Kaynes Technology shares rally 11% post Q1 results. Should you buy, sell or hold?
Kaynes Technology
climbed as much as 11.4% on Thursday, July 31, to Rs 6,282 on the BSE, after the electronics manufacturer reported strong Q1 FY26 earnings marked by a 50% jump in net profit and robust margin expansion.
The company posted a 49.96% year-on-year increase in consolidated net profit to Rs 74.61 crore for the quarter ended June 2025, while revenue from operations rose 33.63% to Rs 673.46 crore. Profit before tax climbed nearly 50% to Rs 96.08 crore, and EBITDA surged 69% to Rs 113 crore, helping margins expand by 350 basis points to 16.8%.
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Margins impress even as revenue lags forecasts
Brokerage firms were broadly positive on the results, even as revenue came in slightly below expectations.
JM Financial
noted that 'Kaynes' 1Q revenue at Rs 6.7 billion rose 34% YoY and missed our and consensus estimate by 6% and 9% respectively,' but flagged a major upside surprise on the margin front.
'Gross margin at 41.3% improved significantly over 27.3% YoY, indicating a superior product mix,' JM Financial said, adding that EBITDA performance was 'in-line with our estimate and 6% ahead of consensus,' despite a steep increase in employee and other expenses.
Motilal Oswal, which has a 'Buy' rating on the stock, also emphasised operating strength and said that the 'operating performance beats our estimates. EBITDA rose 69% YoY to Rs 1.1 billion (est. Rs 1 billion). EBITDA margins expanded 350bp YoY to 16.8% (est. 13.8%).'
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Industrial business and ODM gains lift outlook
Behind the margin expansion was a shift in revenue mix. Kaynes' industrial vertical, largely driven by smart meter demand, led growth with a 43% YoY revenue increase and now accounts for 59% of total sales, up from 55% last year. Meanwhile, the automotive and railway segments posted slower growth of 24% and 17%, respectively.
The real standout was Kaynes' move into higher-margin design-led manufacturing. 'The highlight here is the pickup in Kaynes' ODM & Product Engineering vertical, which posted revenue of Rs 24 billion, its share rising to 36% vs. 1% YoY,' JM Financial noted. 'This appears to be a key driver of the gross margin expansion.'
That shift coincided with weaker performance in legacy segments. The box-build business shrank 48% YoY, while its share of revenue fell to 19% from 49% a year earlier. Core PCB Assembly grew 23% but saw its contribution drop to 45%.
Orderbook momentum points to strong pipeline
Kaynes' orderbook climbed to Rs 7,401.1 crore as of June 30, up nearly 47% from the previous year, reflecting sustained demand across end markets.
Still, analysts flagged questions heading into the company's earnings call. JM Financial highlighted the need for clarity on the "driver of gross margin expansion and its sustainability, reason for significant increase in employee costs and sharp increase in other expenses, and update on commencement of OSAT and PCB manufacturing.'
What should investors do?
Kaynes' Q1 performance underscores a company in transition, from a traditional contract manufacturer to a higher-margin, design-led electronics player. Brokerages like Motilal Oswal maintain a bullish stance, citing the margin-led earnings beat and long-term demand tailwinds.
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According to Trendlyne data, the average target price for Kaynes Technology stands at Rs 6,245 per share. Of the 24 analysts tracking the stock, nine have a 'buy' rating, 10 recommend holding, and three advise selling.
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