Fundamental Analysis Of Kaynes Technology – Future Plans, Financials & More
Fundamental Analysis Of Kaynes Technology: Providing electronic components for India’s lunar mission resulted in a 40% surge in this company’s stock. Explore Kaynes Technology’s past performance, financial metrics, and future outlook to gain insights into its position in the rapidly evolving ESDM market through this comprehensive article. In this article, we will look into the […] The post Fundamental Analysis Of Kaynes Technology – Future Plans, Financials & More appeared first on Trade Brains.
Fundamental Analysis Of Kaynes Technology: Providing electronic components for India’s lunar mission resulted in a 40% surge in this company’s stock. Explore Kaynes Technology’s past performance, financial metrics, and future outlook to gain insights into its position in the rapidly evolving ESDM market through this comprehensive article. In this article, we will look into the Fundamental Analysis Of Kaynes Technology with its financials, future outlook and more.
Fundamental Analysis Of Kaynes Technology – Company Overview
Kaynes Technology, Established in 2008, it has evolved into India’s leading integrated electronics manufacturer, specializing in end-to-end solutions and IoT-enabled services, with over three decades of experience. The company’s comprehensive Electronics System Design and Manufacturing (ESDM) services cover conceptual design, process engineering, integrated manufacturing, and life cycle support.
Spanning 250,000 square feet across 7 Indian cities, Kaynes boasts a robust infrastructure comprising 9 manufacturing plants and 2 service centers. Its global footprint is evident, with a client base exceeding 250 satisfied customers across three continents.
Leveraging 34 years of manufacturing expertise, Kaynes is a trusted partner for major players in diverse industries, including automotive, industrial, aerospace and defense, outer space, nuclear, medical, railways, IoT, IT, and more.
Segment Analysis
Original Equipment Manufacturers-Turnkey Solutions-Box Build: The company engages in Build to Print or Building to Specifications for intricate box builds, sub-systems, and products across diverse industry sectors. In the context of Original Equipment Manufacturer (OEM) Printed Circuit Board Assemblies (PCBA), it provides comprehensive turnkey electronics manufacturing services encompassing PCBAs, cable harnesses, magnetics, and plastics.
The services span from prototype development to full-scale production, ensuring a seamless process from concept to product realization.
OEM-Turnkey Solutions-Printed Circuit Board Assemblies (“PCBAs”): The company provides conceptual design and product engineering services for both industrial and consumer segments. Its array of offerings includes hardware, software accelerators, and exclusive sensors, complemented by cloud platform-based solutions. These services extend to areas such as asset tracking, remote device management, and the development of intelligent products.
Original Design Manufacturing (ODM): ODM specializes in providing services for original design manufacturing using various cutting-edge technologies. These include smart metering technology, smart street lighting, brushless DC (BLDC) technology, inverter technology, gallium nitride-based charging technology, and IoT solutions tailored for the development of intelligent consumer appliances.
(Source: Annual report)
Industry Overview
India continues to remain a bright spot in the global economic landscape. It leverages its demographic dividend, digital transformation, and innovation potential to drive sustained growth. According to the economic survey, real GDP growth is forecast to reach 6.5% in FY24. Though lower than in FY23, India will still be one of the fastest-growing economies in the world.
This growth will be primarily driven by a progressive regulatory environment, a strong industrial policy (through PLI), a deleveraged private sector, and sustained capital expenditure, especially on large-scale infrastructure projects.
The Indian electronics industry has been one of the fastest-growing industries. The industry was valued at Rs 9,263 bn in FY 2022 and is anticipated to reach Rs 21,540 bn by 2027, registering a CAGR of 18.4% over FY 2022–FY 2027.
The Indian PCBA market was valued at Rs 1,788 billion (US$ 24 billion) in FY 2021–22 and is expected to reach Rs 6,556 billion (US$ 88 billion) in FY 2026. The market is expected to register a CAGR of 38.4% until FY 2026.
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Fundamental Analysis Of Kaynes Technology – Financials
Revenue & Net Profit
The financial statement of the company indicates that revenue has increased by 206 percent from ₹368 crores to ₹1126 crores from FY22 to FY23, respectively. On a 3-year CAGR basis, the company grew by 32.26 percent. The global rise in income levels has further fueled spending on digital housing equipment, contributing to overall sales growth.
The net profits of the company have increased by 955 percent, from ₹9 crore in FY22 to ₹95 crore in FY23. On a 3-year CAGR basis, the company has grown by 80.25 percent.
The significant boost in revenue and profits resulted from a comprehensive strategy involving a 31% increase in average order value. This growth was achieved through concentrated efforts across various business functions, from business development to supply chain and operations, along with other enabling functions.
