Kaynes Technology India

Investment case

EMS + semiconductor (OSAT/PCB)

Why this business

Mysuru-based end-to-end electronics manufacturing services (EMS) company doing design-led box-build and PCB assembly for automotive, industrial, aerospace/defence, railways, medical and IoT customers - a high-mix, higher-margin niche (16% EBITDA margin vs Dixon's ~3%). It is building India's first commercial OSAT (semiconductor packaging) plant at Sanand, Gujarat (commercialised Mar-2026, multi-chip module shipped) and a bare-PCB/HDI plant in Chennai (Kaynes Circuits), to move up from assembly into components. FY26 revenue Rs 3,626 cr; order book ~Rs 8,900 cr (+20% YoY) at Jun-26.

What we believe

1. 01Fastest-growing listed Indian EMS at scale: 5-yr sales CAGR 54% and PAT CAGR 104% (screener); FY26 revenue +33% to Rs 3,626 cr and Q1FY27 +40%; management guides ~30% FY27 growth ('2x industry') and ~17% EBITDA margin.
2. 02Order book Rs ~8,900 cr (+20% YoY) = ~2.3x FY26 revenue, weighted to industrial, auto and aerospace/defence where margins (16%) are 5x Dixon's mobile-EMS margins (2.6-3.0%).
3. 03OSAT + PCB step-up: Rs 1,250 cr invested to date (Rs 700 cr OSAT with Rs 170 cr subsidy received; Rs 500 cr PCB), both to reach operational readiness by Q3FY27 with a combined Rs 450-500 cr revenue target in FY27 and higher-margin component revenue thereafter; Sanand shipped India's first commercial multi-chip module in Mar-26.
4. 04Policy tailwind: India EMS market $40-45 bn in FY25 heading past $150 bn by FY30 (KPMG, Jun-26) and MOFSL's Rs 6 lakh cr FY27 EMS estimate (26% CAGR); ISM 2.0/ECMS incentives directly subsidise Kaynes' OSAT/PCB capex.
5. 05Valuation reset: 1-yr price -49% while EPS grew 19% in FY26; Buoyant's FY28e P/E 46.6x vs MOFSL's 52% PAT CAGR gives a PEG <1 if the OSAT/PCB ramp lands.

Why now

TTM P/E 71x; stock is -49% over 1 year (52-wk range Rs 2,995-7,705) so the multiple has compressed sharply from >100x at the 2025 peak, though 5-yr average P/E not sourced. EV/EBITDA computed on Rs 25,466 cr EV (mcap + ~Rs 800 cr net debt) / TTM EBITDA Rs 609 cr. EV/EBITDA 41.8x; dividend yield 0.0%.

Market disagreement

• Dixon Technologies: Dixon (P/E 46x, mcap Rs 86,679 cr) is 92% mobile/EMS at 2.6-3.0% EBITDA margin with ROCE falling to 34% from 45% after Mobile PLI 1.0 expiry; Kaynes has 5x the margin, a 2.3x order-book cover and component (OSAT/PCB) optionality Dixon lacks.
• Syrma SGS: Syrma (P/E 85x, ROE 14%, FY26 PAT Rs 346 cr) is priced higher than Kaynes on trailing earnings with a more consumer/auto-commodity mix and no semiconductor/PCB backward-integration programme.
• Amber Enterprises: Amber (P/E 127x, ROE 6%) is a seasonal RAC-component business (Q1FY27 PAT just Rs 3 cr on Rs 3,888 cr sales) with lower margins and heavier capex intensity; Kaynes' industrial/defence mix is less seasonal and higher margin.

Position sizing

Core Small cap  2.4% of the PMS on $31 Jul 2026 (August rank 12). Core positions are owned through the cycle for leadership and cash-flow quality.

Catalysts

• Q3FY27 (Oct-Dec 2026): commercial ramp of Sanand OSAT and Chennai PCB plants; first meaningful component revenue.
• Q2FY27 results (Nov-2026): evidence of working-capital normalisation and margin recovery toward 17% guidance.
• ISM 2.0 / ECMS approvals and any anchor OSAT customer announcements (Kaynes was linked to advanced-node packaging news in 2026).

Risks and response

• Working capital and cash burn: debtor days 154 and working-capital days 133 at Mar-26 (from 64), FY26 operating cash flow -Rs 600 cr; net debt rose to ~Rs 800 cr in Q1FY27 - growth is being funded by the balance sheet.
• Execution/timing of OSAT and PCB: both slipped to Q3FY27 readiness; yields, customer qualification and subsidy timing could delay the Rs 450-500 cr FY27 contribution and keep ROE at 9-11% (Buoyant FY27e ROE 11.3%).
• Promoter holding fell 10.1% over 3 years (53.46% at Jun-26) on QIP dilution; further equity raises for semiconductor capex would dilute EPS.

Thesis-break conditions

Not stated separately on this page; the risk list carries the monitoring triggers.

Review history

• 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p46) · portfolio as of $31 Jul 2026
• 31 Aug 2026 · Classification in the August top-30: Turnaround (July book: Core)

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p46. Internal; external publication of these fields is controlled by audience policy.