Kaynes Tech Falls 17.1% as Q4 Earnings Miss Guidance; JPMorgan Downgrades Stock to Underweight
Kaynes Technology Shares Plummet 17% After JPMorgan Downgrades Stock
Shares of Kaynes Technology, a Mysuru-based electronics system design and manufacturing company, tanked 17% on May 14 following a downgrade by JPMorgan post the company's March quarter results.
The company posted a consolidated net profit of Rs 91 crore for Q4, which represents a 22% fall compared to Rs 116 crore in the corresponding quarter last year. This decline is attributed to the company missing its own 4QFY27 revenue guidance by 27% and even failing to meet lowered Street/JPM expectations by 18% and 13%, respectively. Furthermore, Kaynes' net working capital days remained elevated at 125 days, surpassing the company's guidance of 85 days.
At 10:01 am on May 14, Kaynes stock was trading 17% lower at Rs 3,454.2.
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| Company | Revenue Guidance | Actual Revenue |
|---|---|---|
| Kaynes | Rs 1,700 crore | Rs 1,240 crore |
| CLSA | N/A | Rs 1,570 crore |
JPMorgan downgraded the stock, citing a 12-17% cut in earnings over the next two years, led by reductions across core EMS, OSAT, and PCB businesses. The global brokerage also reduced the core EMS multiple to 33x from 45x, driven by a decrease in revenue growth over the next two years and an increase in net working capital days over the medium term. JPMorgan ascribed a 'Neutral' rating to the stock and set a target price of Rs 4,000.
While JPMorgan still expects strong 40-45% revenue/earnings compound annual growth rate (CAGR) over FY26-28E, thanks to the ramp-up of OSAT and PCB businesses, the brokerage believes that the stock will remain a 'show me' stock until the gap between actual numbers and company guidance narrows.
CLSA also noted that Kaynes missed its own guidance and Street expectations on operational parameters. The company's balance sheet deteriorated further, with 4Q revenue growing 26% year-over-year to Rs 1,240 crore, falling short of CLSA's estimate of Rs 1,570 crore and the company's guidance of Rs 1,700 crore. Meanwhile, the company's margin fell 150 basis points year-over-year to 15.6%, and its net debt increased to Rs 71 crore, from Rs 190 crore in FY25.
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Investor Takeaway
Investors should be cautious about Kaynes Technology's stock due to the downgrade by JPMorgan.
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