The table below exhibits the revenue and profits of Kaynes Technology over the last 4 years.
| Fiscal Year | Revenue from operations (In Crores) | Net Profit (In Crores) |
|---|---|---|
| 2023 | 1126 | 95 |
| 2022 | 706 | 42 |
| 2021 | 421 | 10 |
| 2020 | 368 | 9 |
| 3-year CAGR | 32.26% | 80.25% |
Profit Margins
The financials reported an operating margin of 15% and a net profit margin of 8.4% in FY23, compared to 13% and 6%, respectively, in FY22. From a four-year perspective, operating margins stand at 12.5% and net profit margins at 4.8%.
The margins have been increasing constantly in the past years due to a systematic approach to managing fixed expenses that played a critical role in ensuring a modest increase in margins with an increase in revenue.
The table below exhibits the profit margins of Kaynes over the last 4 years.
| Fiscal Year | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|
| 2023 | 15 | 8.4 |
| 2022 | 13 | 6 |
| 2021 | 10 | 2.4 |
| 2020 | 12 | 2.4 |
| 4-year average | 12.5 | 4.8 |
Return Ratios
As for its return ratio, Kayne’s business generates a good return on capital employed and equity. Its RoCE and RoE stood at 24.2% and 24.9%, respectively, in FY23, indicating efficient utilization of resources and good returns.
The RoCE and RoE ratios have remained stable compared to last year. On a longer perspective, the ratios have improved and are above their 4-year average of 19.13% and 17%, respectively.
The table below shows the ROE and RoCE of Kaynes for the last 4 years:
| Fiscal Year | Return on Capital Employed (%) | Return on Equity (%) |
|---|---|---|
| 2023 | 24.2 | 24.9 |
| 2022 | 24.4 | 24.5 |
| 2021 | 13.5 | 8.1 |
| 2020 | 14.4 | 10.5 |
| 4-year average | 19.13 | 17 |
Leverage Ratios
Looking at the company’s leverage ratio, we can see that it has maintained a debt-to-equity ratio of less than 1.4 for the past four years. This indicates that the company is relying less on borrowed capital for financing its business and can retain more of its revenue. The company is almost debt-free now, with a D/E of 0 compared to 0.7 times in FY22 due to the repayment of borrowings from the proceeds of the IPO.
The company’s interest coverage ratio has strengthened in recent times, with ICR standing at 4.5 times in FY23 and a 4-year average of 2.6. This indicates that the company can pay its interest easily.
The table below shows the D/E interest coverage ratio of Kaynes for the last 4 years:
| Fiscal Year | Debt / Equity (Times) | Interest Coverage Ratio (Times) |
|---|---|---|
| 2023 | 0.05 | 4.5 |
| 2022 | 0.7 | 3.2 |
| 2021 | 0.9 | 1.4 |
| 2020 | 1.4 | 1.4 |
| 4-year average | 0.75 | 2.6 |
Fundamental Analysis Of Kaynes Technology – Key Metrics
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | 2853 | Market Cap(Cr) | 18248 |
| EPS | 20.8 | Stock P/E | 151 |
| RoE | 24.90% | RoCE | 24.20% |
| Promoter Holdings | 57.83% | FII Holdings | 12.71% |
| Debt to Equity | 0 | P/B | 16.3 |
| Operating Profit Margin | 15 | Net Profit Margin | 8.4 |
Fundamental Analysis Of Kaynes Technology – Future Plans
- Kaynes aims to sustain its accelerated growth trajectory by steadily building its customer base in the rapidly growing ESDM market.
- It aims to move up the value chain and manufacture more sophisticated aerospace electronics over time.
- They are committed to continually upskilling their workforce and investing in cutting-edge infrastructure, including acquiring newer licenses, upgrading testing equipment, and implementing advanced application software.
- The company has allotted a sum of ₹ 989 mn to enhance its existing facilities located in Mysuru and Manesar.
- The company raised ₹1,493 million for investments in Kaynes Electronics Manufacturing Private Limited, facilitating the establishment of a new facility in Chamarajanagar.
- Kaynes is aiming to identify and scale new technology applications in consumer appliances, smart technology, IT accessories, and sensor-driven IoT solutions, driving revenue growth and improved margins.
Conclusion
In this article, “Fundamental Analysis Of Kaynes Technology,” we have looked into its business, how it performed in the last four years, and what its plans are. Their well-diversified product portfolio allows them to mark their presence in several industries, which keeps them insulated from the volatile economic environment and also exposes them to many opportunities to serve domestic and global markets.
Further analysis is required before investing to understand the risk & return characteristics of the company. What do you think about this company? I hope to hear from you in the comments section below.
Written By Ashish Agarwal
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The post Fundamental Analysis Of Kaynes Technology – Future Plans, Financials & More appeared first on Trade Brains.
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