Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KDDL Ltd (BOM:532054, Financial) has commenced commercial production in its bracelet division, which has received an encouraging response and is expected to offset performance challenges in other segments.
- The precision engineering business, Eigen, continues to show strong momentum with a 46% increase in revenue compared to the same period last year, driven by robust export demand.
- KDDL Ltd (BOM:532054) has secured a new production facility in Bangalore to support the growth of its precision engineering business, indicating a strategic expansion plan.
- The company has launched a new packaging unit in Panchkula, enhancing its capacity to produce 100,000 packaging boxes per month for both domestic and export markets.
- The acquisition and relaunch of the Favre Leuba brand have been met with positive responses, with plans for international availability starting January 2025, indicating potential growth in the luxury watch segment.
Negative Points
- The global luxury goods sector, including premium watch brands, is experiencing a decline in consumer spending, particularly in key markets like China and Hong Kong, impacting KDDL Ltd (BOM:532054)'s watch component segment.
- Supply chain disruptions and rising costs of materials like steel and precious metals are putting pressure on margins in the watch component sector.
- Currency exchange rate fluctuations have increased component costs for buyers in markets with depreciated currencies, affecting KDDL Ltd (BOM:532054)'s profitability.
- The company is facing challenges in the watch component segment due to inventory corrections and a decline in Swiss watch exports, leading to reduced order inflow.
- Estima, a subsidiary focused on Swiss-made components, continues to incur losses due to the slowdown in the Swiss watch market, delaying its turnaround.
Q & A Highlights
Q: Can you provide insight into the acquisition of Favre Leuba and the plans for manufacturing watches for the global market?
A: The acquisition of Favre Leuba was completed last year through Silvercity Brands, a Swiss subsidiary of KDDL. Favre Leuba is an iconic Swiss brand with a rich history. The goal is to produce Swiss-made watches of high standards, with distribution arrangements being finalized globally. In India, Ethos will have exclusive distribution rights. The vision is to develop Favre Leuba into a top 20 Swiss brand over the next 5 to 10 years.
Q: How quickly can the new bracelet division ramp up production, and what has been the response so far?
A: The bracelet division, meant for export to Swiss brands, is expected to reach close to 100% capacity utilization in the next fiscal year. The response has been very positive, and there are plans to expand capacity by 30% to 40% with additional equipment. The business could potentially generate INR 80 crores to INR 100 crores over the next three to five years.
Q: Can you provide a breakdown of Q2 sales in the watch component segment and the capacity utilization of the bracelet division?
A: While exact breakdowns are not provided, dials and hands are approximately equal in value, with 70% exported. The bracelet division has a capacity of 75,000 units annually, and full capacity utilization is expected next fiscal year. The business is projected to grow significantly with ongoing expansion plans.
Q: What is the outlook for the precision engineering business, and how is the expansion progressing?
A: The precision engineering business is experiencing robust demand, particularly in new geographies and technologies. A new 30,000 square feet facility on lease will be operational next fiscal year to meet demand. Further expansion is planned in the existing facility by FY27. The business is expected to grow faster than other segments and could become the largest part of KDDL's manufacturing business.
Q: What is the status of Estima, and why have receivables increased this quarter?
A: Estima continues to face losses due to market slowdowns, particularly in China and Hong Kong. Efforts are underway to enhance technology and specialization at Estima. Regarding receivables, the increase is due to the growing share of the precision engineering business, which has longer credit terms, especially for exports.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
