Kaynes Technology India Ltd. warned that FY27 will be a "difficult year" as higher component costs, supply constraints and other cost pressures weigh on profitability, even as the company delivered 40.5% revenue growth in the June quarter. The warning came after consolidated net profit fell 24.4% to Rs 56.4 crore, while Ebita margin narrowed to 15.5% from 16.9% a year earlier.
The company said component availability and pricing have become key challenges for the business. Management also expects profitability to take a couple of quarters to normalise, adding to investor concerns after the company reported strong revenue growth but weaker profit in Q1 FY27.
Ramesh Kunhikannan, executive vice chairman of Kaynes Technology, said during the company's Q1 FY27 earnings call that the company was facing higher costs and supply constraints.
"This year is a difficult year," Kunhikannan said. "It is not going to be an easy year, it is going to be a tough year."
Margin Pressure
Kaynes Technology's consolidated revenue rose 40.5% year on year to Rs 946 crore in Q1 FY27 from Rs 673.5 crore, while Ebita increased 29.5% to Rs 147 crore from Rs 113.5 crore.
The slower growth in Ebita than revenue resulted in margin compression. Consolidated Ebita margin stood at 15.5% in Q1, compared with 16.9% a year earlier.
Net profit declined 24.4% to Rs 56.4 crore from Rs 74.6 crore. Other income also fell to Rs 14.4 crore from Rs 27.1 crore in the year-ago quarter.
Management attributed the pressure on profitability to higher costs across components, labour and electricity, along with supply constraints.
"The market is quite challenging," Kunhikannan said, adding that the situation would put pressure on the bottom line in the coming quarter.
He said component prices had risen, while availability had become a major problem. PCB component prices have risen, with prices increasing by about 10%-12%, according to management.
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Cost Outlook
Muthukumar Narayanaswamy, managing director of Kaynes Technology, said the company expects profitability to take a couple of quarters to return to previously committed levels.
He attributed the margin pressure to global supply-chain issues, higher energy and crude oil prices, commodity prices and foreign-exchange movements.
Narayanaswamy said the company had increased inventory to protect future business commitments as supply times in some categories have stretched to more than six to eight months.
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Kunhikannan said Kaynes had also increased inventory to ensure that customer production lines did not stop. He said the company passes on pricing increases to customers, but the benefit may not be reflected immediately because adjustments are generally made quarter on quarter.
The company said it remains on track with its FY27 capital expenditure plans, including about Rs 300 crore for OSAT, Rs 300 crore for PCB and Rs 250 crore for EMS. It spent about Rs 230 crore across the three businesses in the first quarter.
Management did not provide an absolute FY27 revenue-growth target, citing volatility and the impact of material availability. It reiterated its commitment to grow at twice the market rate.
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