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Up over 20% this year so far, the newly listed Kaynes Technology is trading more than 60% higher than its IPO price currently.
Kaynes Technology India is a small-cap stock with a market capitalization of ₹5,610 crore. The company is a leading end-to-end and IoT solutions enabled integrated electronics manufacturing player, having capabilities across the entire spectrum of Electronics System Design and Manufacturing (ESDM) Services.
Kaynes provides conceptual design, process engineering, integrated manufacturing, and life-cycle support for major players in the automotive, industrial, aerospace and defence, outer space, nuclear, medical, railway, IoT, information technology (IT), and other segments.
The stock, which went public on November 22, 2022, enjoyed a great debut, opening at ₹778 apiece, which was almost 32% higher than the issue price of ₹587. It closed the first day with a 17.5% gain at ₹690.
The company had mopped up ₹858 crore through its IPO. The public offering received a stellar response from investors, as it was subscribed to 34 times. Most brokerages recommended subscribing to the issue on the back of its diversified business and customer profile as well as its robust order book.
Within just four months of its listing, the stock advanced by 43.86% in difficult market conditions to hit an all-time high of ₹992.65. At the current market price of ₹964.55 apiece, the stock is trading 64.31% higher than its issue price.
Year-to-date, the stock has yielded a return of 28.5%. In contrast, the BSE small-cap index has experienced a decline of 6.57% over the same period.
The company is in a good position to take advantage of the rapid expansion of EMS (electronics manufacturing services) market. According to F&S estimates, the electronics manufacturing services market is expected to grow almost six-fold from US$ 14 billion in FY21 to US$ 81 billion in FY26, representing a CAGR of 41%.
The growth of the EMS market is expected to be driven by strong demand, the government's production-linked incentive (PLI) scheme, import substitution, and the global China Plus One shift, said brokerage firm BoB Capital Markets.
The boom in demand has prompted most EMS players to ramp up capacities. Kaynes too is in the midst of brownfield capacity addition at its Mysore (Karnataka) and Manesar (Haryana) plants with a budget of ₹1 billion.
In addition, it is building a greenfield facility at Chamarajanagar (Karnataka) for ₹1.5 billion and aims to commence with some capacity as early as Q1 FY24. The focus is to expand capabilities in box builds and PCBAs, the brokerage noted.
The company has a well-diversified order book totalling ₹25.6 billion as of December 2022. Revenue stood at ₹7.6 billion in 9MFY23, equaling its FY22 run rate, and the management aims to close FY23 at ₹12 billion, it added.
Besides strengthening capabilities in existing verticals, the company plans to scale up growth in its newer verticals of aerospace and defence.
According to the brokerage, the company operates at an industry-leading EBITDA margin profile of 12–14%, aided by a strategic selection of end-user industries.
In Q3 FY23, the company posted a 109% jump in its consolidated net profit at ₹23 crore. The revenue from operations came in at ₹289 crore, a surge of nearly 58% YoY.
Further, the company’s EBITDA grew almost 87% to ₹41 crore in Q3FY23 compared to ₹22 crore in the year-ago quarter. While the EBITDA margin expanded to 14% from 12% in Q3 FY22.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
