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    Kaynes Tech

    KAYNES
    Capital Goods·16 May 2025
    Management Summary

    Kaynes Technology reported robust Q4 FY25 results with strong revenue and EBITDA growth, driven by a surging order book and strategic acquisitions. The company provided optimistic guidance for FY26, projecting minimum 60% revenue growth and 50 bps EBITDA margin expansion. While facing temporary working capital challenges from an acquired entity and lower asset turns due to capacity expansion, management remains confident in its long-term growth strategy, focusing on high-margin segments and global expansion.

    Highlights

    5
    • Consolidated revenue for Q4 FY25 grew by 54% YoY to ₹984.5 crores, and for FY25 by 51% YoY to ₹2,721.8 crores.

    • EBITDA margin expanded to 17.1% in Q4 FY25 and 15.1% for FY25, with a 76% YoY growth in Q4 EBITDA to ₹167.9 crores.

    • Order book surged by 60.3% YoY to ₹6,596.9 crores, indicating strong future revenue visibility and margin-accretive orders.

    • Net working capital days improved from 97 to 91 days in FY25, with a commitment to further significant improvement in FY26.

    • Strategic acquisitions like August Electronics (Canada) and Sensonic (AI-based rail safety) are expected to strengthen North American presence, add high-margin customers, and capitalize on technology upgrades.

    Concerns

    3
    • Cash flow from operations was negative due to an increase in other non-current assets, primarily related to deferred payments from an acquired subsidiary's pre-agreed contract conditions.

    • Asset turns may appear lower temporarily for a couple of years due to significant capacity build-up for larger, long-term clients, though management views this as a necessary cost of business for future growth.

    • Other expenses in Q4 FY25 jumped sharply from ₹31 crores to ₹101 crores, partly due to reclassification of consumables and higher employee costs for buffering capacity for future global engagements.

    What Changed1

    vs Q1 FY26

    Guidance items8 → 11 (+3)
    Key financials

    Metrics

    13

    Periods

    3

    Q4 FY25

    5
    • Revenue
      ₹984.5 Cr
      YoY+54%
    • EBITDA
      ₹167.9 Cr
      YoY+76%
    • EBITDA Margin
      17.1%
    • PAT
      ₹116.2 Cr
      YoY+43%
    • PAT Margin
      11.8%

    FY25

    6
    • Revenue
      ₹2,721.8 Cr
      YoY+51%
    • EBITDA
      ₹410.7 Cr
      YoY+62%
    • EBITDA Margin
      15.1%
    • PAT Margin
      10.8%
    • Net Working Capital Days
      87 days

    Adjusted FY25

    2
    • ROE
      19.4%
    • ROCE
      19.2%

    Order Book

    high confidence

    Total Value

    ₹ 6,596.9 crores

    as of 2025-03-31

    quantified
    60.3% YoY9.1% QoQ

    Inflow this qtr

    ₹ 1,534.2 crores

    Execution

    executed over 1.5-year timeframe

    Composition

    Aerospace(segment)
    Industrial(segment)
    Automotive(segment)
    Exports(geography)
    15.0%

    "The order book is very healthy, with most new orders being margin-accretive and contributing to a higher EBITDA profile than the current consolidated average."

    Source:
    Prepared remarks

    Capital allocation

    4
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Partially through government subsidies (50% Central, 20-25% State for OSAT eligible capex; 40% State, 25% Central for PC Board), remaining by company, with bridge loans for lag periods.

    M&A

    August Electronics (Canada)

    acquisition · integrated

    M&A

    Sensonic

    acquisition · integrated

    M&A

    Kaynes Space Tech

    Other · announced

    Guidance & targets

    11
    CategoryTargetPriority
    Revenue
    Consolidated Operating Revenue Growth
    minimum 60%
    High
    Revenue
    Total Revenue
    $1 billion
    Medium
    Margin
    EBITDA Margin Expansion
    about 50 basis points
    High
    Margin
    Core Business EBITDA Margin
    15.6%
    High
    Margin
    Core Business EBITDA Margin (Long-term)
    15.5-16%
    Medium
    Capex
    OSAT & HDI PCB Plant Construction Completion
    by end of 2025 calendar year
    High
    Capex
    EMS Business Annual Investment
    ₹300-400 crores
    Medium
    Capacity
    OSAT First Chip Production
    Q2/early Q3
    Medium
    Capacity
    OSAT First Production
    Q3
    Medium
    Capacity
    PC Board Factory Readiness for Full Production
    November/December
    High
    Working Capital
    Working Capital Days Improvement
    significantly
    High

    OSAT First Chip and Production Timeline

    Q2/Q3 FY26
    CurrentConstruction in full swing, POC by midyear
    TargetFirst chip in Q2/early Q3, first production in Q3 FY26

    Why it matters

    Verifying the timely commercialization of the OSAT plant is crucial for realizing returns on significant capex and new revenue streams.

