Vinyas Innovative Technologies Ltd

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Vinyas Innovative Technology Limited

CMP - 950/-

Market Cap - 1194 Cr

Date - 7/6/25

Trigger – Management Meet

Mr. Narendra Narayanan Managing Director

Management Commentary

The management, led by Managing Director Mr. Narendra Naran and Whole-Time Director Mr. Sumuk Narendra, conveyed a positive and confident tone regarding the company’s performance and future outlook.

  • Mr. Narendra Naran highlighted Vinyas’s evolution into a leading electronic manufacturing service (EMS) provider with over two decades of operational excellence and three decades of domain expertise, serving global OEMs and ODMs across critical sectors like aerospace, defense, medical, and industrial applications.
  • The company operates on two integrated service models: built to print and built to spec, which strengthens its position as a strategic manufacturing partner.

(Built to Print: Our B2P solutions involve our client providing the design for the product for which we provide agile and flexible manufacturing services.

Built to Spec: Our B2S services involve utilising our design capabilities to design the relevant product based on the specifications provided by the client and manufacturing the product. Our solutions primarily comprise: (i) printed circuit board (“PCB”) assembly (“PCBA”), and (ii) box builds which are used in safety critical systems such as cockpits, inflight systems, landing systems, and medical diagnostic equipment. )

  • A key differentiating factor is the focus on high-reliability electronics for mission-critical and safety-critical applications, producing precision components for cockpit systems, inflight electronics, medical electronics, and defense platforms.
  • He emphasised a strong foundation and clear revenue visibility,

Financial Highlights

  • Total Revenue (FY25): Reached ₹396.6 crores, representing a robust 25% Year-on-Year (YoY) growth from ₹317 crores in FY24.
  • EBITDA (FY25): Stood at ₹44.4 crores, showing 22% growth, while maintaining an EBITDA margin of around 11%.
  • Net Profit (PAT) (FY25): Grew by an impressive 27% to ₹19.4 crores from ₹15.3 crores in FY24.
  • Earnings Per Share (EPS) (FY25): ₹15.43.
  • H2 FY25 Performance:
    • Revenue: ₹247.1 crores, an exceptional 37% YoY growth over the same period last year.
    • EBITDA: ₹26.7 crores, with 32% growth and an EBITDA margin of around 11%.
    • PAT: Grew by 8% to ₹12.4 crores.
    • EPS: ₹9.86.
  • New Orders Booked (FY25): ₹737 crores from both domestic and global customers.
  • Order Book (as of May 30, 2025): Over ₹1,008 crores.
  • Balance Sheet Strength:
    • Net Worth increased to ₹147 crores from ₹128 crores.
    • Healthy Debt-to-Equity ratio of 0.7 times.
    • Total assets grew to ₹330 crores, with current assets comprising ₹286 crores.
  • Operating Cash Flow (FY25): Generated a positive ₹8.8 crores.
  • Sector-wise Revenue Distribution:
    • Defense and Aerospace: Dominant segment, contributing 78% of revenue.
    • Industrial Segment: Showed remarkable growth, contributing 18.4%.
    • Medical Devices: Contributed ₹6.7 crores.
    • Other Segments: Accounted for ₹7.5 crores.

Guidance & Outlook

  • Revenue Growth: Expecting a 25% growth for FY26. (62
  • EBITDA Margin Target: Anticipated to be between 9% to 11% for FY26 and the next two to three years, with no expectation of immediate change. Operational efficiencies and maturing programs have helped reach the current margin profile.
  • Order Inflow Expectation (FY26): Expected to be at the same levels as FY25, between ₹600 to ₹750 crores.
  • Order Book Growth (FY26 End): Expected to grow to ₹1,500 to ₹1,600 crores.
  • Order Book Execution Timeline: The current order book of ₹1,008 crores is expected to be executed over the next 12 to 18 months.
  • Capacity Utilization: Current capacity is at around 35% utilisation. It can support revenues of ₹1,200 to ₹1,400 crores. Full optimal utilization of the facility is expected in FY27, particularly for the defense and aerospace side, which takes 1.5 to 2 years for qualification and approval.
  • Long-term Opportunity Pipeline: Management sees an opportunity pipeline of close to ₹9,000 to ₹10,000 crores over the next 4 to 5 years, based on programs they are a part of or working towards.

Key Drivers & Risks

  • Key Drivers:
    • High Reliability Manufacturing: Trust in Vinyas for high-reliability manufacturing reinforces customer confidence.
    • Certifications & Compliance: Successfully cleared critical compliance requirements for international defense programs and clients, as well as maintaining prestigious certifications (ISO 9001, AS 9100, IATF 16949, ISO 13485).
    • Strategic Positioning: Capitalising on India’s emergence as a global defense electronic hub.
    • New Market Entries: Entry into commercial aerospace manufacturing and a manufacturing agreement with a medical OEM for ‘Made in India’ medical devices.
    • Strong Order Book: A substantial order book provides financial flexibility and positions for sustained profitable growth.
    • Operational Efficiencies: Contributing to stable margin profile.
    • System Integration: Expected to grow gross margins by 2-3 basis points and offer leverage as a full subsystem integrator for defense customers.
    • Export Orders: Close to 22-23% of orders coming from export driven by licenses and approvals, especially China-plus-one opportunities for medical devices.
  • Risks:
    • Supply Chain Disruptions: Experienced “on and off” supply chain issues due to the Middle Eastern conflict, specifically an exposure of 27-30% of programs having dependency on critical components from the Israeli supply chain, leading to a larger receivable portion in H2 FY25.
    • Program Delays: The major risk for the ₹9,000-₹10,000 crore opportunity pipeline is delays in defense programs getting sanctioned and reaching critical manufacturing stages. These delays can extend beyond the 5-year outlook.
    • Raw Material Costs: Significant impact on margin profile, though protected by foreign exchange rate variations and bill of material price parity variance arrangements with customers.

