Semiconductor Stock: Why are shares of Kaynes Technology up 7% today?

Synopsis: Kaynes Technology is targeting $2 billion in revenue by FY30 despite a recent Q3 miss and guidance cut. With PCB integration, OSAT ramp-up and strong EMS growth plans, the company is betting on execution and scale to drive its next phase of expansion.

Kaynes Technology faced a setback in Q3 and had to revise its outlook downward, but it’s still targeting ambitious goals: $2 billion in revenue by FY30. There have been some delays and an increase in working capital, yet the company isn’t retreating. 

They’re focusing more on PCB backward integration, moving into OSAT, and emphasising design-led manufacturing. These initiatives are intended to fuel the next phase of growth. The main challenge? Management must turn these bold strategies into results, only then will the long-term vision remain credible.

With a market capitalisation of Rs 26,181 crore, the shares of Kaynes Technology India Ltd are currently trading at Rs 3,919 per share, up 6 percent from its previous day’s closing price of Rs 3,698.95 per share. In the last one year, the stock has corrected by nearly 5 percent as compared to NIFTY 50’s positive return of 11 percent.

Why Did Q3 Disappoint?

The numbers for the December quarter were disappointing. Revenue growth was lower than expected, mainly due to delays in execution rather than a lack of demand.

A significant factor in this was the postponement of a high-value railway order valued at nearly Rs 300 crore under the Kavach program. Management explained that the delay was strategic; they opted to move directly to an upgraded version of the product to meet stricter safety standards instead of delivering the older model. While this protects long-term credibility, it hinders short-term revenue.

The company had previously estimated Rs 1,300 crore in revenue for Q3 but reached only about 60 percent of that target. Increased competition, pricing pressure, and slower project execution worsened the shortfall. Consequently, the FY26 revenue forecast has been revised down to approximately Rs 4,100 crore from Rs 4,500 crore.

Despite this, management is confident about achieving a “mega” Q4 with around Rs 1,700 crore of revenue and EBITDA margins of about 16 percent. Hitting this target would require a significant sequential increase, allowing for nearly 46–50 percent growth compared to last year.

Working capital also raised concerns during this period. Net working capital days increased to 139 days from 107 days year-on-year, due to higher receivables and inventory build-up amid the execution delays. Management insists that this is mainly a timing issue and expects it to normalise to around 70–85 days by the end of FY26 as Q4 revenue picks up and collections improve. 

Operating cash flow was negative Rs 55 crore during the quarter, but the company noted that it could have turned positive if it had pushed collections more aggressively. Across the EMS industry, discipline in cash flow is becoming crucial, especially as margins remain tight in assembly-led businesses.

Despite the short-term slowdown, the long-term growth plan remains solid. The total order book is around Rs 9,072 crore, covering about 1.5 years of revenue visibility, not including contributions from OSAT and PCB businesses. Order inflows continue to grow at a healthy pace, although revenue conversion lagged this quarter because of deferrals, particularly in railways.

Growth Drivers That Could Power the Next Phase

Kaynes’ future growth heavily relies on backward integration through PCB manufacturing and its new OSAT facility. The Sanand OSAT plant is now operational, with the approval of fiscal support agreements improving subsidy visibility. Meanwhile, the HDI PCB manufacturing initiative is progressing in phases, with Phase-1 production scheduled for April 2026. Management has highlighted a long-term revenue potential of nearly Rs 15,000 crore from existing customers through PCB and related EMS cross-selling.

This brings us to the much-discussed “PCB multiplier effect in the ratio of 1:9. Kaynes is investing about Rs 1,500 crore in PCB manufacturing and claims that for every Rs 1 crore of PCB revenue, it can potentially generate Rs 9 crore of additional EMS revenue.

The logic is clear: clients in complex sectors like industrials, automotive, aerospace, and railways prefer integrated suppliers over multiple vendors. If Kaynes supplies the PCB, that client is likely to award assembly, testing, and integration contracts as well.

In theory, this Rs 1,500 crore PCB capacity could unlock an extra Rs 13,500 crore in EMS opportunities, bringing the total revenue potential to nearly Rs 15,000 crore over time. However, this multiplier effect does not happen automatically; it depends heavily on execution, winning new customers, and ramping up capacity.

Another growth area is design-led manufacturing. Currently, this contributes about 20 percent of revenue and is expected to increase by 5–7 percentage points over the next two fiscal years. Design-led business usually yields higher margins and strengthens client loyalty, supporting Kaynes’ gross margin of around 34 percent and EBITDA margin of 16 percent. Expanding into higher-value segments and increasing contributions from exports are expected to further enhance profitability.

The capital expenditure strategy seems prudent. Management indicated that additional spending in core EMS will be controlled, focusing instead on improving efficiency and better asset use. Major investments will continue in OSAT and PCB facilities, relying on subsidies, internal funds, and improving cash flows. Importantly, management confirmed that there are no plans for equity dilution or a QIP at this time to fund expansion.

Financials Highlights

The revenue from operations for Kaynes Technology India stands at Rs 804 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 661 crores, up by 22 per cent YoY. However, on a QoQ basis, it reported a decline of 11 percent from Rs 906 crore. 

Also, EBITDA stood at Rs 119 crore in Q3 FY26, a growth of 27 percent as compared to Rs 94 crore in Q3 FY25. However, on a QoQ basis, it reported a decline of 20 percent from Rs 148 crore. Also, coming to the margins front, EBITDA margins increased slightly by 100 bps YoY, reaching 15 percent in Q3 FY26.

Coming down to its profitability, the company’s net profit stood at Rs 77 crore in Q3 FY26, a growth of 17 percent as compared to Rs 66 crore in Q3 FY25. However, on a QoQ basis, it reported a sharp decline of 36 percent from Rs 121 crore.

Kaynes Technology India Ltd has set an ambitious goal of $1 billion (around Rs 9,000 crore) in revenue by FY28 and $2 billion (around Rs 18,000 crore) by FY30. This greatly deepens investors interest after a poor quarter.

So, can Kaynes realistically reach $2 billion in revenue by FY30? 

Numerically, it’s possible. If EMS continues to grow at a 25–30 percent CAGR, and if OSAT ramps up significantly with PCB integration driving cross-selling, the revenue projections support that outcome. However, the key risk is consistent execution. The company has shown strong order inflows and good positioning in valuable segments, but quarterly fluctuations, guidance adjustments, and working capital issues create uncertainty for investors.

Ultimately, the next few quarters will be crucial for establishing credibility. Delivering the projected Rs 1,700 crore in Q4, improving cash flows, and reducing working capital days will help restore confidence in the management’s ability to execute. If these operational metrics stabilise while new facilities ramp up as planned, Kaynes’ goal of $2 billion by FY30 may transition from an aspiration to a realistic target. However, if delays continue, the growth narrative could come under further scrutiny.

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