KDDL Ltd — Q4 FY25 earnings call

Call held 28 May 2025

Management summary

KDDL Ltd reported a mixed FY25, with robust 55% YoY growth in precision engineering and 13% growth in domestic watch components, offsetting a significant 28% decline in watch component export revenue due to global slowdowns. The company remains optimistic about future growth, guiding for 15-20% overall revenue growth and stable EBITDA margins for FY26, driven by anticipated market recovery and strategic diversification into new geographies and product segments like bracelets and packaging. Initial losses in the strategic Favre Leuba brand are expected to diminish by FY28.

Highlights

  • FY25 Consolidated Total Income reached INR 1,695 crores.

  • FY25 Consolidated EBITDA stood at INR 307 crores, with an EBITDA margin of 18.1%.

  • FY25 Consolidated PAT was INR 142.3 crores.

  • Precision Engineering revenue grew 55% YoY to INR 147 crores in FY25.

  • Overall revenue is expected to grow in the range of 15-20% in FY26.

  • EBITDA margins are expected to remain broadly in the similar range (around 23% stand-alone) in the coming years.

  • A capex of INR 35 crores is planned for FY26.

Concerns

  • Global Economic Volatility & Slowing Growth

  • Contraction in Swiss Watch Demand (China & Hong Kong)

Key financials

2 periods

Q4 FY25

  • Total Income
    ₹431 Cr
  • PAT
    ₹31.6 Cr

FY25

  • Total Income
    ₹1,695 Cr
  • EBITDA
    ₹307 Cr
  • EBITDA Margin
    18.1%
  • PAT
    ₹142.3 Cr

What they filed

Q1 FY27: revenue up 40.0%, net profit up 66.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue92 97 99 110 123 +34%116 +20%147 +48%154 +40%
EBITDA21 22 16 21 25 +19%23 +5%39 +144%35 +67%
Net profit15 16 8 12 14 −7%30 +88%20 +150%20 +67%
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.

Segment breakdown

  • Watch Component Business
    -20% Revenue Growth (FY25)-28% Export Revenue Growth (FY25)13% Domestic Revenue Growth (FY25)
  • Precision Engineering
    ₹147 Cr Revenue (FY25)55% Revenue Growth (FY25)
  • Packaging Division
    13% Revenue Growth (FY25)

Guidance & targets

Watch Component Business

  • Market Revival Watch Component Business · Beginning in the second half of FY '26 · Medium confidence Gradual revival
    Based on current indicators and market feedback, we anticipate a gradual revival, beginning in the second half of FY '26.

    — Yashovardhan Saboo

Overall Revenue

  • Revenue Growth Overall Revenue · FY '26 · Medium confidence 15% to 20%
    In FY '26, we expect our revenue to grow in the range of 15% to 20%, majorly driven by recovery in the international watch market, growth of our precision engineering business and enhancement in the utilization and growth of the bracelet and packaging businesses.

    — Sanjeev Masown

Overall Profitability

  • EBITDA Margins Overall Profitability · Coming years (FY26 onwards) · Medium confidence Similar range to 23%
    we expect the EBITDA margins to remain broadly in the similar range in the coming years...

    — Sanjeev Masown

Precision Engineering

  • EBITDA Margins Precision Engineering · Coming year (FY26) · High confidence 19% to 20%
    Regarding the EBITDA margins, the EBITDA margins are in the range of 19%, 20%. And we expect that these type of margins will be maintained in the coming year.

    — Sanjeev Masown

  • Business Growth Precision Engineering · Longer period · Medium confidence 25%
    we have given a long-term indication for the precision engineering business where the growth of business will over the longer period, will be in the range of 25%. So we still maintain that.

    — Sanjeev Masown

Capex

  • Capital Expenditure Capex · Coming year (FY26) · High confidence INR 35 crores
    And in the coming year, we expect to do a further capex of around INR35 crore.

    — Sanjeev Masown

Bracelet Division

  • Capacity Utilization Bracelet Division · FY '26 · High confidence About 65%
    With continuous improvements in operational efficiency and recovery of the market conditions, we anticipate capacity utilization rising to about 65% in FY '26.

    — Yashovardhan Saboo

Packaging Division

  • Revenue Growth Packaging Division · 5 to 10 years · Medium confidence Upward of 20% CAGR
    The revenue numbers again we are looking at growth upward of 20% CAGR. And I think this is sustainable for a good 5 to 10 years in the future anyways...

    — Yashovardhan Saboo

  • Capacity Utilization Packaging Division · This year (FY26) · High confidence Close to 60% or 70%
    And here I think we will get also close to 60% or 70% capacity utilization during this year.

    — Sanjeev Masown

Favre Leuba

  • Annual Units Favre Leuba · At some point in time (long term) · Low confidence 100,000 units per annum
    My last question was, would be on Favre Leuba. In a small conference that you had held earlier, you mentioned that your aspiration to go there is about 100,000 units per annum. That is the kind of aspiration at some point in time. Does that aspiration still hold given the early demand trends that you've seen? You've spoken very highly... Absolutely.

    — Yashovardhan Saboo

Risks & concerns

  • Global Economic Volatility & Slowing Growth

    high

    Over the past year, the global economic environment has been marked by a clear and concerning increase in volatility and slowing growth.

    Management acknowledged

  • Contraction in Swiss Watch Demand (China & Hong Kong)

    high

    The contraction in demand was heavily influenced by China and Hong Kong, which are among the largest markets for the watch business, where the market declined by 25.8% and nearly 19%, respectively, over the previous year.

