Kaynes Tech

Kaynes Technology reported robust financial results for Q1 FY26, with total revenue reaching ₹673.5 crores (INR6,735 million), marking a 34% year-on-year growth. Operational EBITDA grew by 69% to ₹113 crores (INR1,130 million), leading to a 350 basis points expansion in EBITDA margin to 16.8%. Profit after tax (PAT) increased by 47% year-on-year to ₹74.6 crores (INR746 million), with PAT margin improving by 100 basis points to 11.1%. The company also reported a healthy ROE of 15.4% and ROCE of 13.7%.

The company's growth momentum is diversified across all business verticals, with strong traction from new clients in electric vehicle, aerospace, industrial, and rail sectors. Management highlighted a strategic shift from a pure EMS company to an integrated ESDM company, enhancing ownership of product life cycles and deeper strategic engagements. This approach positions Kaynes to serve high-volume customers and drive predictable long-term growth, setting industry benchmarks for EMS companies in India.

Kaynes is making significant progress on its infrastructure projects aimed at vertical integration. The OSAT facility in Sanand is nearing completion, with proto products for AOS already available and full commercial production expected by December '25. Similarly, the HDI multilayer PCB plant in Chennai has completed building construction and is anticipated to be operationally ready by January 2026. These projects are crucial for advancing the company's end-to-end solution capabilities within India.

Net working capital days increased to 132 days in Q1 FY26 from 113-115 days, primarily due to an increase in receivables, including an abnormal spike of INR350 crores related to an acquisition. Management is focused on optimizing working capital through strategic initiatives like supplier managed inventory, collaborative forecasting, and enhanced production planning. They expect to resolve the extraordinary receivables in the first half and target reducing working capital days to sub-70 by year-end, leading to significantly positive operating cash flow for FY26.

The OSAT business is progressing well with two major clients already secured (one American, one Indian with Japanese business) and a new German client lined up. The construction of the facility is on track, with the first building expected to be ready by early August and operational Phase 0.09 by September. Commercial shipping is anticipated in Q4 FY26, potentially sooner. The company also has MoUs with four additional clients, indicating strong market interest and future growth potential for its advanced packaging capabilities.

Kaynes is actively pursuing inorganic growth to accelerate market entry and diversify its portfolio. The acquisition of August Electronics in Canada has scaled EMS capabilities in North America, providing access to high-margin customers and strengthening its value proposition as an alternative to China-based sourcing. Additionally, the company has acquired Sensonic in the railway sector, invested INR40 crores into another railway ODM company, and made a minority investment in Mixx Technologies for advanced packaging, all contributing to its global growth strategy.

Management expects continued strong growth across segments. The smart meter business is targeted to achieve INR1,000-1,200 crores annually, aiming for 15% of the total market. The EV segment is gaining traction with a large 2-wheeler client and upcoming 4-wheeler models. Aerospace and railway segments are projected to contribute significantly by year-end, reaching approximately 8% and 10-12% of total sales, respectively. Margin expansion is attributed to both gross margin improvements from material cost reductions and better pricing, as well as operating leverage across all verticals.