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00:00 Good morning and welcome to Earnings Edge right here at NETV Profit.
00:09 We are now tracking Keynes Technologies on the back of the strong quarter for earnings
00:14 reported.
00:15 The company reported 75% growth in revenues while EBITDA increased by 60% and profitability
00:21 came at a strong 97% growth compared to the previous year.
00:25 We are now joined by Mr. Ramesh Kanan, Managing Director and Promoter along with Mr. Jayaram
00:31 Sampath, the whole time Director and CFO.
00:34 Good morning sir and thank you so much for joining us today.
00:36 Good morning.
00:37 Good morning.
00:38 Sir, I just wanted to start with of course the quarter for earnings as well as financial
00:43 year 24.
00:44 I was hoping you could break it down for us.
00:46 We have seen like strong revenue growth upwards of 60% for this fiscal and while that has
00:53 happened we have seen margins also grow while on an absolute level.
00:57 They have come down just slightly about 80 basis points compared to the previous year
01:01 but really strong at roughly 14.1%.
01:06 What led to this slight fall which we see roughly by 86 basis point and how are you
01:10 seeing these margins going forward?
01:11 Do you see this particular range to be maintained around the 14% or are you seeing them going
01:17 back to the level of FY23?
01:20 Absolutely.
01:21 So thank you for having us for this call.
01:26 See fundamentally the margin is a result of performance across the different verticals
01:32 that our portfolio has.
01:34 And so in the short term many times the margins may be if the sales in a particular vertical
01:40 is a little higher and some other verticals where the margins are higher the sales are
01:44 not taken off.
01:46 So from that perspective yeah FY24 you saw a minor dip in the beta margins.
01:52 But going forward FY25 since we already have the order book of the order book of about
01:58 4,115 crores and we also know that some of the other sectors which are let's say high
02:04 yielding sectors or higher profit sectors like aerospace and strategic electronics,
02:09 railway signaling, medical etc.
02:13 So it's our conviction that going forward in FY25 the beta margins will increase by
02:19 at least 100 basis points to begin with and then that depends on what are the orders we
02:24 execute.
02:25 This is on the back of a similar growth performance that we expect in FY25.
02:31 Last year we grew about 60% this year also I think it will be 60% plus growth in revenues.
02:38 So like I said the small changes in the short term are led more by the mixed changes.
02:46 And so we expect the mix to recover to the kind of mix that we normally use.
02:51 Over the next few years similar trend will continue and we think that the beta margin
02:58 is intact as per our estimate.
03:01 Understood sir.
03:02 Now that's really strong commentary that you are saying that it will go back up to
03:06 from the to at least 100 basis points as well as thank you for giving us the revenue guidance
03:11 as well really strong at 60% from these current levels as well.
03:15 Now I want to talk about just the split of revenue I think compared to last year the
03:20 auto segment has just come down slightly but I estimate that because you've seen a really
03:24 strong growth in the industrial segment now that contribution has gone up from 27 to roughly
03:30 48%.
03:31 How are you seeing the split going forward for both these segments because these are
03:35 the top revenue contributors and I have another related question to industrial but please
03:39 go ahead sir.
03:40 Yeah so fundamentally automotive, industrial and EV there are two let's say primary segments
03:47 verticals where they contribute anywhere more than 60% of the total revenues.
03:53 But having said that the other segments which are like let's say medical electronics, aerospace,
03:59 out of space and strategic electronics, IT, IOT that is high performance computing servers
04:04 and daily signaling.
04:06 So there is a lot of traction in these segments too and going forward I think once the new
04:12 government takes control second quarter onwards you could see a lot of stronger growth in
04:17 these segments too because these segments are primarily driven by governments push for
04:23 infrastructure projects and so on.
04:25 And also some of the purchases from outside of India global players both of these factors
04:30 will be positively impacted once the government is formed in June.
04:33 So second quarter onwards we can expect very good growth in these types of segments and
04:39 that is going to drive the balance between the portfolio even though the automotive and
04:46 industrial and EV are growing at a good rate the other segments also will now catch up
04:51 and so you will see the same 60/40 kind of split between the high volume and high profit
04:56 segments so to say.
04:58 So this is a balanced portfolio that we also like to cultivate.
05:02 The high volume segment gives us ability to buy components cheaply and high profitability
05:07 segment obviously improves the profitability of our company.
05:12 For us the combination is very important.
05:17 We need to have a balance of all the sectors.
05:22 So normally if we can get 50% from this sector and 50% from the rest of the sectors like
05:30 railway aerospace and defense then medical we are good to go for this type of projects.
05:38 Thank you so much for that sir.
05:39 And we can be positive forward looking because we have got good orders for the next 2 to
05:47 3 years.
05:48 Understood sir and I just wanted to spend a little more time on this industrial segment
05:53 and then come back to the other segments as well as you are saying.