    Management acknowledged

  • Geopolitical Tensions & Shifting Policies

    medium

    Rising geopolitical tensions and shifting policies have added to the uncertainty, with the global economy facing renewed pressure from such uncertainties, tariffs and nontariff barriers.

    Management acknowledged

  • Customer Concentration (Bracelet Division)

    medium

    The bracelet division was initially set up in collaboration with one customer, but the company plans to work with multiple customers in the years to come as production expands.

    Management acknowledged, but with mitigation plans

Q&A highlights

3 direct
Favre Leuba strategy, production, and confidence for 15-20% growth guidance. Direct
So Favre Leuba really brings in the point where we are starting a company to own a Swiss brand; and not only own it but actually to be able to control both sides and therefore the entire value chain, from manufacturer of components, eventually to manufacturing the watch and its distribution.

Reveals the long-term strategic intent behind Favre Leuba as a vertical integration play and a platform for future brand expansion, justifying the investment despite initial losses.

Asked by Vijram, an Individual Investor

Reasons for lower EBITDA margins in Q4 FY25 and customer concentration in precision engineering. Direct
Ajay, regarding your question of lower margins in the quarter 4 of the financial year '25. Yes, to some extent, you have rightly captured that the precision engineering business revenue in the previous quarter was around 40%. That is one reason of lower margins in at the overall level. Number two, in the quarter 4, the watch component business revenue is broadly in the range of 50%. The other revenue is from the bracelet and the packaging business, which are at the nascent stages of the ramp-up, where the costs are there. And there also the margins are lower.

Explains the margin compression in Q4 due to product mix shift towards lower-margin precision engineering and nascent businesses, providing clarity on a key financial metric.

Asked by Ajay Surya, Niveshaay

China Plus One strategy and the most promising segments within precision engineering. Direct
Jagdishwar, you ask about the -- in the precision engineering business, the different segments where we have the presence, that which segments contributed to the major growth in the previous year. In the last couple of years, the major traction has been from the alternate energy segment, which comprises EV and the battery energy storage system. And that has continued. In the previous year, there was also strong growth and an order position. Coupled with that, the aerospace, which post COVID, for some period, for a couple of years, it was on a downturn and the slowdown was there. That also witnessed a decent recovery. And the second segment is from the aerospace industry.

Identifies the key growth drivers within the high-growth precision engineering segment (alternate energy, EV, aerospace) and confirms the continued relevance of the China Plus One strategy for diversification.

Asked by Jagdishwar Toppo, Japa Investment Adviser LLP

3 min read 5 chapters

Detailed narrative

Watch Component Business Navigates Global Headwinds

KDDL's watch component business faced significant challenges in FY25, with overall revenue declining by nearly 20% year-on-year. This was primarily driven by a 28% decline in export revenue, heavily impacted by demand contraction in key markets like China and Hong Kong (down 25.8% and 19% respectively). Despite this, the domestic market showed resilience, growing by 13% during the year. Management anticipates a gradual revival in the international watch market, beginning in the second half of FY26, and is strategically expanding product offerings to mid-to-high value segments and exploring new geographies beyond Switzerland.

Precision Engineering Drives Robust Growth and Expansion

The precision engineering business emerged as a strong performer, recording a 55% year-on-year growth in revenue to INR 147 crores in FY25. This segment continues to demonstrate healthy momentum, fueled by robust export demand and exceeding customer expectations. Management expects this business to grow at a long-term rate of 25% and maintain EBITDA margins in the range of 19-20% for FY26. Key growth drivers include alternate energy (EV and battery storage systems) and aerospace sectors, with a new 28,000 sq ft facility in Bengaluru becoming operational in H2 FY26 to support future demand.

Favre Leuba: A Strategic Vertical Integration Play

Favre Leuba is positioned as a strategic new business, allowing KDDL to own and control the entire value chain of a Swiss watch brand, from component manufacturing to distribution. The brand has seen a "great response" in India, with distribution launched and products falling short of demand. Favre Leuba watches are priced between CHF 2,000 and CHF 4,500, offering superior specifications (e.g., La Joux-Perret movement) at a 20-25% lower price point than competitors. While an aspiration of 100,000 units per annum exists long-term, management aims for faster growth and expects initial losses to diminish by FY28.

Bracelet and Packaging Businesses Show Promising Traction

The bracelet division, dedicated to exports, is integral to KDDL's strategy, with current capacity utilization at about 50%. Management anticipates this rising to 65% in FY26, with plans to enhance capacity to approximately 90,000 units per annum. The packaging division saw revenue improve by 13% in FY25, driven by robust domestic demand from watch and jewelry segments, and is targeting international brands. Management projects a revenue growth upward of 20% CAGR for packaging over the next 5-10 years, with the new unit expected to reach 60-70% capacity utilization in FY26.

Consolidated Financial Performance and FY26 Outlook

KDDL reported a consolidated total income of INR 431 crores for Q4 FY25 and INR 1,695 crores for the full FY25. Consolidated EBITDA for Q4 FY25 was INR 75.9 crores (17.6% margin), and for FY25, it was INR 307 crores (18.1% margin). PAT stood at INR 31.6 crores for Q4 FY25 and INR 142.3 crores for FY25. Profitability in Q4 was impacted by a shift in product mix towards lower-margin precision engineering and nascent bracelet/packaging businesses. For FY26, KDDL expects overall revenue growth of 15-20% and aims to maintain EBITDA margins broadly in the similar range as FY25 (around 23% stand-alone). A capex of INR 35 crores is planned for FY26.

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