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Systematix Research Report
Kaynes Technology India Ltd., in a seasonally weak quarter, reported 49%/64%/145% YoY rise in revenue/Ebitda/profit after tax.
Growth was driven by original equipment manufacturer-box build and industrial including electric vehicle verticals. Management expects the low 13.5% Ebitda margin to improve in the coming quarters and to close FY24 at ~15%.
Robust industry tailwinds and Kaynes' strong focus on the entire customer value chain has helped the company in maintaining a superior business profile over peers.
We retain our estimates post Q1 result and expect 32%/34%/40% compound annual growth rate in revenue/Ebitda/profit after tax over FY23-25E (FY20-23: 45%/60%/116%), driven by strong order booking (Rs 30 billion, 2.7 times FY23 revenue) from customers in all the verticals, with broadly stable Ebitda margin (15-15.5%) and healthy 26% return on invested capital despite high capex (Rs 2.2 billion in FY24 to triple capacity).
Likely lower net working capital days (99 currently) should boost cash flows.
While we remain constructive on robust prospects of Kaynes, after ~30% rally in its scrip in last two months and at ~53 times FY25E price/earning on current market price, we see low upside potential.
Our target price remains unchanged at Rs 1,930 (60 times FY25E EPS of Rs 32).
While order book position is strong, its on-time execution is the key monitorable.
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