IGI Logo

Kaynes Technology India Limited (KAYNES) 1QFY25 results vs. JMFe saw beat on revenue and margins. Rev at INR 5bn, up 70% yoy and down 21% qoq (JMFe: INR 4.6bn). GP margin at 27.3%, down 349bps yoy and up 240bps qoq. EBITDA at INR 669mn, up 66% yoy and down 30% qoq. OPM at 13.3% down 28bps yoy and 167bps qoq (JMFe: 12.5% at INR 576mn). As % of sales: Employee exp at 6.6% vs 7.9% yoy and other expenses at 7.4% vs 9.3% yoy. Other income (as % of sales) at 5.6% vs 2.7% yoy and 4.6% qoq mainly led by interest income on funds raised. PAT at INR 508mn, up 106% yoy and down 38% qoq. PAT margin at 10.1% up 179bps yoy and down 268bps qoq. (JMFe: 8.8% at INR 407mn).

* Order book at INR 50.4bn: Order inflows were mainly from (1) Industrial / EV (2) Aerospace / Outer space and (3) Medical segments – acquired a large export customer mainly for Europe and USA region. In existing order book consist of some A&D orders extending upto 5 years and c.10% is Industrial order with two year time frame. Expect more order inflow in upcoming quarters. Currently have enough orders to meet the revenue guidance – c.60/70% of order book can be executed in next 12 months.

* OSAT: Approval in final stage. Acquired land in Gujarat. Expect revenue from Q4FY26. Margin accretive to existing EMS business with asset turn of c.1x to 1.3x. Expect c.INR 30/35bn in revenue by FY30 - c.75% in advance packaging areas and bal. 25% in legacy areas. Incentive: CG: Pari passu and SG: Post commencement of operations + will provide special subsidy on land. PCB: c.INR 10/15bn in revenue by FY30.

* Guidance: In FY25, all segments to see good traction. Expect beat on revenue guidance of INR 30bn with EBITDA margins of c.15% - on account of favourable mix (larger contribution from industrial, aerospace, outer space and strategic electronics). Target NWC of c.70/80 days. Long term: c. US$ 1bn of revenue by FY28 - incl. atleast c.75% from EMS business and bal. 25% from OSAT + PCB business. Export contribution will increase to 20/25% from current 15% of rev

Maintain BUY with TP of INR 4935: We expect Kaynes to see a strong growth mainly due to: (1) strong product mix and focus on adding high margin segment, (2) development of component/chips ecosystem in India leading to improving supply chains (3) on-boarding new value-added customers, (4) strong order book visibility, backward integration (bare PCB and new segments like OSAT), and (5) exploring exports opportunities. With all these positives, we expect the company’s Revenue/EBITDA/PAT CAGR of c.59%/65%/50% over FY24-26 with OPM of 14.7/14.8% (management expects c.15% in FY25) in FY25/FY26 and earnings growth of c.26%/79% in FY25/FY26 (factoring OSAT and PCB revenue and margins synergies from FY26/27). At CMP, the stock trades at a PE of 67x on FY26 EPS. We value the company on SOTP basis. Based on strong financials, improved ROCE/ROE of c.16.8%/13.1% in FY26, and better working capital improvement visibility, we maintain BUY with target of INR 4,935 (earlier INR 4,060) - upside of 16% from CMP (EMS: 3,818, P/E 55x (previously 50x) + PCB: 422, P/E 35x (previously 30x) + OSAT: 695, P/E 35x (previously 30x))

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361