Fundamental Analysis Of Kaynes Technology: Providing electronic components for India’s lunar mission resulted in a 40% increase in that company’s stock. Explore Kaynes Technology’s past performance, financial metrics and future outlook to gain insight into its position in the rapidly evolving ESDM market with this comprehensive article. In this article, we will look at 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, 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 of a robust infrastructure consisting of 9 factories and 2 service centers. Its global footprint is evident, with a customer base exceeding 250 satisfied customers across three continents.
Leveraging 34 years of manufacturing expertise, Kaynes is a trusted partner for major players in a variety of industries, including automotive, industrial, aerospace and defense, aerospace, nuclear, medical, rail, IoT, IT, and more.
Segment Analysis
Original Equipment Manufacturers – Turnkey Solutions – Box Construction: The company engages in Build to Print or Build to Specification for complex box structures, subsystems and products across various industry sectors. In the context of Original Equipment Manufacturer (OEM) Printed Circuit Assemblies (PCBA), it provides comprehensive turnkey electronic manufacturing services encompassing PCBAs, cable harnesses, magnets and plastics.
The services range 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 suite 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 smart products.
Original Design Manufacturing (ODM): ODM specializes in providing services for original design production 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 smart consumer devices.
(Source: Annual Report)
Industry Overview
India continues to remain a bright spot in the global economic landscape. It is leveraging its demographic dividend, digital transformation and innovation potential to drive continued growth. According to the economic survey, real GDP growth is expected to reach 6.5% in FY24. Although 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, strong industrial policy (through PLI), an unlevered private sector and continued capital expenditure, particularly 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 projected to reach Rs 21,540 bn by 2027, registering a CAGR of 18.4% during 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% through FY 2026.
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Fundamental Analysis Of Kaynes Technology – Financials
Revenue & Net Profit
The company’s financial statement indicates that revenue increased by 206 percent from ₹ 368 crore to ₹ 1126 crore from FY22 to FY23, respectively. On a 3-year CAGR, the company has grown by 32.26 percent. The global increase in income levels further fueled spending on digital home equipment, contributing to overall sales growth.
The company’s net profits increased by 955 percent, from ₹ 9 crore in FY22 to ₹ 95 crore in FY23. On a 3-year CAGR, the company has grown by 80.25 percent.
The significant boost in revenues and profits resulted from a comprehensive strategy involving a 31% increase in average order value. That growth was achieved through focused efforts across various business functions, from business development to supply chain and operations, along with other enabling functions.
The table below shows the revenues and profits of Kaynes Technology over the last 4 years.
Profit Margins
The funds 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%.
Margins have steadily increased in the past years due to a systematic approach to managing fixed expenses, which have played a critical role in ensuring modest growth in margins with increased revenue.
The table below shows Kaynes’ profit margins over the last 4 years.
Return Ratios
In terms of 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 remained stable compared to last year. In the longer term, the ratios have improved and are above their 4-year average of 19.13% and 17%, respectively.
The table below shows Kaynes’ ROE and RoCE over the last 4 years:
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 over the past four years. This indicates that the company relies less on borrowed capital to finance its business and can retain more of its income. 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 loans 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 Kaynes’ D/E interest coverage ratio over the last 4 years:
Fundamental Analysis Of Kaynes Technology – Key Metrics
Fundamental Analysis Of Kaynes Technology – Future Plans
- Kaynes aims to continue 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 produce more advanced 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 allocated a sum of ₹989 mn to improve 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 aims to identify and scale new technology applications in consumer devices, 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 looked at its business, how it has performed in the last four years, and what its plans are. Their well-diversified product portfolio allows them to mark their presence in multiple 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 and 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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