05:56 Now the industrial segments has roughly 2 to 3 major products engine control panel as
06:01 well as street light controller BLE module among other products.
06:06 Now what segment has driven the revenues in this particular financial year and as you
06:10 rightly said you already have orders roughly of 4000 crores.
06:14 So going forward how are you seeing the mix within this industrial segment?
06:19 So industrial so we classify automotive, industrial and electric vehicles.
06:24 Obviously electric vehicles is a big growth segment.
06:27 So we are I'm happy to tell you that we are presenting all the different dimensions of
06:32 electric vehicles.
06:33 That is 2 wheeler, 4 wheeler, 3 wheeler and EV is first section and EV components too.
06:39 So obviously different product categories will have different margin profiles and different
06:45 volume profiles etc.
06:46 So in industrial EV is one major thing.
06:49 Remaining industrial like you correctly mentioned there are power electronics, there are things
06:55 like energy meters and so on.
06:58 Smart meter is likely to be a growth engine for next at least 3 to 5 years time because
07:04 we have got very large contracts in this area.
07:06 They were under development for last 2 years and now we have done some significant inroads
07:12 into that particular business.
07:13 So the business will be driven in the industrial EV business will be driven on one side by
07:17 EV the other side by smart meters growth.
07:20 And in addition to that the instrumentation clients etc. without falling into getting
07:25 a unit done in a unit acquired in US we are likely to get some more traction in the industrial
07:32 sector from the United States too.
07:34 So all these put together we expect this percentage of total business industrial EV to remain
07:41 similar to what it has been in the past.
07:44 By way of volume and large orders it is automobile and industrial which will always gain.
07:53 Whereas railways and defense aerospace are low volume high tech highways.
08:02 Thank you for that sir.
08:04 And I wanted to talk about the EV percentage I think you would given in the previous call
08:09 I think you mentioned 10 to 12% of your revenues are from EVs at that time.
08:14 How is that share evolved in this particular quarter and any kind of numbers you want to
08:18 say for the next year as well for EVs specifically?
08:20 Yeah so it goes up to about 15% so typically you can take 15% as the EV and related products
08:25 share and it can go a little up a little down depending on how the other sectors do but
08:30 going forward I think that will remain at that point because the initial let's say initial
08:36 growth of the EV segment in our portfolio has happened from zero it has gone to a good
08:41 number.
08:42 So it will go the normal route of whatever 40-50% growth that is happening.
08:47 So compared to that all other segments also it's slated to grow so it will remain around
08:51 15% of our portfolio will be probably the EV segment because we have onboarded many
08:57 clients not only just originally we had only a four-wheeler client now we have two four-wheeler
09:02 clients, one two-wheeler client, we got a three-wheeler client, we got EV infrastructure
09:07 several clients, some in exports, we got a large component player in EV too for exports.
09:14 So yeah so it's going to grow at the portfolio rate at about 15% of the portfolio.
09:22 And I want to talk about the OSAD business now and that's one business that's really
09:26 unique for K&S Technologies among all other EMS players as well.
09:31 What has been the preliminary construction going on in Telangana if I'm correct?
09:38 You were also talking with the government for some other approvals as well.
09:43 Could you just give us some update on that and also on the semiconductor assembly business
09:49 both of these aspects currently?
09:53 So as far as the OSAD business is concerned, the approvals from the government for the
09:58 subsidy is at the final stages.
10:01 Unfortunately, in between this model board of content has come in so obviously post-elections
10:05 only this formality will get completed.
10:09 On the other hand, we are quite confident of this approval coming in so we have taken
10:13 all the steps required be it in partnership, be it in acquisition of people, be it in training
10:17 of people.
10:18 The question about Telangana also, our factory is almost ready in Telangana so based on whatever
10:24 government orders that come in we will proceed in any case.
10:29 We are going aggressively acquiring land in different states who have favorable policies
10:33 for even EMS and all other businesses like the PCB business and so on.
10:39 So it's always a good thing to have a reasonable amount of land for expansion because many
10:44 of the new clients look at the company's ability to deliver based on how many extra factories
10:50 you can quickly start.
10:53 So from that perspective, the Agarwal is already ready.
10:56 So depending on what is decided by the government in terms of approval in the semiconductor,
11:03 we will take appropriate steps necessary to utilize it in semiconductor or any other sectors
11:09 but we have a good 60% growth in our EMS itself.
11:13 So that also requires additional capacities to be built up.
11:16 So going forward, you can call Telangana as an advanced work for putting together the
11:26 capacity for our business.
11:27 Most of the business will bring in a thousand crore of top line in next three years.
11:36 We want to start the production in one year's time and then we are also planning to do advanced
11:43 assembly also.
11:45 So all this put together, we can easily take a thousand crore.
11:50 We have not yet got any order but we have got a lot of MOUs and other things which can
11:56 be converted into order because our type of business, unless we have a factory constructed
12:02 and start production, we cannot get orders.
12:05 [MUSIC]