Kaynes Stock Bounces Back as Financials Beat Estimates After Post-Quarterly Dip
Shares of Kaynes Technology recovered significantly in intraday trading on Monday, erasing much of the sharp decline experienced following its recent quarterly results announcement. The stock, which had initially fallen nearly 9 percent to a low of Rs 3,535 per share after the post-market announcement last Friday, managed to limit losses and traded at Rs 3,726 per share by around 1:30 p.m., exhibiting a limited but strong rebound.##Revenue and Margin Surprises Drive Intraday Recovery
The stock recovery was substantially supported by operational excellence demonstrated during the quarter. Brokerage firm JPMorgan noted that Kaynes Technology achieved better-than-expected results regarding both revenue and margins for at least five quarters consecutively. Revenue grew robustly by 40 percent year-on-year, exceeding consensus estimates by 10 percent, while it surpassed JPMorgan's forecast by 12 percent.
While the company maintained a strong performance across core segments, specifically noting that its EMS business (excluding smart meters and August Electronics) expanded by 66 percent year-on-year, challenges related to working capital persist. Net working capital days increased to 163 from 125 in the previous quarter. This rise was attributed primarily to smart meter collections extending into July and an increase in inventory days stemming from supply-side hurdles.
##Brokerage Opinions Offer Mixed Signals on Balance Sheet Health
Financial analysts provided varied views, with some citing operational strength while others pointed to balance sheet concerns. CLSA maintained a "Hold" rating on Kaynes Technology, raising its price target to Rs 3,650. They acknowledged the operationally strong first quarter, noting that revenue and EBITDA were ahead of estimates.
However, CLSA noted that the company's balance sheet parameters weakened further due to rising working capital days, which impacted reported return on capital employed. The brokerage reiterated its focus on the balance sheet, stating that a turnaround in receivables for the smart metering business is anticipated by the end of FY27. Meanwhile, Motilal Oswal maintained a "Buy" rating with a target price of Rs 5,000, projecting a potential upside of 30 percent from current levels.
##Positive Outlook and Future Milestones Detail Company Strategy
The management provided an outlook that suggests a focused effort towards stability and future growth despite expecting FY27 to be a tough year. The company indicated it plans to respond faster to market changes compared to its peers, anticipating that profitability will normalize over the next few quarters.
A key focus area is the smart metering business, which the company expects to turn cash positive by the end of this year. Kaynes Technology also intends to issue a detailed de-risking strategy in February next year. Further clarity regarding the service-to-product model is expected to emerge from the company during the third quarter. The company is also on track to commission its OSAT and PCB facilities within the third quarter of FY27, targeting a revenue range of Rs 4.5 billion to Rs 5 billion for that fiscal year.
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