Buy Kaynes Technologies Ltd for the Target Rs.7,300 by Motilal Oswal Financial Services Ltd
Favorable order mix boosts profitability
Operating performance above our estimate
* Kaynes Technologies (KAYNES) reported a robust 1QFY26 operating performance, with revenue growth of 34% YoY, while EBITDA grew at a much faster pace of 69% YoY. This was fueled by a gross/EBITDA margin expansion of 14pp/350bp YoY due to a favorable business mix and reduction in raw material costs.
* Despite lower-than-expected revenue growth in 1QFY26, the company maintains its full-year revenue guidance of INR45b, indicating an implied growth of ~73 YoY in 9MFY26. KAYNES further indicated a similar EBITDA margin trajectory of ~16.8%, achieved in 1Q, for the full year.
* Factoring in its strong performance in 1Q and improved guidance, we raise our FY27 Adj. PAT estimate by 5% while maintaining our FY26 estimates. We keep our EPS estimates unchanged for FY26/FY27 due to the QIP dilution. We reiterate our BUY rating on the stock with a TP of INR7,300 (premised on 55x FY27E EPS).
Robust operating performance due to higher gross margin and operating leverage
* Consol. revenue grew 34% YoY to INR6.7b (est. INR7.6b) in 1QFY26, while EBITDA rose 69% YoY to INR1.1b (est. INR1b). ? EBITDA margin expanded 350bp YoY to 16.8% (est. 13.8%), led by a steep expansion in gross margin (up 14pp YoY) due to a favorable business mix and reduction in raw material cost, which was partly offset by higher employee cost (up 210bp YoY) and other expenses (up 830bp). Adjusted PAT grew 47% YoY to INR746m (est. of INR793m).
* Order inflows remained strong at INR14.8b in 1Q, boosting the order book by 47% YoY/12% QoQ to ~INR74b, anchored by high-margin sectors like Aerospace, Industrials, and Automotive.
* Net working capital days increased to 132 in 1QFY26 from 121 days in 1QFY25. Higher receivable days (up 65 days YoY) were on account of the increased sales in Jun’25, which are expected to normalize going forward. Net debt stood at ~INR9.9b as of 1QFY26 vs. INR5.8b as of 1QFY25.
Highlights from the management commentary
* Guidance: Management retained its full-year revenue guidance of INR4.5b (with INR42.5b from the EMS business, INR1b from the OSAT business, and INR1.8b from the Canadian business). EBITDA margin is expected to be in a similar range to 1Q (it is revised upwards). Management guided a ‘significantly positive’ OCF and NWC days in the range of 70-80 for FY26.
* OSAT business: KAYNES has already secured two clients for this business (from India and the US), while it is on track to onboard one more client (from Germany). Both the OSAT/HDI PCB facilities are on track to be fully commissioned by 4QFY26.
* Inorganic initiatives: The company is targeting North America for further inorganic growth. Further, the company would like to focus on Europe for design and ODM (in railway, industrial, etc.) related business. Lastly, the company would like to deepen its technology footprint by suitably adding backward integration into niche areas.
Valuation and view
* KAYNES exhibited a robust operating performance in 1QFY26 with an all-around performance. With a robust order book as of Jun’25 (INR74b), the company is likely to sustain strong revenue growth momentum going forward.
* The company appears well-positioned to sustain growth and profitability going ahead on the back of improving operating leverage, a favorable order mix, and continued investments in high-tech verticals.
* We estimate a revenue/EBITDA/adj. PAT CAGR of 58%/65%/74% over FY25- FY27. Reiterate BUY with a TP of INR7,300 (premised on 55x FY27E EPS).
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