Capex & Expansion Plans

  • Existing Infrastructure: State-of-the-art facility of 150,000 square feet in Mysore equipped with advanced SMT lines capable of producing 500 million components annually.
  • New Facilities/Qualifications:
    • Qualified a new cable harness facility within the same premises.
    • Had a first assessment with a leading Tier-1 OEM for commercial aerospace and placed a first purchase order for manufacturing process validation.
  • Current Capacity: Utilised at 35%, with potential to scale up to ₹1,200 to ₹1,400 crores of revenue.
  • Future Capex:
    • The necessary capex was done about a year back to sustain growth for the next two years.
    • For EMS business, incremental capex for adding SMT lines is estimated at ₹600 crores of revenue per SMT line.
    • Additional ₹2-3 crores capex on a yearly basis is expected for other critical equipment to support quality improvements and programs.

Competitive Landscape

  • Vinyas distinguishes itself as a “high mix, high complexity assembly house” focusing on critical subsystems and low/medium volume manufacturing, unlike other EMS providers that cater to low mix, high volume manufacturing.
  • Despite focusing on complex products and low volumes, the margins are similar to other EMS players (10-11%) because it is primarily a “bill to print” operation where raw material costs are significantly higher, making the value-add portion 10-11%.

Investor Concerns Addressed

  • Order Book Execution: Confirmed the ₹1,008 crore order book will be executed over 12-18 months.
  • Order Inflow Outlook: Expects ₹600-₹750 crores in new orders for FY26, similar to FY25.
  • Margin Sustainability: Confident in maintaining 9-11% EBITDA margins for the next 2-3 years, attributing it to operational efficiencies and maturing programs, but not foreseeing immediate margin expansion.
  • Balance Sheet (Receivables & Inventory): Acknowledged a sharp jump in receivables at year-end due to supply chain disruptions (Middle East conflict, Israeli supply chain exposure) affecting manufacturing in the last quarter. Inventory management has improved compared to last year. The receivable situation has smoothed out in Q1 FY26 and is expected to improve.
  • Export Business & China+1: Export orders (22-23% of total) are primarily driven by China-plus-one opportunities for medical devices and necessary certifications for defense.
  • Medical Device Opportunity: The manufacturing agreement with a medical OEM is for domestic ‘Made in India’ devices, with initial phase of manufacturing underway and ramp-up expected in FY26.
  • Capacity & Revenue Potential: Current capacity of 150,000 sq ft is at 35% utilisation and can generate ₹1,200-₹1,400 crores in revenue. Full optimal utilisation is expected in FY27.
  • Backward Integration: Management is not looking at backward integration (e.g., PCB boards) due to very low volumes of parts and electronic components, thus no significant value add.
  • Component Price Volatility: Protected by foreign exchange rate variations and Bill of Material (BOM) price parity variance arrangements with customers, with reconciliation cycles happening twice a year.
  • Rejection Rates: Emphasised stringent quality processes and testing, resulting in final yields above 99% and very low rejection rates at customer locations. Rework is possible if needed.
  • Working Capital: The target is to reduce working capital as a percentage of sales from close to 50% to about 30%. Management is working with customers for advances to support working capital requirements. Sufficient unutilised non-fund based limits are available with banks for readiness.

Strategic Updates

  • International Defense Programs: Successfully cleared critical compliance requirements to work with international defense programs and clients.
  • Commercial Aerospace Manufacturing: Made an entry into this segment, with the first assessment and purchase order from a leading Tier-1 OEM for validation of manufacturing process.
  • Cable Harness Facility: Qualified a new cable harness facility within the existing premises.
  • Medical OEM Agreement: Entered into a manufacturing agreement with a medical OEM to start manufacturing for ‘Made in India’ medical devices.
  • System Integration: Targeting manufacturing subsystems for defense programs, which involves system and subsystem level integration, expected to grow gross margins.

Red Flags or Surprises

  • Supply Chain Dependency: The 27-30% dependency on the Israeli supply chain for critical components and made-to-order parts, leading to an increase in receivables in H2 FY25, is a notable risk. While management states it has smoothed out, it represents a potential vulnerability.
  • H2 Margins Slightly Lower: H2 FY25 margins were slightly lower than the previous year’s similar half due to a mix change involving a larger volume of slightly lower margin boards. However, the overall FY25 margin remained stable, and the management remains confident in the 9-11% range.
  • Program Delays: Acknowledgment that defense programs can be delayed by 2-3 years, which could impact the execution of the large opportunity pipeline of ₹9,000-₹10,000 crores.

Summary

The overall tone of the earnings call was positive and confident. Management highlighted strong financial performance in FY25, driven by robust growth in revenue and profits, especially in the second half. The company has a substantial and growing order book, with clear visibility for the next 12-18 months. Strategic initiatives like entering commercial aerospace and medical device manufacturing, coupled with global defense program qualifications, are seen as key growth drivers.

An investor should infer that Vinyas Innovative Technologies Limited is well-positioned for continued growth, leveraging its expertise in high-reliability, complex electronics for critical sectors. The company’s unique “high mix, low/medium volume” approach differentiates it in the EMS space. While there are manageable risks related to supply chain dependencies (Israel) and potential delays in defense programs, the company has mechanisms (e.g., price protection for raw materials) and significant unutilised capacity to support future growth. The stable margin profile (9-11%) is expected to continue for the foreseeable future, without immediate expansion. The focus on ‘Made in India’ programs is a strong tailwind. The commitment to reducing working capital is also a positive sign for operational efficiency.

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