Kaynes Tech Q2 Results: Higher expenses result in earnings miss; Announces JV with Toyokawa Techno

Kaynes Technology Ltd. reported their September quarter results late Saturday night on November 14, which turned out to be below what the street had anticipated across all parameters.

On a consolidated basis, Kaynes Tech reported revenue of ₹952.5 crore, which is a growth of 4% from last year. However, the number is below the CNBC-TV18 poll expectation of ₹1,049 crore.

The company's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter fell 15.7% from the year-ago period to ₹126.5 crore, which is also below the poll expectation of ₹154 crore.

EBITDA margin for the quarter narrowed by over 300 basis points to 13.28%, while consensus expected the margins to narrow to 14.7%. The company had reported a margin figure of 16.3% during the same quarter last year.

Kaynes Tech reported a net profit of ₹45.4 crore during the September quarter, which is 62% lower than the same quarter last year, and well below the CNBC-TV18 poll of ₹81 crore.

The impact on the profitability of the company was due to higher expenses, as finance costs tripled to ₹39 crore from ₹13 crore last year. Employee benefit expenses also increased to ₹103 crore from ₹77 crore during the year-ago period.

Kaynes Tech Announces Joint Venture

In the same earnings statement, Kaynes Tech also announced the execution of a Joint Venture Agreement between itself and Toyokawa Techno Pvt. Ltd.

The JV company will be engaged in manufacturing, assembling, testing, and supplying Thin-Film Transistor Display (TFT) modules, FOG/COG bonding, backlight assemblies, optical bonding, software, R&D, and automated manufacturing systems.

The JV will be a subsidiary of Kaynes Tech, owned by fresh equity subscriptions, that will give Kaynes a 90% ownership in the JV and the rest to Toyokawa. Board of the JV will include five directors, two each from Kaynes and Toyokawa and one independent director appointed mutually by both companies.

As per the JV details, Kaynes will provide operational, administrative, and management support, while Toyokawa will provide technical support services.

Kaynes Tech also continues to be operating and free cash flow negative for the first six months of the current financial year. However, the negative free cash flow has narrowed to ₹834 crore from ₹1,005 crore during the six-month period last year.

Further details about the numbers are yet to be disclosed in its investor presentation.

Shares of Kaynes Technology India Ltd. ended 1.5% lower on Friday at ₹3,430. The stock has gained 5% in the last one month, but is still down 13% so far this year.