Accumulate Kaynes Technology India Ltd for the Target Rs. 7,565 By Prabhudas Liladhar Capital Ltd
Order book and margin expansion drive growth
The automotive and industrial segment grew by 28.7%/75.4% in Q2FY26 which contributes 22%/59% to the topline respectively also Margins got expanded by ~200bps to 16.3% mainly due to operating leverage and increased in contribution from ODM segment. KAYNES has maintained its guidance to reach Rs 45bn, with a its margin guidance of ~17% by FY26. In Q2FY26 company is having an order book of Rs 80bn. Kaynes Semicon achieved a significant milestone in Q2FY26 by delivering India’s first commercially manufactured multi-chip module (IPM5) from its Sanand OSAT facility in collaboration with Alpha & Omega Semiconductor and Mitsui & Company, also its PCB manufacturing is expected to begin as planned, contributing to revenue from FY27 onwards. We cut our earnings estimates by 0.3%/0.7% for FY27/28E mainly due to higher Finance Cost and upward our rating to ‘Accumulate’ from ‘HOLD’ due to the significant correction in the stock price. Our DCF-based TP is Rs 7,565 (Earlier 7,427), implying PE of 62x Sep’27E earnings. We estimate FY25-28E revenue/EBITDA/PAT CAGR of 46.0%/48.9%/45.0%, with EBITDA margin expansion of ~90bps.
Revenues increased by 58.4%, PAT grew by 101.7%: Sales increased by 58.4% YoY to Rs 6.7bn (PLe: Rs9.0bn). Automotive/Industrial/Medical/IT & Consumer/Railway/Aerospace grew by 28.7%/75.4%/55.9%/29.6%/55.0%/178.4% YoY. EBITDA grew by 80.2% YoY to Rs 1.5bn (PLe: Rs1.4bn). EBITDA margins expanded by ~200bps to 16.3% (PLe: 15.9%). PBT grew by 78.6% YoY to Rs1.5bn (PLe: Rs 1.2bn). PAT grew by 101.7% YoY to Rs 1.2bn (PLe: Rs 0.9bn). Company order book stood at Rs 80bn in H1FY26 vs Rs 54bn in H1FY25.
Con call highlights: 1) Kaynes has maintained its revenue guidance of Rs45bn by FY26, with a margin of 17%, driven by higher contribution from high-margin businesses and improved operating leverage. 2) In FY26, Kaynes expects strong growth across segments, with the Automotive & EV segment ~50% YoY (aided by GST benefits and new customers), the Industrial segment will be the largest contributor (~40% of revenues), Railways growing on Kavach and signaling demand, Aerospace & Defense contributing ~10% driven by localization, and IT/IoT & Consumer Electronics (~12%) supported by high-performance computing and exports. 3) Gross margins expanded significantly in Q2FY26, mainly due to growth in all the segments and rising contribution from the ODM business. Going forward, margin expansion is expected to continue, led by OSAT and Multi/HDI PCB, both of which are high-margin verticals. 4) Kaynes Semicon achieved a significant milestone in Q2FY26 by delivering India’s first commercially manufactured multichip module (IPM5) from its Sanand OSAT facility, in collaboration with Alpha & Omega Semiconductor and Mitsui & Company. 5) Kaynes’ strategic collaboration with Infineon marks its entry into MEMS-based true wireless stereo (TWS) packaging, strengthening its presence in the rapidly expanding consumer and IoT electronics segment. 6) Kaynes is enhancing India’s PCB manufacturing landscape with Government of India approval for its advanced PCB projects. The company’s upcoming multi-layer HDI PCB facility in Chennai will play a key role in this expansion. 7) The global PCB market is projected to cross USD 100bn by CY30, with India’s market growing at 20% CAGR driven by EVs, industrial automation,defense, and telecom. Kaynes expansion will reduce import dependence, enable domestic value addition, and support India’s vision of self-reliance in advanced electronics manufacturing. 8) Working capital days grew to 116 in H1FY26 vs 108 in H1FY25 due to a Rs3.5bn one-time acquisition-related receivable and seasonal billing. However, management plans to reduce net working capital days by FY26. 9) The company expects positive operating cash flow in FY26, with notable improvement in H2. 10) The company continues its transition from a traditional EMS player to a fully integrated ESDM, by expanding into design, prototyping, system integration, and IP-led solutions.
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