Kaynes Technology India Ltd.’s June-quarter earnings drew a cautious brokerage verdict as strong revenue growth was offset by weaker profit, a sharp increase in working capital and higher net debt. Kotak maintained its ‘Reduce’ rating, JPMorgan retained ‘Neutral’ and Nuvama downgraded the stock, citing earnings risks and its recent rally.
Brokerages said the company’s core EBITDA margin was better than expected and revenue growth remained strong, but cash-flow generation and smart-metering collections remain key concerns. The delay in the OSAT and PCB facilities to the third quarter of FY27 also pushed back expectations for the next phase of growth.
Management expects FY27 to remain challenging as cost pressures persist, with the company also flagging a supply and cost environment similar to the period during Covid-19.
Kaynes Technology Q1 Highlights (Consolidated, YoY)
- Revenue rose 40.5% to Rs. 946 crore from Rs. 673.5 crore. *(Estimate: Rs. 863 crore)*
- EBITDA increased 29.5% to Rs. 147 crore from Rs. 113.5 crore. *(Estimate: Rs. 130 crore)*
- EBITDA margin stood at 15.5% versus 16.9% a year ago. *(Estimate: 15.1%)*
- Net profit declined 24.4% to Rs. 56.4 crore from Rs. 74.6 crore. *(Estimate: Rs. 66 crore)*
The decline in profitability came despite strong revenue growth. Gross margin fell 680 basis points, while employee expenses increased 44% to Rs. 85 crore. Other income declined to Rs. 14.4 crore from Rs. 27.1 crore a year earlier, while the tax outgo also increased.
Working capital emerged as a key concern during the quarter. Net working capital days increased to 163 from 122 in the previous quarter, while net debt rose to Rs. 800 crore from Rs. 200 crore. Smart-metering receivables also increased to Rs. 1,311 crore from Rs. 1,158 crore.
The company expects its OSAT and PCB units to become operational in Q3 FY27, later than the earlier Q2 FY27 timeline. Management said cost and supply challenges in the component industry have intensified.
Here’s what brokerages are saying after Kaynes Technology announced Q1 results:
Kotak
- Maintained ‘Reduce’; Target Price Raised To Rs. 3,550 From Rs. 3,280
- Q1 profit declined 25% versus its estimate despite 40% year-on-year revenue growth.
- Core EBITDA margin at 15.6% was ahead of estimates.
- Negative operating cash flow of Rs. 260 crore remains a key concern.
- Working capital days increased to 163 from 122.
- Smart-metering collections remain a concern.
JPMorgan
- Maintained ‘Neutral’; Target Price Cut To Rs. 3,600 From Rs. 3,700
- Q1 was a strong beat and marked the first revenue and margin beat in at least five quarters.
- Revenue grew 40% year on year.
- Working capital remains the key concern.
- OSAT and PCB ramp-up has been delayed to Q3 FY27.
Nuvama
- Downgraded To ‘Reduce’; Target Price Raised To Rs. 3,450 From Rs. 3,150
- Cut FY27 and FY28 earnings estimates by 12% and 2%, respectively.
- Revised estimates to factor in the Q1 earnings miss and outlook.
- Downgraded the stock following its recent sharp rally.
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