- JPMorgan calls Kaynes Tech the cheapest stock under its coverage with PEG ratio 0.7x
- Kotak report alleged accounting lapses and balance sheet stress, which Kaynes denied
- Kaynes Tech shares dropped over 40% in the last month following the allegations
After a note last week urging investors not to 'fish for the dip', JPMorgan has released a fresh note on Kaynes Tech, highlighting the company's attractive valuation in the wake of the recent drawdown.
The brokerage firm even admitted that Kaynes Tech is the cheapest stock under their coverage right now, with the price to earnings to growth ratio of 0.7x.
This comes on the back of heavy selling in Kaynes Tech after a Kotak Institutional Equities report last week that highlighted accounting lapses and questioned the company's accounting practices.
Kotak also reported stress in balance sheets - something that the company categorically denied, first during an interview with NDTV Profit and later during an analyst call on Monday.
The EMS player did, however, admit to 'errors' in certain disclosures and vowed not to repeat the mistakes.
Shares of Kaynes Tech have fallen more than 40% in the last month.
In its latest note, JPMorgan said Kaynes Tech is currently trending below a bear case and is the cheapest in terms of price to earnings to growth.
While the firm said there is no change in Kaynes Tech's fundamentals, JPMorgan highlighted stretched working capital and receivables as key concerns for the stock.
The firm added that higher working capital assumptions could lead to a bear case fair-value of Rs 4,900.
Nevertheless, JPMorgan retained an 'overweight' rating on Kaynes Tech with a target price of Rs 7,550. This implies a whopping upside of almost 100% from the current market price.
The bullish calls come on the back of expectations of an improving receivables and working capital cycle over the next two quarters, which could be key drivers for the stock.
Meanwhile, Macquarie has released a report on Kaynes Tech, stressing that management clarification on Kotak report sounded reasonable.
The firm retained an 'outperform' call on Kaynes Tech as well, with a target price of Rs 7,700, an implied upside of more than 100%.
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