Centum Electronics has reported a robust 18% year-over-year standalone revenue growth to INR 206.00 crores in the second quarter, driven by strong execution in its Build-to-Spec (BTS) business for domestic defence and space customers. The company's EBITDA margins expanded to 11.97%, reflecting operational efficiency and an improved revenue mix.

Financial Highlights

• Standalone revenue grew 18% YoY to INR 206.00 crores in Q2
• EBITDA margins expanded by 154 basis points to 11.97%
• Standalone PAT increased by 97% YoY to INR 13.00 crores
• H1 standalone revenue up 24% YoY to INR 391.00 crores

Business Performance

The company's growth was primarily driven by its domestic operations, particularly in the Build-to-Spec and Electronic Manufacturing Services (EMS) segments. Centum Electronics is targeting a 30% growth for the full financial year on a standalone basis, with expectations of accelerated revenues in the second half.

Order Book and Future Outlook

Centum Electronics reported a healthy order book, with the domestic Build-to-Spec business standing at approximately INR 650.00 crores and the EMS business at INR 763.00 crores as of Q2. The company is eyeing significant opportunities in the space and defence sectors, including:

• A potential INR 1,000.00 crore opportunity in space-based surveillance programs over the next few years
• Advanced stage of design finalization for electronic warfare-based payloads
• Prospects for additional satellite constellation orders, following a previous INR 300.00 crore order

Strategic Partnerships and Recognitions

The company has strengthened its position through strategic partnerships and recognitions:

• Signed MoUs with Garden Reach Shipbuilders and Engineers (GRSE) for collaboration on navigation systems for the Indian Navy
• Partnered with Bharat Electronics Limited (BEL) to advance indigenous defence electronics
• Delivered nearly 400 critical modules for ISRO's recent CMS-3 GSAT-7R program
• Received NABL accreditation for its BTS unit, enhancing credibility in defence contracts
• Recognized by CII as an energy-efficient unit for excellence in energy management

Challenges in International Operations

Despite strong domestic performance, Centum Electronics faced challenges in its international subsidiaries:

• Weak macroeconomic conditions and intense competition in the ER&D market in France affected the European subsidiary
• The company is progressing on the planned divestment of its Canada operations
• Management is evaluating strategic options for the European business to address the impact on consolidated margins

Nikhil Mallavarapu, Joint Managing Director, commented, "We are confident about our growth trajectory in the domestic market. While our international operations face challenges, we are taking decisive actions to address these issues and expect to have clear direction by the end of Q4."

The company remains focused on capitalizing on the growing opportunities in the Indian defence and space sectors, while working to resolve the challenges in its international operations.

Centum Electronics , a leading provider of end-to-end electronics system design and manufacturing solutions, has announced strong financial results for the second quarter. The company's standalone performance showed significant growth, while its consolidated results were impacted by subsidiary performance.

Standalone Performance Highlights

Centum Electronics delivered impressive standalone results for Q2:

• Operational income reached INR 2,055.00 million, representing an 18.4% year-over-year growth.
• EBITDA margin expanded to 11.97%, showcasing improved operational efficiency.
• Net profit stood at INR 130.00 million with a PAT margin of 6.33%.

For the first half (H1), the company's standalone revenue climbed to INR 3,906.00 million, marking a robust 24% year-over-year growth. The EBITDA margin for H1 was 12.88%, indicating strong profitability.

Key Growth Drivers

The Build-to-Spec (BTS) business, particularly for domestic Defence and Space customers, emerged as a significant growth driver for Centum Electronics. This segment's performance underscores the company's strong positioning in high-growth sectors with high entry barriers.

Consolidated Performance

While the standalone results were strong, the consolidated performance was impacted by subsidiary losses:

• Consolidated revenue for Q2 was INR 2,906.00 million, up 11.9% year-over-year.
• Consolidated EBITDA margin stood at 6.16% for Q2, reflecting the impact of subsidiary performance.
• Consolidated PAT for Q2 was INR 42.00 million, with a PAT margin of 1.45%.

Strategic Developments

Centum Electronics has been actively pursuing strategic initiatives to strengthen its market position:

1. The company signed Memorandums of Understanding (MoUs) with:

   • Garden Reach Shipbuilders & Engineers (GRSE) for collaboration on navigation systems for the Indian Navy.
   • Bharat Electronics Limited (BEL) to enhance indigenous Defence Electronics, focusing on advanced electronic systems for Electronic Warfare, radar, and military communications.

2. Centum delivered nearly 400 critical modules for ISRO's CMS-03 satellite mission, demonstrating its capabilities in the space sector.

3. The company is evaluating strategic actions for its European business to improve overall performance.

4. Progress is being made on the planned divestment of Canadian operations, which may help in streamlining the business structure.

Order Book and Future Outlook

As of September 30, Centum Electronics' consolidated order book stood at INR 18,151.00 million, providing strong visibility for future revenue. The order book is well-diversified across the company's key business segments: Engineering Research & Development (ER&D), Build-to-Spec (BTS), and Electronic Manufacturing Services (EMS).

Conclusion

Centum Electronics' Q2 results demonstrate the company's strong performance in its standalone operations, particularly in the domestic Defense and Space sectors. While consolidated results were impacted by subsidiary performance, strategic actions being undertaken may help in improving overall group performance in the coming quarters. The robust order book and strategic partnerships position the company well for sustained growth in its key markets.

Investors and stakeholders will likely keep a close watch on the progress of the company's strategic initiatives, particularly the evaluation of its European business and the divestment of Canadian operations, as these could significantly impact future consolidated performance.