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A Detailed Analysis of KES Technology’s Performance and Future Outlook

In an exclusive interview, the Whole-Time Director and CFO of KES Technology shed light on the company’s quarterly performance and the factors impacting its share price trajectory. Here are the key takeaways from the conversation:

Revenue Growth and Missed Estimates

KES Technology reported a 30% year-on-year revenue growth for the quarter, though the numbers fell short of market expectations. The CFO clarified that this was due to execution delays in industrial production, which are now resolved. On a year-to-date basis, the company’s growth stands at an impressive 50%, and they aim to close the fiscal year with a 60% growth, achieving revenues between ₹2,800 and ₹2,900 crore.

Quote: “We’re confident of achieving our targets by the year-end and even exceeding 15% margins,” said the CFO.

Execution Challenges and Resolutions

The CFO elaborated on the execution challenges in their smart meter business, which stemmed from the ramp-up of a new factory in Hyderabad. However, the company has addressed these issues, and the production is now on track.

Quote: “The smart meter factory is fully operational, and we are seeing steady progress. The backlog will be cleared in the upcoming quarters,” they added.

Order Book and Annual Guidance

KES Technology boasts a robust order book of ₹6,000 crore. Despite earlier hiccups, the company maintains its annual revenue target of ₹2,900 crore, with plans for 70% growth in Q4 alone. The CFO emphasized that this growth would be achieved organically, without acquisitions.

Managing Receivables and Incentives

Addressing concerns about receivables, the CFO highlighted that KES Technology’s reliance on capital subsidies rather than production-linked incentives (PLI) has minimized cash flow issues.

Quote: “Our capital subsidy processes are smooth, and we’re not facing significant challenges from government incentives,” they assured.

Impact of Employee Expenses

The CFO attributed the 133% increase in employee expenses to recent acquisitions in the U.S., including companies like Isano and Sensonic. These acquisitions have temporarily impacted operating leverage, but profitability is expected to normalize by Q4.

Future Capacity Utilization

The company plans to maximize capacity utilization in Q4, particularly in its smart meter production segment. Additional machinery and operational enhancements have been implemented to meet the growing demand.

Geopolitical Concerns: U.S. Tariffs and Global Strategy

When asked about potential semiconductor tariffs, the CFO expressed confidence in KES Technology’s strategy. The company plans to establish manufacturing facilities in North America, Europe, and South Asia to align with local regulations and benefit from regional markets.

Quote: “We are focused on building local manufacturing capabilities to support high-value work in the U.S. and leverage India for cost-efficient operations,” they explained.

Looking Ahead

With a target of ₹4,500 crore in revenues for the next fiscal year, KES Technology is optimistic about its growth trajectory. The company is also betting on new businesses like semiconductor assembly and PC board assembly to drive future growth.

Closing Statement: “We’ve seen the bottom of our business cycle and expect a strong rebound next year, especially with increased government spending in sectors like railways,” concluded the CFO.

Stay tuned for more updates on KES Technology and how their strategy impacts the Kenes share price.

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