Kotak maintained its cut back score however slashed its fair-value estimate to Rs 4,150 from Rs 6,180, an aggressive 33% reduce, even after the inventory’s steep slide in latest days. Crucially, the brokerage stated that regardless of administration’s responses to its earlier report, “sure facets with respect to intangible accounting and elevated working capital nonetheless stay unclear,” underscoring the market’s unease with disclosures.
Kotak warned that optimistic working money circulate in FY2026, stronger inner controls and well timed execution of PCB and OSAT expansions stay crucial, noting that it has trimmed EPS estimates by 0.2–6.9% for FY2026–28. The brokerage additionally raised its WACC to 13% from 12% to mirror larger execution danger, a uncommon and pointed shift that additional dampened sentiment.
The brokerage additionally sharpened the market’s give attention to the corporate’s near-term vulnerabilities. The brokerage warned that Kaynes’ FY2026 steerage is now in danger, notably as a result of the slowdown in smart-meter revenues means the EMS enterprise, excluding good meters, would wish to develop almost 90% within the second half of the yr, a goal it described as a “tall ask.”
Kotak additionally highlighted the corporate’s weak cash-generation profile, noting that Kaynes reported an working money outflow of Rs 0.8 billion in FY2025, adopted by an excellent bigger outflow of Rs 2.2 billion within the first half of FY2026. The brokerage attributed this to stretched receivables and heavy working-capital necessities stemming from the Iskraemeco acquisition. This strain, it added, has pushed web working-capital days up sharply to 171, a steep rise from 110 days in FY2024.
The brokerage additional flagged the slower-than-expected ramp-up of the corporate’s HDI PCB plant, alongside rising curiosity prices, underscoring execution dangers that it believes will weigh on earnings and cash-flow visibility within the months forward.
In opposition to this backdrop, Tuesday’s sharp rebound was extensively interpreted as short-covering fairly than renewed conviction.
‘Danger–reward has improved, however volatility stays elevated’
Some analysts, nevertheless, say the correction has reset valuation expectations. Harshal Dasani, Enterprise Head at INVasset PMS, stated the “danger–reward has actually improved within the close to time period, however volatility will stay elevated till supply information stabilises and institutional flows flip supportive.”
Dasani famous that “pockets of over-ownership and stretched valuations had constructed up by means of 2024–25,” making the inventory weak to opposed information.
Whereas Tuesday’s bounce provided short-term aid, Dasani stated “the rebound suggests short-covering and worth shopping for at decrease bands, but sustainable restoration will rely upon how rapidly fundamentals re-anchor.”
Technical construction weak regardless of oversold indicators
Dasani warned that the technical image stays fragile. “Technically, the inventory is making an attempt to stabilise after a steep drawdown, however the construction stays fragile,” he stated. The decline has “sliced by means of key short-term averages, creating overhead provide zones that can act as resistance till volumes verify power.”
Momentum indicators have slipped into oversold territory, however Dasani cautioned that “oversold isn’t the identical as development reversal, affirmation sometimes comes solely when costs reclaim short- and medium-term transferring averages with supportive breadth.”
“MACD stays in a unfavourable crossover,” he stated, signalling persistent promoting strain.
Steadiness-sheet self-discipline now a crucial watchpoint
On fundamentals, Dasani stated the main target should shift to capital effectivity and governance consistency. “Working-capital stretch within the EMS sector isn’t unusual… nevertheless, sustained elongation does compress money flows and elevates dependence on short-term borrowings,” he famous.
Dasani stated that “related-party disclosures and rising contingent liabilities benefit shut monitoring… as a result of they form investor notion of governance and balance-sheet high quality.” He stated valuation stability shall be pushed by readability on receivable cycles and legal responsibility administration.
Progress pivot underway as smart-meter cycle tapers
With the smart-meter growth cooling, buyers are assessing Kaynes’ subsequent development levers. Dasani stated “the subsequent leg of development within the EMS ecosystem will rely upon diversification — particularly industrial, automotive electronics, and rising high-reliability segments.”
Whereas space-tech presents long-cycle optionality, he stated “it would scale meaningfully solely over a multi-year horizon, not within the subsequent quarter or two.”
The inventory’s renewed slide displays a market recalibrating quickly to governance issues and balance-sheet questions. Whereas the sharp correction has improved near-term valuations, the technical construction stays weak, disclosures are below heightened scrutiny and institutional participation stays tentative.
For buyers, Kaynes now sits in a high-volatility zone the place warning carries extra weight than conviction. A sturdy restoration would require clearer indicators, on money flows, inner controls, order momentum and the corporate’s capacity to reclaim technical thresholds.
Till then, the controversy over whether or not to purchase, promote or maintain stays tightly tied to danger urge for food fairly than visibility.
Additionally learn | Kaynes Expertise shares rebound 14% after crashing 30% in 4 days. Do you have to get in or get out now?
(Disclaimer: Suggestions, solutions, views and opinions given by the specialists are their very own. These don’t signify the views of the Financial Instances)
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