Kaynes Tech shares: Key triggers for stock after 40% plunge in one month

With Kaynes Technology India Ltd seeing its shares falling 40 per cent in a month, Nomura India believes cash flow improvement remains a key monitorable for the stock, with the ex-smart meter growth recovery likely to serve as a catalyst going ahead. Saying growth drivers for Kaynes Tech need to be reassessed given significant drag of working capital, the foreign brokerage felt the recent issues are not related to corporate governance but reporting and execution issues. For now, it has slashed its target on the stock to Rs 5,455 from Rs 8,478 earlier.

"While there have been lapses in disclosure (which the company acknowledged), the explanation regarding the accounting issue seems plausible. Working capital challenges in smart meters along with its strategy to de-focus on this segment should have been communicated earlier, thus avoiding negative surprises," Nomura said. 

Given these challenges, Nomura believes the company needs to re-look at growth in smart meters, which it can partly offset by a significant step-up in growth from other segments such as automotive, railways, and aerospace, potentially leading to smart meter revenue share coming down from 30 per cent in H1FY26 to 17 per cent in H2FY26F and 11 per cent by FY28.

Nomura said the Kaynes management acknowledged that a few accounting disclosures required better clarification and reporting, which will be addressed in the future. It would look at incorporating the advice of external agencies as well. According to the management, working capital normalisation is underway and improvement should be visible going ahead. 

"In smart meters, Kaynes will no longer be a service provider and only supply smart meter devices with better collection terms. Also, it does not expect any equity funding in the near term to fund its ongoing projects across the OSAT and PCB segments," Nomura said.

Nomura has lowered its target P/E to 35 times from 50 times previously, which is at the low end of its historical trading band of 35-55 times. 

"Its current valuation at 26 times FY28F P/E (adjusted for subsidiaries) looks attractive given a 40 per cent EPS CAGR over FY26-28F; hence; we maintain Buy. Improvement in working capital to