HomeBusiness NewsCompanies NewsKaynes Tech eyes 60% revenue growth in FY25; Morgan Stanley raises price target
Kaynes Tech eyes 60% revenue growth in FY25; Morgan Stanley raises price target
The brokerage firm retained 'overweight' rating on the electronics manufacturing services (EMS) player while raising the target price to ₹3,845 per share.
Kaynes Technology India, an electronics manufacturing services (EMS) company with a market cap of $2.7 billion, aims to achieve over 60% revenue growth for the second year in a row.
Strong growth guidance and a price target increase by Morgan Stanley lifted Kaynes shares by over 8% on June 8.
The brokerage firm retained its 'overweight' rating on the stock while raising the target price to ₹3,845 per share. It estimates revenue at $1 billion by FY28 with core EMS business accounting for nearly 75%.
In a discussion with CNBC-TV18, Jairam Sampath, the company's Director and CFO, forecasted revenue of ₹3,000 crore for the fiscal year April-March 2024-25 with margin expansion of 100 basis points.
One basis point is one-hundredth of a percentage point or 0.01%.
“50-60% over FY25 one can expect in FY26 too. In terms of margins, we are expecting about 15% EBITDA margins this year, which is up about 100 bps compared to last year,” he said.
The current orderbook of the company stands at ₹4,150 crore and is increasing at a rate of ₹300-400 crore per month, Sampath said.
Kaynes Technology's FY24 revenue from operations grew 60% over last year to ₹1,805 crore. Profit after tax (PAT) nearly doubled to ₹183 crore. However, EBITDA (earnings before interest, tax, depreciation, and amortisation) margin marginally contracted to 14.1% from 14.9% last year..
Also Read | Kaynes Tech surges 14% to near record high; stock up 5x from IPO price
The company has also received significant order in the smart meter segment and expects to start execution soon.
The Outsourced Semiconductor Assembly and Test (OSAT) project is on schedule, Sampath said, adding that the company will be able to make up for the lost time.
OSAT companies handle the packaging, assembly, and testing of integrated circuits and other semiconductor devices after fabrication for manufacturers.
The total capital expenditure for this project is approximately ₹3,740 crore, partially supported by government subsidies.
The project is expected to be commissioned by FY26.
Renu Baid Pugalia, Senior VP of Research at IIFL Institutional Equities, believes valuations for EMS space are expensive but there is still a strong earnings growth backing them.
Kaynes is her top pick within the sector with a 'buy' rating. Dixon Technologies is fairly priced and Syrma SGS Tech will take some time to regain investor confidence, she said in an earlier interaction with CNBC-TV18.
Conrad Saldanha, MD and Senior Portfolio Manager for Emerging Markets at Neuberger Berman is also bullish on Kaynes Technology India and Dixon Technologies.
“These businesses can grow at 30%. I am not going to say 50-70% is sustainable when you look at five years. So, on a PE multiple in that range, probably makes more sense. You get those opportunities. Dixon has never been a cheap stock. You get disruption from one customer to the next," he said.
The current market capitalisation of the company is ₹22,601 crore.
The shares have gained 40% year to date and nearly 145% over the past year.
For more, watch the accompanying video
Strong growth guidance and a price target increase by Morgan Stanley lifted Kaynes shares by over 8% on June 8.
The brokerage firm retained its 'overweight' rating on the stock while raising the target price to ₹3,845 per share. It estimates revenue at $1 billion by FY28 with core EMS business accounting for nearly 75%.
In a discussion with CNBC-TV18, Jairam Sampath, the company's Director and CFO, forecasted revenue of ₹3,000 crore for the fiscal year April-March 2024-25 with margin expansion of 100 basis points.
One basis point is one-hundredth of a percentage point or 0.01%.
“50-60% over FY25 one can expect in FY26 too. In terms of margins, we are expecting about 15% EBITDA margins this year, which is up about 100 bps compared to last year,” he said.
The current orderbook of the company stands at ₹4,150 crore and is increasing at a rate of ₹300-400 crore per month, Sampath said.
Kaynes Technology's FY24 revenue from operations grew 60% over last year to ₹1,805 crore. Profit after tax (PAT) nearly doubled to ₹183 crore. However, EBITDA (earnings before interest, tax, depreciation, and amortisation) margin marginally contracted to 14.1% from 14.9% last year..
Also Read | Kaynes Tech surges 14% to near record high; stock up 5x from IPO price
The company has also received significant order in the smart meter segment and expects to start execution soon.
The Outsourced Semiconductor Assembly and Test (OSAT) project is on schedule, Sampath said, adding that the company will be able to make up for the lost time.
OSAT companies handle the packaging, assembly, and testing of integrated circuits and other semiconductor devices after fabrication for manufacturers.
The total capital expenditure for this project is approximately ₹3,740 crore, partially supported by government subsidies.
The project is expected to be commissioned by FY26.
Renu Baid Pugalia, Senior VP of Research at IIFL Institutional Equities, believes valuations for EMS space are expensive but there is still a strong earnings growth backing them.
Kaynes is her top pick within the sector with a 'buy' rating. Dixon Technologies is fairly priced and Syrma SGS Tech will take some time to regain investor confidence, she said in an earlier interaction with CNBC-TV18.
Conrad Saldanha, MD and Senior Portfolio Manager for Emerging Markets at Neuberger Berman is also bullish on Kaynes Technology India and Dixon Technologies.
“These businesses can grow at 30%. I am not going to say 50-70% is sustainable when you look at five years. So, on a PE multiple in that range, probably makes more sense. You get those opportunities. Dixon has never been a cheap stock. You get disruption from one customer to the next," he said.
The current market capitalisation of the company is ₹22,601 crore.
The shares have gained 40% year to date and nearly 145% over the past year.
For more, watch the accompanying video
(Edited by : Shweta Mungre)
First Published: Jun 11, 2024 2:53 PM IST
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