    Our construction for OSAT plant in Sanand, Gujarat has already started along with construction for HDI PCB plant in Chennai. Both the plants' construction is in full swing, and we are in line with meeting the deadlines of completing the construction by year-end. ... And so we will have probably the first chip coming out sometime, if I'm not mistaken, in the second quarter or at least early third quarter. Third quarter, I think you can fairly expect the first production to happen.

    How to verify

    guidance_and_targets[metric='OSAT First Chip Production'].target_value

    Risks & concerns

    3
    RiskSeverity

    Working capital strain from acquired subsidiary's deferred payment terms

    An acquired subsidiary has pre-agreed contract conditions leading to delayed payments, impacting CFO, but management plans to implement annuity funding to mitigate this.Analyst acknowledged

    medium

    Temporary lower asset turns due to significant capacity build-up

    While asset turns may appear lower for a couple of years due to investments in new capacity for larger clients, management views this as a necessary cost for long-term growth and increased order book.Analyst acknowledged

    low

    Execution delays for new OSAT and HDI PCB plants

    Despite construction being in full swing, the commercialization and full production for OSAT and PCB plants are phased, with significant portions of the building and revenue generation expected only next year after trials and validation.Management acknowledged

    medium

    Q&A highlights

    8

    “So this is a business that we acquired in our subsidiary in the industrial area, and they had orders with pre-agreed contract conditions, which we have to honor. ... So this particular thing has got delayed payment. So the way we have found a way for funding this through annuity funding through some of the banks, which we'll implement in the coming quarter.”

    Clarified the reason for negative CFO, attributing it to specific legacy contracts from an acquired entity and outlining a plan to address it, indicating it's not a systemic issue.

    asked by Vipraw Srivastava

    2 min read6 chapters

    Detailed Narrative

    01

    Robust Financial Performance Driven by Strong Order Book

    Kaynes Technology reported a strong Q4 FY25, with consolidated revenue growing 54% YoY to ₹984.5 crores and EBITDA increasing 76% YoY to ₹167.9 crores, achieving a 17.1% margin. For the full FY25, revenue reached ₹2,721.8 crores (up 51% YoY) with an EBITDA of ₹410.7 crores (up 62% YoY) and a margin of 15.1%. The company's order book surged by 60.3% YoY to ₹6,596.9 crores, with average monthly order inflow growing from ₹428.5 crores in Q3 FY25 to ₹511.4 crores in Q4 FY25, indicating robust future revenue visibility.

    02

    Strategic Acquisitions and Global Expansion

    The company's strategic initiatives include the majority stake in Sensonic, an AI-based rail network safety solution company, and the acquisition of August Electronics in Canada. August Electronics, a CAD 57 million business, is expected to strengthen Kaynes' North American footprint, add high-margin customers, and contribute to margins better than the consolidated average. These acquisitions, along with the new Kaynes Space Tech subsidiary, are part of a broader strategy to expand into new geographies and technologies, positioning the company as a global player in the electronics sector.

    03

    Ambitious Growth and Margin Targets for FY26

    Management provided optimistic guidance for FY26, targeting a minimum of 60% growth in operating revenues and an expansion of approximately 50 basis points in EBITDA margins. The core business is expected to achieve an EBITDA margin of 15.6% in FY26. Key drivers for this growth include industrial (smart meters), aerospace, and automotive segments, with a projected 15% of FY26 revenue potentially coming from exports.

    04

    Significant Capex for OSAT and HDI PCB Plants with Government Support

    Kaynes is undertaking substantial capex for new OSAT (₹3,400 crores) and HDI PCB (₹1,400 crores) plants, with construction in full swing and expected completion by the end of calendar year 2025. These projects are significantly supported by government subsidies: 50% from the central government and 20-25% from the state government for eligible OSAT capex (₹2,700 crores), and a total of 65% subsidy for PC Board capex. The first chip from OSAT is expected in Q2/early Q3 FY26, with full PC Board production by November/December 2025.

    05

    Working Capital Management and Asset Utilization

    Net working capital days improved from 97 to 91 days in FY25, and the company aims for significant further improvement in FY26 through strategies like supplier-managed inventory and better production planning. While asset turns may temporarily appear lower due to the large-scale capacity build-up, management views this as a necessary investment to cater to larger, long-term clients and accommodate the growing order book, which is increasingly recognized by major global players.

    06

    Smart Metering Business and Software Contribution

    The smart metering business, acquired previously, contributed to an increase in other non-current assets due to deferred payment terms from pre-agreed contracts. However, management clarified that this is being addressed through annuity funding. Furthermore, this acquisition includes significant software solutions for meter data management, which are expected to add to margins without associated costs, enhancing the overall profitability of the segment.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.