Kaynes Tech shares recover 8% from opening lows reacting to Q1 results; Stock in F&O ban

Shares of Kaynes Technology India Ltd. fell as much as 9% on Monday, August 10, as they will be reacting to their June quarter results that were reported after market hours last Friday. The results were largely in-line to better-than-expected. The stock has recovered most of those losses within the first 30 minutes of the trading session.

Kaynes Tech's revenue for the quarter stood at ₹946 crore, a growth of 40% from last year, and higher than the CNBC-TV18 poll figure of ₹866 crore. The company's core businesses grew over 30% each, while its other smaller businesses grew between 70% to as high as 180%.

Kaynes Tech Segments	YoY growth	% sales
Automobile	+35%	26
Industrial (incl EV)	+31%	55
Aerospace Outerspace & Strategic electronics	+181%	2
Medical	+181%	2
Railway	+81%	9
IoT/IT, Cons and others	+69%	6

The company's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter stood at ₹147.5 crore, largely in-line with the CNBC-TV18 poll estimate of ₹130 crore and higher than last year's figure of ₹113 crore.

EBITDA margins saw some pressure, narrowing to 15.6% from 16.7% in the year-ago period, but turned out to be better than the 15% estimate. With cost of goods rising to ₹620 crore from ₹396 crore during the quarter, the company's gross margins narrowed to 34.4% from 41.1% last year. The management attributed the gross margin compression to supply-chain, energy, commodity and forex cost escalation.

At the end of the June quarter, Kaynes Tech's order book stood at ₹8,900 crore, a growth of 20% from last year and 6% sequentially. Order book-to-trailing 12-month sales ratio remained stable at 2.3x. However, the average cash conversion cycle increased to 163 days from 122 last year.

Here are three key takeaways from the management's earnings call:

The company has called financial year 2027 to be a tough year, but expects it to react faster to situations compared to its peers. It also sees profitability normalizing over the next couple of quarters.

Kaynes Tech's smart metering business is likely to turn cash positive by the end of the year and it plans on issuing a detailed de-risking strategy in February next year, with service-to-product model clarity emerging by the third quarter.

The company is also in advanced, near-closing talks with one of the largest global Electric Vehicle manufacturers, the space business is targeting to launch a prototype satellite by mid-next year, and its two subsidiaries are entering the titanium-gas bottle supply for ISRO and DRDO.

Motilal Oswal Says "Buy" for 30% Upside:

Brokerage firm Motilal Oswal has maintained its "buy" rating on Kaynes Technology with a price target of ₹5,000, indicating an upside potential of 30% from current levels.

The brokerage said that with a robust order book, Kaynes is likely to sustain its strong revenue growth momentum going forward.

"Going forward, Kaynes' growth will be driven by continued scaling of its core EMS business, with growth across all verticals. OSAT and PCB are expected to emerge as key growth engines, with commercialization targeted from the third and fourth quarter of FY27," Motilal Oswal said, adding that the company's expansion into space and defense electronics should further diversify its growth profile.

Motilal Oswal expects Kaynes Tech's revenue to grow at a Compounded Annual Growth Rate (CAGR) of 41%, EBITDA CAGR of 44% and Adjusted. PAT CAGR of 52% over financial year 2026-2028.

However, to factor in the lower-than-expected results due to higher depreciation and tax, and lower other income, the brokerage has cut Kaynes' financial year 2027 and 2028 Earnings Per Share (EPS) expectations by 11% and 5% respectively.

Here's what other analysts have to say about Kaynes Tech:

CLSA has maintained its "hold" rating on the stock with a price target of ₹3,650.

The brokerage said that despite an operationally strong quarter, Kaynes' balance sheet parameters weakened further, with a rise in working capital days, resulting in a decline in reported Return on Capital Employed (RoCE).

It also attributed the negative operating cash flow to elevated inventory and receivables, although collections from the smart metering business has started to pick-up.

JPMorgan is also "neutral" on Kaynes with a price target of ₹3,600. It also called the rise in net working capital days as a big negative, along with an increase in inventory days due to supply side challenges.

It has cut its EPS estimates for the company by 7% to 9% mainly due to a higher tax rate.

"Although the revenue and margin performance is encouraging given misses seen in last one year, NWC remains a concern & would monitor execution there in terms of reducing receivables especially in smart meters," the brokerage said.

Nomura has also maintained its "neutral" rating on the stock with a target of ₹4,094.

It has maintained its revenue and EBITDA growth estimates for the next three years but cut its EPS estimates by 6% to 9% due to higher depreciation and tax rates. It called valuations "fair."

Kotak Institutional Equities has a "reduce" rating on the stock with a target of ₹3,550.

Shares of Kaynes tech are looking to recover from the lows of the day, currently trading 6% lower at ₹3,655. It must be noted that the stock is currently in the Futures & Options (F&O) ban, which means no new positions could be created in the stock.