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Long-term prospects bright

Kaynes Technology (KAYNES IN) has outlined a massive capex plan of ~INR 110bn until FY29 to support its future growth, to be utilized towards OSAT, PCB, EMS, new businesses and working capital. We also expect working capital concerns to ease by Q4FY26, led by focused efforts. We upgrade KAYNES to Buy with TP retained at INR 7,670 on 60x September FY27E P/E, as the stock has sharply corrected since our last report Strong performance led by sectoral tailwinds dated 5 November 2025. We remain positive on KAYNES given strong tailwinds for India’s EMS segment.

Working capital concerns may ease by Q4: KAYNES has seen an increase in working capital days in Q2FY26 due to rise in receivables and inventories. The increase in receivables is partly due to a legacy non-current receivable of INR 3bn acquired as part of its acquisition of Iskraemeco. Since then, KAYNES has reduced this to INR 2.3bn via a combination of collection and discounting. KAYNES expects to eliminate this receivable by the end of this financial year and turn OCF positive. This would also be supported by a scheme of supply chain financing incurred for five of its existing clients and most of its new clients, with related cost offset by cost optimization in existing operations. KAYNES seeks to reduce inventory days via an agreement with suppliers to hold their low-risk continuous business inventory (e.g., inventory for automotive orders). Through these measures, KAYNES targets an NWC of 70-80 days by end of FY26

Massive ~INR 110bn capex plan earmarked until FY29: KAYNES has outlined its massive capex plan of ~INR 110bn, to be incurred in FY26-29, which will support its current growth in the upcoming years. The capex will be incurred towards OSAT (~29%), PCB (14%), existing EMS business (4%), new projects such as HDI PCB, copper clad laminates, camera modules (33%), and towards its working capital requirement (17%). As per management, ~INR 85bn would be the capex requirement and balance would be working capital, which would be funded via a mix of equity, debt, government subsidy and internal accruals. KAYNES expects to receive a cash subsidy from the government for its current capex in FY26 (balance subsidy will be received once operations commence).

FY26 sales target of INR 45bn maintained: KAYNES maintained its FY26 sales growth guidance to INR 45bn, led by strong momentum in high growth areas of automotive, EV, Railways, Aerospace IT, IoT and steady growth in industrials led by smart meters. It expects ~35-40% of its overall sales to be incurred in Q4FY26. In FY26, it expects core EMS business sales of ~INR 41- 42bn and balance from August Electronics and OSAT.

Upgrade to Buy; TP retained at INR 7,670: We maintain our EPS estimates for FY26E-28E and retain our TP at INR 7,670 on 60x September FY27E P/E. We upgrade KAYNES to Buy from Accumulate, as the stock has sharply corrected from INR 6,659 since our last report to INR 5,778 currently. We remain positive on KAYNES, led by strong momentum in India EMS (on import substitution, with KAYNES enjoying industry-leading margin and robust order inflows). We expect an earnings CAGR of 49% in FY25-28E with average ROE and ROCE of 12% and 11%, in FY26E-28E. Key risks include delay in ramping up OSAT and PCB production, and slowdown in ordering momentum in EMS

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