KDDL Ltd — Q2 FY26 earnings call

KDDL Ltd reported a strong financial performance for the first half of FY26, with consolidated revenue crossing the INR1,000 crore mark to reach INR1,007.9 crores, representing a 29.2% Y-o-Y growth. The consolidated EBITDA for H1 FY26 stood at INR166.8 crores, growing 17.5% Y-o-Y, with an EBITDA margin of 16.5%. For Q2 FY26, consolidated total income was INR531 crores, up 29.5% Y-o-Y, and PAT was INR32.7 crores with a 6.2% margin. The company invested INR9 crores in capital expenditure during H1 and plans to invest another INR15-18 crores in H2 FY26.

The Precision Engineering (Eigen) business demonstrated exceptional growth, with revenue increasing by 55% Y-o-Y in Q2 FY26 and 44% Y-o-Y for H1 FY26, reaching approximately INR90 crores for the half-year. This performance is driven by healthy demand from export markets, the company's niche capabilities in progressive tooling and stamping, and its focus on customized products for diverse segments including aerospace, defense, and alternate energy. Management expects this growth momentum to continue for the coming quarters and targets a 20-25% growth on a long-term basis, with Eigen's EBITDA margin broadly around 20%.

KDDL is actively expanding its operational capabilities to support future growth. The in-house electroplating capacity for Precision Engineering is expected to be operational by the end of Q1 FY27, enhancing efficiency and capability. The bracelet division has achieved over 80% capacity utilization and is undergoing further expansion with new technology for increased flexibility and faster production runs. The Packaging division, though on a small base, registered an exceptional 70% Y-o-Y revenue growth in H1 FY26, focusing on premium packaging solutions for luxury brands and exploring export opportunities.

The global watch business faces a complex environment marked by rising tariffs, changing consumer behavior, and currency volatility^🌐. Swiss watch exports to China and Hong Kong declined by 16% and 27% Y-o-Y respectively in Jan-Sep 2025, primarily due to a general slowdown in consumer sentiment. To counter these headwinds, KDDL is strengthening relationships with leading Swiss brands, exploring new geographies beyond Switzerland, and diversifying its watch component portfolio into bracelets and other value-added components, which helps maintain growth momentum.

The Favre-Leuba brand is performing strongly, with sales exceeding targets and budgeted losses proving lower than expected. A significant positive development is the recent reduction of U.S. tariffs on Swiss watches from 39% to 15%, which is anticipated to boost Favre-Leuba's sales efforts in the U.S. Management is 'upping the plan' for Favre-Leuba, indicating higher expectations than original budgets, and is expanding distribution globally across India, other Asian countries, Middle East, Europe, and the U.S.

Management reaffirmed its commitment to previously shared long-term targets, including Eigen's revenue potential of INR750-1,000 crores in 7-10 years and INR80-100 crores for the bracelet and packaging businesses in 3-5 years. They view current tariff challenges^🌐 as short-term and expect normalization, stating there is no reason to alter long-term forecasts. KDDL employs a robust de-risking forex management strategy with partial cover and benefits from a natural hedge at the consolidated level due to KDDL's export earnings and Ethos's imports.