Macquarie Sees Further Upside To A Stock With 146x P/E Multiple — Here's Why
Macquarie has justified Kaynes Tech's valuation, citing the global electronic system design and manufacturing (EDSM) opportunity, which is pegged at $1 trillion.
Macquarie has initiated coverage on electronic manufacturing services player Kaynes Technologies Ltd with an 'outperform' rating and expects the company to register stellar growth in the years to come.
The brokerage firm has set a 12-month target price of Rs 7,700 on Kaynes Tech. The stock currently trades around Rs 6,780 levels. This implies an upside of 14% from current market price.
However, what is particularly interesting is the way Macquarie has justified Kaynes' sky-high valuation.
The stock currently trades at a price to earnings multiple of 146x, making it the most overvalued stock among its peers. Kaynes current EV/EBITDA, which measures how much a company would pay for each unit of operational earnings, also stands at 95x - higher than any other EMS player.
Kaynes Tech Valuations Justified: Macquarie
Macquarie has justified Kaynes Tech's valuation, citing the global electronic system design and manufacturing (EDSM) opportunity, which is pegged at $1 trillion.
Kaynes Tech is the most aggressive EDSM player in Macquarie's coverage, with significant investment in international expansion, backwards integration and value-added services.
These serve as key growth levers for the company, aiding not just growth but also improving margins and customer stickiness.
Macquarie believes that Kaynes Tech has the 'dry powder to accelerate further' following its Rs 1,600 crore capital raise.
The brokerage firm further cites growing Original Design Manufacturing (ODM) presence, PLI-related news and Outsourced Semiconductor Assembly and Test (OSAT) and PCB facilities as key growth catalysts for the EMS player.
Prime Minister Narendra Modi recently mentioned Kaynes Tech in his Semicon India address, in reference to the company's OSAT plant in Sanand, Gujarat, which is soon expected to produce commercial chips.
In keeping with Kaynes Tech's guidance of Rs 9,000 crore topline in three years. Macquarie believes the company's EV/EBITDA will come down to 26x, with a price to earnings multiple of 62x in FY28.
The Karnataka-based company registered an FY25 revenue of Rs 2,722 crore but has seen its topline improve at a CAGR of 57% over three years, whereas PAT has grown 91% during the same period.
A total of 26 analysts are tracking the company, with 11 having a 'buy' rating. 11 have recommended 'hold,' while four suggest 'sell,' as per data compiled by Bloomberg.
