Kaynes Tech: JP Morgan Cautions Investors After Kotak’s Critical Report

JPMorgan has sent a clear message to investors looking to buy the dip on Kaynes Technologies: Do not rush. This comes on the back of the stock facing immense pressure on Thursday's trade in the wake of a critical report from Kotak Institutional Equities.

The brokerage firm flagged many concerns around Kaynes Tech's FY25 annual report, calling some of them 'ambiguous' and 'inconsistent' with normal practices.

JPMorgan, despite retaining an 'overweight' rating and a bullish target price of Rs 7,550, advised against 'bottom fishing' at current levels.

The firm cited unresolved issues surrounding balance and cash flow, as well as the company's questionable accounting, as key reasons for not fishing for the dip, at least for now.

JPMorgan further noted that while Kaynes Tech's fundamentals and guidance remain unchanged, it is negative sentiment that has led to immense selling pressure in the stock, thus making it difficult to predict where the stock will bottom out.

"We don’t see a clear, strong catalyst from here till Q3 earnings," the firm wrote in its latest note. "Would advise investors not to bottom fish even as we remain Overweight," JPMorgan says.

The caution tones in well with broader market scepticism that has kicked in following the recent report from Kotak Institutional Equities.

The firm reported on Kaynes Tech on Thursday, flagging risks regarding elevated working capital cycle, discrepancies in cash flow and potential question marks in the way financial metrics were reported, particularly in subsidiaries.

Kotak also talked about the smart metering segment, noting that while the business drove growth, there are question marks over the entity's revenue diversification. JPMorgan believes these question marks on the revenue growth of smart meters are weighing on valuation.

The brokerage firm added that the fortune of the stock now hinges on its financial health rather than just order book growth.

"Balance sheet and cash flows performance will determine the fortune of the stock," JP Morgan says.