Robust growth ahead aided by OSAT and PCB…
About the stock: Kaynes Technology India (Kaynes) is an Indian integrated electronics manufacturing company offering end-to-end solutions, from design to life-cycle support, for various sectors including Automotive, Industrial, Aerospace, Medical, and IoT. Founded in 1988 and headquartered in Mysore, it provides Electronics System Design and Manufacturing (ESDM) services and has experience with 500+ customers both domestically and in international markets.
Q2FY26 performance: Kaynes reported broadly in line results wherein revenue came in at ₹906 crore (up by 58% YoY / 35% QoQ). Industrial segment contributed ~59% of revenue, Automotive: ~22%, IoT and railways: ~7% each, medical division: 3%, Aerospace and defence: ~1%. Company reported EBITDA of ₹148 crore with EBITDA margins translating to 16.3%. PAT reported at ₹121 crore up by 102% YoY and 63% QoQ. Order book continues to grow (up 9.4% QoQ to ₹8099 crore), suggesting healthy growth outlook. Increase in debtors from ₹ 575 crore in FY25 to ₹ 1122 crore in H1FY26 impacted cash flow. Management intends to discount receivables and improve overall cashflow in H2FY26.
Investment Rationale
• Superior growth for multi-years: Kaynes is one of the fastest-growing EMS players, which is further reinforced by its ongoing investments in PCB manufacturing and outsourced semiconductor and assembly testing (OSAT) facilities. At consol level, management aims to achieve $1bn revenue (~₹ 8,800 crore+) by FY28E and $2bn (~₹ 18,000 crore) by FY30E, implying ~46% CAGR over FY25-30E. Further, these expansions are expected to drive backward integration, enhance supply chain resilience, unlock operating leverage and expand margins, thus making Kaynes well-placed to deliver long-term profitable growth.
• Industry leading margins: Kaynes consistently earns industry leading gross margin of 30%+ (34% in Q2FY26) as it focuses on select high margin segments like industrial, automotive, railways, Aerospace & defence, medical, etc. It earns EBITDA margin of 15%+ and is slated to increase further owing to operating leverage and increasing proportion of high margin verticals i.e. industrials, railways and aerospace. Over medium term, PCB manufacturing and OSAT shall be further margin accretive.
Rating and Target Price
• Successful delivery of India’s first multi-module chip during October and government’s approval under ECMS scheme for PCB manufacturing in initial round, indicate Kaynes superior all-round execution abilities. On OSAT and PCB manufacturing, the company has just scratched the surface. Considering robust growth runway, superior capabilities and execution track record, the valuations are expected to stay on the premium side. We maintain BUY rating on the stock with a target price at ₹ 8,900, valuing the stock at 67x P/E on FY28E EPS.
