Electronics System Design & Manufacturing (ESDM) big Kaynes Know-how has seen its shares right almost 48% this yr. Worldwide brokerage home JP Morgan has reiterated an Chubby ranking and a Rs 7,550 goal worth, signalling about 91% potential upside from present ranges.
Here’s a detailed evaluation of JP Morgan’s funding rationale for Kaynes Tech
#1: JP Morgan on Kaynes Know-how: Valuation name holds regardless of steep correction
JP Morgan mentioned the current derating seems tied to short-term liquidity pressure reasonably than any weakening within the firm’s fundamentals. Kaynes’ core EMS enterprise continues to broaden, and the brokerage valued it at Rs 5,200 per share, with further worth coming from its OSAT and PCB segments. It added that the share worth now trades effectively beneath its long-term valuation vary, creating room for restoration if money cycles stabilise. The agency believes the corporate’s development technique stays heading in the right direction and that the present volatility displays timing points reasonably than structural issues.
#2: JP Morgan on Kaynes Know-how: Knowledge reveals the pressure from smart-meter receivables
Receivables climbed to round Rs 1,360 crore within the first half of FY26, a big portion of which got here from smart-meter shoppers. About Rs 240 crore of those dues had been pending for greater than a yr, putting strain on working capital and forcing the corporate to fund operations for longer durations earlier than money got here in. This pushed working-capital days to 116, in contrast with 87 final yr. For a enterprise investing closely in new capability, such delays prohibit monetary flexibility and sluggish the tempo at which new amenities can scale, it additional added.
#3: JP Morgan on Kaynes Know-how: Good-meter combine skewed short-term efficiency
A surge in smart-meter deliveries earlier within the yr elevated the section’s share inside the income combine. Whereas it added to top-line development, the longer fee timelines related to these prospects weighed on money move. JP Morgan expects the combination to normalise within the second half as different verticals regain share. The brokerage additionally famous that agreements signed lately embody higher fee constructions, which ought to scale back the chance of comparable buildups in future durations.
#4: JP Morgan on Kaynes Know-how: Assortment enchancment is the primary sign to observe
The brokerage believes essentially the most speedy indicator of restoration will probably be progress in gathering dues tied to older smart-meter contracts. Administration has set a timeline to resolve the Rs 240 crore backlog by March 2026. Any motion on this path would relieve strain on working capital and point out that the worst of the receivable cycle has handed. JP Morgan mentioned buyers have a tendency to reply rapidly when corporations exhibit that liquidity points are easing, even when earnings haven’t totally recovered.
#5: JP Morgan on Kaynes Know-how: Good-meter publicity set to ease within the second half
JP Morgan added that the corporate is prone to profit as its income combine turns into extra balanced. With smart-meter shipments anticipated to taper within the coming quarters, the share of enterprise from prospects who usually comply with sooner fee cycles ought to rise. This shift would assist working-capital days transfer again towards historic ranges. The brokerage considers this rebalancing vital as a result of it permits the corporate to function with larger monetary headroom whereas persevering with its growth.
#6: JP Morgan on Kaynes Know-how: OSAT and PCB growth might strengthen earnings
The OSAT and PCB verticals, although nonetheless in early phases, are getting into a section the place they will start contributing extra meaningfully. These amenities often require lengthy ramp-up durations, however as soon as utilisation rises, they will enhance margins and supply extra secure earnings. JP Morgan mentioned early traction from these models might assist buyers look past near-term money constraints. Consistency in output, even at average ranges, would point out that the corporate’s capital investments are starting to repay.
OSAT is the stage the place semiconductor chips are packaged and examined earlier than they can be utilized in any gadget, making it one of the vital important steps within the chip provide chain. PCB manufacturing, in the meantime, includes producing the circuit boards that maintain and join digital elements inside all the things from industrial machines to shopper electronics.
#7: JP Morgan on Kaynes Know-how: Monetary outlook and the valuation hole
The brokerage forecasts income development of about 46% yearly between FY25 and FY28 and expects margins to enhance as new capability stabilises. Nonetheless, its valuation assumes that working-capital days transfer nearer to 75. If the corporate can convey working-capital days right down to roughly 75, it might mark a shift again to a more healthy money cycle and take away one of many greatest overhangs on the inventory. If receivables stay as stretched as they’re now, the brokerage’s draw back estimate stands at round Rs 4,900. This hole between eventualities reveals how intently the inventory’s trajectory relies on money conversion reasonably than demand traits.
JP Morgan on Kaynes Know-how: Dangers to observe
JP Morgan mentioned the corporate’s long-term story stays intact regardless of a difficult yr. The approaching quarters will reveal whether or not Kaynes can convey receivables below management and exhibit constant progress in its new amenities. The brokerage believes the hole between the corporate’s present market worth and its valuation might slender. For now, money move stays the central metric to observe as the corporate works via this section.
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