Accumulate Kaynes Technology Limited For Target Rs. 3,100 - Elara Capital
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Top line zooms on growing orderbook Q3 revenue up 76%, led by industrials and railways Kaynes Technology (KAYNES IN) Q3 revenue surged 76% YoY to INR 5.1bn, 10% higher than our estimates. Revenue was led by healthy B2B demand and strong order backlog. Revenue from the industrials segment spiked 217% YoY to INR 2.7bn on rising import substitution in the EV space. Automotive revenue grew 28% YoY to INR 1.4bn and Railways revenue rose 58% to INR 452mn on healthy project pipeline. Revenue from the consumer segment (including IT & IoT and others) fell 55% to INR 159mn, medical declined 58% to INR 115mn, and aerospace, defence, nuclear & space by 47% YoY to INR 36mn. Management has received a large ticket order in aerospace and defence, the impact of which is to be visible from Q4FY24. Orderbook up 9% QoQ to INR 38bn Orderbook as on December 2023 stood at INR 38bn, up 9% QoQ, implying a book-to-bill at 2.1x of FY24E revenue. Implied order inflows doubled YoY to INR 8.4bn, primarily led by Railways and defence. OSAT to bolster top line and margin post FY26 With the new facility at Chamrajnagar, Karnataka, operationalized in Q3, production may commence by Q4. KAYNES has acquired new land for outsourced semiconductor assembly and test (OSAT) phase 1 in Telangana, and trials may start in the current fiscal. It is focused on the branded semiconductor segment, starting from regular semiconductor assembly business, and moving on to advanced packaging & compound semiconductors. This would become a critical part of the industrials segment and could bolster top line and margin when it kicks in by FY26. Valuation: reiterate Accumulate with a higher TP of INR 3,100 We lower our FY24E EPS by 1% and FY25E EPS by 23% on higher other expenses due to operationalization of OSAT and printed circuit board (PCB). We raise our FY26E EPS by 21% as OSAT kicks in. We raise our TP by 19% to INR 3,100 from INR 2,610 on 56x (from 50x) December 2025E P/E. We reiterate Accumulate. KAYNES is a preferred play on India’s industrial growth opportunity, import substitution, and a diversified business stream. We expect an earnings CAGR of 57% during FY23-26E with an average ROE of 12% and a ROCE of 11% during FY24-26E.
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