Kaynes Tech shares crash 8% after weak Q1 results: What are Nomura and Motilal Oswal saying

Shares of Kaynes Technology tanked 8% to the day’s low of Rs 3,531 on the BSE on Monday after the electronics manufacturing services firm reported a 24.4% year-on-year decline in net profit for the first quarter of FY27.

Net profit stood at Rs 56.4 crore in the April-June quarter, down from Rs 74.6 crore in the same period last year. Revenue, however, jumped 40.5% YoY to Rs 946 crore from Rs 673.5 crore in Q1 FY26. EBITDA increased 29.5% to Rs 147.5 crore from Rs 113 crore last year, while the EBITDA margin narrowed to 15.6% from 16.7%.

Kaynes Technology saw pressure at the gross margin level as its cost of goods increased to Rs 620 crore from Rs 396 crore a year ago. Gross margin consequently narrowed to 34.4% from 41.1%. The company attributed the compression to higher supply-chain, energy, commodity and foreign exchange (forex) costs.

At the end of the June quarter, the company’s order book stood at Rs 8,900 crore, up 20% YoY and 6% sequentially. The order book-to-trailing 12-month sales ratio remained stable at 2.3x.

Kaynes Tech shares: Buy, sell or hold?

Motilal Oswal maintained its ‘Buy’ rating with a target price of Rs 5,000, implying around 30% upside from current levels. It expects Kaynes Technology to maintain strong growth momentum, supported by a robust order book of Rs 89 billion as of June 2026, up 20% YoY. The brokerage said the company delivered a healthy operating performance in Q1 FY27, with growth across all segments. Going ahead, growth is expected to be led by the continued scaling of its core EMS business across verticals, while OSAT and PCB are likely to emerge as key growth drivers, with commercialisation targeted for Q3/Q4 FY27. Its expansion into space and defence electronics should also help diversify the company's growth profile.

Nuvama downgraded Kaynes Technology to ‘Reduce’, with a target price of Rs 3,450, implying 10% downside, citing near-term margin pressure and the stock's sharp recent rally. While the company maintained its FY27 revenue growth guidance of twice the industry growth, it did not rule out operating margin pressure in the near term. OSAT and PCB businesses are expected to start contributing from Q3. Nuvama has cut its FY27E and FY28E EPS estimates by 12% and 2%, respectively, to factor in the Q1 miss and outlook. It continues to value Kaynes at 35x FY30E EPS, discounted at 18%, resulting in a June 2027 target price of Rs 3,450, up from Rs 3,150 earlier. At the current market price, the stock trades at 53x FY28E EPS.

Nomura retained its ‘Neutral’ rating on Kaynes Technology with a target price of Rs 4,094, implying 6.2% upside, noting that revenue growth, excluding smart meters, picked up in Q1 FY27, led by the auto, EV and industrial segments. However, elevated working capital, largely due to the smart meter business, remains a key monitorable, with a clear strategy to bring it down yet to be established. The brokerage also flagged risks from significant investments in OSAT and PCB, high dependence on government subsidies, losses and potential execution delays as the company scales up these new businesses.

It warned that weak cash flow from operations could put further pressure on the balance sheet. Nomura has maintained its FY27–29F EMS revenue growth estimates at 41%, 33% and 29%, respectively, along with EBITDA margin estimates of 15.6%, 15.6% and 15.7%. However, higher depreciation and tax rates have led to a roughly 6-9% cut in its FY27-28F EPS estimates.

Management outlook

Kaynes Technology has described FY27 as a challenging year, but stated that it expects to respond to changing conditions more quickly than its peers. The company also expects profitability to normalise over the next few quarters.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)