Shares of Kaynes Technology crashed as much as 19.4% to Rs 3,366 apiece on the BSE on Thursday after the electronics manufacturing company's Q4 results delivered a triple blow of revenue guidance miss, deteriorating balance sheet metrics, and a sharp decline in profit, prompting at least two brokerages to cut their ratings on the stock.
JPMorgan downgraded the stock to Neutral from Overweight and slashed its target price to Rs 4,000, while Nuvama downgraded to Hold and cut its target price to Rs 3,550 from Rs 5,500, a reduction of nearly 36%. Morgan Stanley maintained its Equal-weight rating with a target of Rs 3,663. CLSA retained Outperform with a Rs 4,200 target but acknowledged the results were a clear negative.
Kaynes posted Q4 revenue of Rs 1,243 crore, a 26% year-on-year increase but the company had guided for Rs 1,700 crore, making the miss a staggering 27% below its own target. JPMorgan noted the results missed even the lowered Street and JPMorgan estimates by 18% and 13%, respectively.
"While we still expect strong 40%/45% revenue/earnings CAGR over FY26-28E thanks to the ramp-up of OSAT and PCB businesses, we believe the stock will remain a 'show me' stock until the gap between actual numbers and company guidance narrows," JPMorgan wrote in its note.
The company’s working capital trajectory also came as a concern for analysts. Net working capital days rose to 125 against guidance of 85-100 days. Morgan Stanley pegged the figure even higher at 137 days, up from 95 days a year ago. Operating cash flow came in at negative Rs 4.6 billion. CLSA calculated working capital increased 85 days year-on-year, with net debt at Rs 711 million.
"Its balance sheet also deteriorated further, which was a key item heading into its results," CLSA noted.
JPMorgan said it was cutting its core EMS multiple to 33x from 45x, citing both a reduction in revenue growth expectations over the next two years and an increase in net working capital days in its discounted cash flow model. The brokerage cut earnings by 12-17% over FY27-28, with reductions across the core EMS, OSAT, and PCB businesses. Nuvama went further, cutting FY27 and FY28 EPS by 22% and 20%, respectively, and now values Kaynes at 35x FY29 EPS with an 18% discount, yielding its March 2027 target price of Rs 3,550.
At the current market price, Nuvama noted, Kaynes trades at 70x/53x/35x FY27/FY28/FY29 estimated earnings, a valuation that leaves little room for continued execution misses.
Morgan Stanley flagged that Q4 EBITDA margin contracted 145 basis points year-on-year to 15.6%, with the PAT miss driven by operational weakness compounded by higher interest and depreciation costs. The brokerage said it is awaiting segment-wise details and an order book update before making further calls.
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