Kaynes Technology faces execution and cash flow pressure despite Rs 8,366 crore order book

Investment View and Valuation

ICICI Securities’ May 18, 2026 result update retains a HOLD view on Kaynes Technology India. The brokerage believes near-term execution and cash-flow concerns outweigh the company’s attractive medium-term positioning in electronics manufacturing services, printed circuit boards and outsourced semiconductor assembly and test.

ICICI Securities values Kaynes at 43 times FY28E earnings per share for its target-price assessment. The report identifies restraints in domestic government-support measures as a key risk, while better-than-expected order-book execution and cash-flow improvement could provide upside.

Business Overview

Kaynes provides end-to-end electronics system design and manufacturing solutions, from design through life-cycle support. Its operations serve the automotive, industrial, aerospace, medical and IoT sectors, with additional positioning in printed circuit boards and outsourced semiconductor assembly and test.

Weak Q4 FY26 Performance

Kaynes reported a weak Q4 FY26, with revenue materially below management guidance and profitability affected by higher costs, finance expenses and depreciation.

Revenue was well below management’s approximately Rs 1,700 crore guidance. The EBITDA margin declined year on year because of higher input and employee costs, although it improved sequentially. Profit after tax was affected by higher finance costs and depreciation.

Management attributed the revenue shortfall to customer-project delays, disruption from the West Asia conflict and a sharp volume decline from a key electric-vehicle customer. It stated that deferred revenue was principally timing-related and that there were no material order cancellations.

Working Capital and Cash-Flow Concerns

Working capital is the principal concern. Consolidated working-capital days rose to 172 days in FY26 from 91 days in FY25, despite management’s earlier guidance for sub-90 days and positive operating cash flow by the end of FY26.

Smart metering was the principal drag. The metering subsidiary generated approximately Rs 971 crore, or about 25% of total revenue, while its receivables were Rs 1,365 crore, representing around 89% of total receivables. The delays were linked to installation, commissioning and payment realisation.

ICICI Securities highlights a credibility risk arising from the missed revenue and cash-flow guidance. Kaynes began FY26 with revenue guidance of around Rs 4,500 crore, reduced it to approximately Rs 4,000–4,100 crore in Q3 FY26 and ultimately delivered Rs 3,626 crore.

Management’s Corrective Actions

Management said core EMS operations remained stronger than the consolidated picture. Core EMS working-capital days improved from about 83 days in FY24 to about 53 days in FY26, while standalone EMS generated approximately Rs 250 crore of positive operating cash flow.

The company plans to reduce its exposure to working-capital-intensive turnkey AMISP contracts and focus more on meter supply and EMS-led work. Management is targeting a 70–80% reduction in negative operating cash flow over the next three quarters through faster installations and collections, along with securitisation initiatives.

ICICI Securities considers delivery on these corrective actions essential to improving investor confidence.

Order Book and Segment Outlook

The medium-term opportunity remains supported by an order book of more than Rs 8,366 crore and demand visibility in core EMS, industrial, railways and aerospace.

Management expects railway revenue to grow approximately 20–25% in FY27, with margins above the company average. This outlook is supported by Kavach-related approvals and trial orders.

OSAT and PCB Expansion

OSAT Unit 1 at Sanand is operational, while Unit 2 is expected to be commercialised by Q2 FY27. Management guides for FY27 OSAT revenue of approximately Rs 250–300 crore and PCB revenue of approximately Rs 300–400 crore.

These expectations are lower than earlier guidance of around Rs 1,000 crore for OSAT in its first year and around Rs 500 crore for bare PCB. Management provided no absolute FY27 revenue guidance, instead indicating growth at around twice the industry growth rate.

ICICI Securities sees internal use of PCB and OSAT capacity for ODM and product-led offerings as a potential route to higher value addition and margins above mid-teen levels over time.

Key Risks and Monitoring Factors

• Execution delays and missed revenue guidance could continue to affect confidence.
• Smart-metering receivables, installation delays and payment-realisation issues remain a significant cash-flow risk.
• The company must deliver its targeted reduction in negative operating cash flow through collections, installations and securitisation initiatives.
• Restraints in domestic government-support measures are a key risk identified by ICICI Securities.
• Better-than-expected order-book execution and cash-flow improvement could provide upside.