Kaynes Technology India Ltd. shares fell as much as 8.4% to Rs 3,530.70 on Monday, the most since May 14, after the company's June-quarter profit declined despite a 40% year-on-year increase in revenue. Brokerages retained mixed views on the stock, but flagged working capital, smart meter collections and the pace of new-business ramp-up as key concerns.
The stock decline came after Kaynes reported a 24.4% year-on-year fall in consolidated net profit to Rs 56.4 crore in Q1 FY27, while revenue rose 40.5% to Rs 946 crore. Ebita increased 29.5% to Rs 147 crore, but Ebita margin narrowed to 15.5% from 16.9% a year earlier.
Working capital emerged as a key concern for analysts. Kotak said negative operating cash flow of Rs 2.6 billion and an increase in working-capital days to 163 from 122 remained concerns. It also flagged smart meter collections.
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Brokerages Reassess
Kotak maintained its Reduce rating on Kaynes Technology but raised its target price to Rs 3,550 from Rs 3,280.
The brokerage said Q1 profit was down 25% versus its estimate despite 40% year-on-year revenue growth. It noted that the core Ebita margin of 15.6% was ahead of its estimate.
Kotak also highlighted negative operating cash flow of Rs 2.6 billion and the increase in working-capital days to 163 from 122. Smart meter collections remained a concern, it said.
JPMorgan maintained its Neutral rating but cut its target price to Rs 3,600 from Rs 3,700.
The brokerage said Kaynes delivered a strong Q1 beat and recorded its first revenue and margin beat in at least five quarters. It highlighted the 40% year-on-year revenue growth but said working capital remained the key concern.
JPMorgan also noted that the ramp-up of the company's OSAT and PCB businesses had been delayed to the third quarter of FY27.
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Nuvama Downgrade
Nuvama downgraded Kaynes Technology to Reduce from its earlier rating and raised its target price to Rs 3,450 from Rs 3,150.
The brokerage cut its FY27 and FY28 earnings-per-share estimates by 12% and 2%, respectively, to factor in the Q1 performance and its outlook.
Nuvama's downgrade also reflected the stock's recent sharp rally.
Kaynes management had warned during the Q1 earnings call that FY27 would be a "difficult year", citing cost pressures and supply constraints. Ramesh Kunhikannan, executive vice chairman, said the year would not be easy and would be a "tough year".
The company expects profitability to take a couple of quarters to normalise, while management has also said material availability and pricing will have a significant impact on the business.
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