million, maintaining a 14.2% margin.

PAT for Q3 FY25 was INR665 million, up 47% YoY, with a margin of 10.1%.

Order Book Surge and Strategic Sector Focus

The company's order book demonstrated significant momentum, surging from INR54,228 million at the end of Q2 FY25 to INR60,471 million by the end of Q3 FY25. Monthly order inflow also saw a healthy increase, growing from an average of INR3,188 million in Q2 FY25 to INR4,285 million in Q3 FY25.

This growth is primarily driven by high-yielding sectors such as industrial, EV, aerospace, medical, automotive, aerospace & defense, smart meters, and IT, with several large orders booked in these areas.

Progress on New Manufacturing Facilities and Acquisitions

Kaynes Technology is actively progressing with its strategic expansion initiatives. Land has been acquired and construction has commenced for both the OSAT factory in Sanand, Gujarat, and the HDI PCB factory in Oragadam, Tamil Nadu, with significant revenues expected from Q4 FY26.

The integration of Iskraemeco India is underway, and the Hyderabad smart meter factory is in series production, having supplied several lakhs of meters. Additionally, the company acquired a majority stake in Sensonic, an AI-based railway network safety solution company, to enhance its ODM capabilities.

Capital Expenditure Plans and Government Support

The company has outlined substantial capex plans, with approximately INR4,800 crores allocated for new projects until FY28-29. This includes INR3,300 crores for the semicon project and INR1,400 crores for the HDI PC board project. A significant portion of this capex, ranging from 50% to 75%, will be supported by central and state government subsidies.

The EMS business, requiring INR200-300 crores per annum for capacity expansion, is expected to be self-funded through internal accruals.

Margin Outlook and Operating Leverage

Management expressed strong confidence in achieving and exceeding a 15% EBITDA margin for FY25, driven by a favorable blend of business from high-yielding sectors and improved operating leverage as new teams and acquired businesses ramp up. Gross margins are expected to remain upward of 30%. For FY25-26, the company targets operating margins between 15-16%, anticipating further operating leverage and efficiency gains.

Strategic QIP for Future Growth and Diversification

The potential Qualified Institutional Placement (QIP) is earmarked for a three-pronged strategic growth plan, not for current business funding. This strategy includes establishing geographical beachheads in regions like the US and North America through acquisitions, enhancing ODM capabilities via inorganic acquisitions (like Sensonic), and deepening technology footprints in niche areas such as semicon and high-density PC boards.

This aims to prepare the company for future growth beyond FY28-29.

Working Capital Management and Cash Flow Outlook

Net working capital days improved to 107 days at the end of December, down from 117 days in the prior year, despite higher inventory due to advanced purchases for upcoming quarters. While Operating Cash Flow (OCF) has not met expectations until Q3 FY25, management is confident of achieving positive OCF by Q4 FY25.

The company is actively working with suppliers to control inventory and exploring recourse-less financing options with customers to optimize working capital.

Summary of a publicly available earnings call transcript; see how call summaries are prepared. Not investment advice.