Kross Ltd

Kross Limited reported a mixed Q3 FY25, with revenue growing 1.01% YoY to INR150.1 crores, but EBITDA declining 5.29% to INR19.7 crores, leading to an 83 basis point contraction in EBITDA margin to 13.1%. Despite this, PAT saw robust growth of 17.24% to INR13.6 crores, with PAT margin expanding by 123 basis points to 9.1%. For the nine-month period, revenue was largely flat at INR435.4 crores, while EBITDA grew 0.92% to INR54.5 crores, and PAT increased 8.8% to INR30.9 crores, with PAT margin improving by 60 basis points to 7.1%.

The company is making significant progress on its axle beam extrusion plant expansion, a key strategic initiative. The new extrusion machine is anticipated to arrive by early March 2025, with commercial production slated to commence shortly thereafter. This expansion will boost capacity from the current 5,000 trailer capacity for axles and suspension assemblies to 7,500 units per month, enhancing product quality and opening new growth avenues, particularly in the tag and dead axle segments where the company currently has no presence.

Kross Limited announced a major backward integration move by investing INR167 crores in a new seamless tube manufacturing facility in Adityapur, Jharkhand. This project, funded by a mixture of debt and internal accruals, is expected to be completed within 18 months, targeting mid-FY27. This strategic entry aims to reduce reliance on external vendors, lower production costs by 3-4% per product, and enhance overall productivity and profitability, with surplus capacity serving external demands in sectors like oil and gas.

The export business is a significant growth driver for Kross Limited, currently contributing 3.4% to 9M FY25 revenue, up from 1% in FY24. The company targets to achieve at least 5% export contribution for FY25 and aims for double-digit contribution in the coming few years, specifically targeting close to 15% within 2-3 years. Management highlighted that export margins are substantially higher, with the export-only business running at an EBITDA of 20-22%, compared to the overall company EBITDA margin of 13.1% in Q3 FY25.

Kross Limited is actively expanding its product portfolio and market reach. Recently, it launched an 18-ton axle and two new mechanical suspensions (20-ton and 13-ton) to cater to heavier-duty and lower-GVW applications. In Q4 FY25, the company plans to launch a car carrier axle and suspension, entering a new segment not previously served. These new products, combined with efforts to expand its dealer and service networks into new regions like Gujarat and Maharashtra, are expected to drive future volume growth and market share.

The company acknowledged prevailing industry challenges^🌐, including a slowdown in infrastructure projects that led to subdued demand in the M&HCV segment, which was down 5% in 9M FY25. The overall trailer industry has also been flat or slightly down YoY. Despite these headwinds, Kross Limited outpaced broader industries and expects to end FY25 with better performance than the previous year, projecting 15-20% revenue growth for FY26 driven by new products and capacity expansions.