Buy Kaynes Technologies Ltd for the Target Rs 5,000 by Motilal Oswal Financial Services Ltd
Core EMS business drives growth
* Kaynes Technologies (KAYNES) reported a healthy operating performance in 1QFY27, with EBITDA growth of 31% YoY to INR1.5b (est. INR1.3b). This was largely fueled by strong growth in its core EMS business (+48% YoY), which more than offset the decline in smart-metering revenue (-12% YoY). Further, Automotive/Industrials/Aerospace/Medical/ IT/Railways grew 35%/31%/2.8x/2.8x/69%/81% YoY to INR2.5b/INR5.2b/INR189m/ INR189m/INR568m/INR851m.
* Beyond core business, the company is targeting a combined revenue of INR4.5-5.0b from OSAT and PCB in FY27. Further, WC days were up by 41 days, driven by inventory build-up to secure critical components amid supply chain disruptions and long lead times.
* However, as inventory is consumed, supply conditions improve, and the company de-risks smart-metering receivables, working capital is expected to normalize. This should support stronger cash conversion and the company’s target of turning cash-positive by the end of FY27.
* Factoring in the lower-than-estimated 1Q earnings due to higher depreciation and tax and lower other income, we cut our FY27/FY28 earnings estimates by 11%/5%, respectively. We reiterate our BUY rating with a TP of INR5,000, based on 40x FY28E EPS.
Broad-based growth across all verticals
* KAYNES’ consolidated revenue grew 41% YoY to INR9.5b (est. INR8.6b) in 1QFY27; EBITDA grew 31% YoY to INR1.5b (est. INR1.3b). EBITDA margin dipped 120bp YoY to 15.6% (est. 15.5%) due to a contraction in gross margin (down 7pp YoY) and a rise in employee expenses (up 30bp YoY). These were partly offset by other expenses (-6pp YoY). Adj. PAT declined 24% YoY.
* Automotive/Industrials/Aerospace/Medical/ IT/Railways grew 35%/31%/ 2.8x/2.8x/69%/81% YoY to INR2.5b/INR5.2b/INR189m/INR189m/ INR568m/INR851m YoY.
* Order inflows remained flat YoY at INR14.8b in 1Q, with the order book growing 20%/6% YoY/QoQ.
* Net working capital days rose to 163 in 1QFY27 from 122 in 1QFY26.
Valuation and view
* KAYNES reported a healthy operating performance in 1QFY27 with growth across all segments. With a robust order book as of Jun’26 (INR89b, up 20%), the company is likely to sustain 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 3Q/4QFY27. The company’s expansion into space and defense electronics should further diversify its growth profile.
* We estimate a revenue/EBITDA/adj. PAT CAGR of 41%/44%/52% over FY26- FY28. Reiterate BUY with a TP of INR5,000 (premised on 40x FY28E EPS).
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