Kaynes Technologies EMS growth and order book underpin OSAT and PCB expansion

Investment View and Valuation

In its August 8, 2026 results update, Motilal Oswal Financial Services reiterated its BUY rating on Kaynes Technologies following a healthy 1QFY27 operating performance that exceeded its expectations. The broker sees continued scaling of the core electronics manufacturing services (EMS) business, commercialisation of the OSAT and PCB businesses from 3QFY27 or 4QFY27, and expansion into space and defence electronics as the principal growth drivers.

The target price of Rs 5,000 is based on 40 times FY28E EPS.

1QFY27 Financial Performance

Kaynes Technologies reported consolidated revenue of Rs 9,460 million in 1QFY27, up 41 per cent year on year and ahead of Motilal Oswal's estimate of Rs 8,620 million. EBITDA increased 31 per cent year on year to Rs 1,476 million, above the broker estimate of Rs 1,334 million, while EBITDA margin declined 120 basis points year on year to 15.6 per cent.

The margin compression reflected a 7 percentage-point reduction in gross margin and a 30-basis-point increase in employee costs, partly offset by a 6 percentage-point decline in other expenses. Adjusted PAT declined 24 per cent year on year, as depreciation and tax were higher than expected and other income was lower.

EMS Growth and Order Book

Core EMS revenue grew 48 per cent year on year, more than offsetting a 12 per cent decline in smart-metering revenue. The company said the EMS market grew 17 per cent, implying substantial outperformance by Kaynes' EMS business.

• Automotive revenue grew 35 per cent year on year.
• Industrials revenue grew 31 per cent year on year.
• Aerospace and medical revenues each grew 2.8 times year on year.
• IT revenue grew 69 per cent year on year.
• Railways revenue grew 81 per cent year on year.

Standalone revenue rose 53 per cent to Rs 6,400 million, while overseas entities grew 327 per cent to Rs 1,000 million. Order inflows were flat year on year at Rs 14,800 million. The order book increased 20 per cent year on year and 6 per cent quarter on quarter to Rs 89,000 million as of June 2026.

OSAT and PCB Expansion

Management expects Kaynes Technologies to grow at about twice the market growth rate and targets combined OSAT and PCB revenue of Rs 4,500 million to Rs 5,000 million in FY27.

PCB commercial production and revenue are expected from 3QFY27 or 4QFY27. Initial capacity has been sought by a large global customer that has completed validation and issued a vendor code. Management expects PCB margins to remain stable despite input-cost pressures.

OSAT revenue is also expected from 3QFY27 or 4QFY27. The OSAT project is on track despite minor equipment and logistics delays associated with West Asia disruptions. Kaynes has received about Rs 1,700 million of government subsidy, while its Mitsui partnership provides access to the Japanese semiconductor market.

Working Capital and Execution Considerations

Working-capital days rose to 163 in 1QFY27 from 122 a year earlier because Kaynes built inventory to secure critical components amid supply disruption and longer lead times. Management expects normalisation as inventory is consumed, supply improves and smart-metering receivables are de-risked, supporting its aim of becoming cash-positive by end-FY27.

Component availability remains challenging, with price increases across semiconductors, memory, capacitors, resistors and connectors. These conditions, together with the PCB and OSAT ramp-up slippage, are relevant execution risks.

Capex and New Growth Opportunities

Kaynes plans FY27 capex of Rs 3,000 million each for OSAT and PCB and Rs 2,500 million for EMS. Rs 1,800 million was incurred in 1QFY27. Management stated that funding is not a constraint and government subsidies should support capex.

The company is developing a prototype satellite targeted for a mid-FY28 launch, subject to regulatory testing and ISRO launch confirmation. It is also entering titanium gas-bottle manufacturing for ISRO flight programmes and potentially DRDO missile programmes.

Estimates and Growth Outlook

Motilal Oswal raised FY27E revenue by 2 per cent and EBITDA by 3 per cent, while reducing FY28E revenue by 1 per cent and leaving FY28E EBITDA unchanged. The broker cut FY27E and FY28E adjusted PAT and EPS by 11 per cent and 5 per cent, respectively.

The broker forecasts revenue, EBITDA and adjusted PAT CAGRs of 41 per cent, 44 per cent and 52 per cent, respectively, over FY26 to FY28.