- Automotive revenues exploded 41.6% in Q4 FY26 – a catalyst for earnings acceleration.
- EBITDA margin steadied at 16% while the company trims working‑capital days from 139 to 85.
- Smart‑meter revenue will stall at Rs 3 bn, but the railway segment pushes Rs 3 bn into FY27.
- Order book sits at Rs 91 bn, underpinning a 45%+ revenue CAGR through FY28.
- DCF target price of Rs 5,502 implies a 45x FY28E PE – a high‑growth premium.
You missed the automotive surge at your peril.
Kaynes Technology's Q4 FY26 Automotive Boom vs Industrial Slump
In the most recent quarter, Kaynes posted a staggering 41.6% jump in automotive sales, outpacing the broader Indian auto‑component sector, which is projected to grow ~12% YoY. The surge reflects rising demand for electric‑vehicle (EV) power‑train components and a rebound in conventional passenger‑car production after pandemic‑induced headwinds. By contrast, the industrial segment slipped 5% due to a softer smart‑meter rollout, a segment the company had previously counted on for steady growth.
What the 16% EBITDA Margin Means for Your Returns
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a proxy for operating cash generation. Kaynes' 16% margin signals that despite a revenue mix shift, the firm retains robust cost discipline. Compared with peers like Tata AutoComp (13% margin) and Motherson (15% margin), Kaynes is already ahead, giving it room to absorb short‑term headwinds without eroding profitability.
Working Capital Turnaround: From 139 to 85 Days
Working‑capital days measure how long cash is tied up in inventory, receivables, and payables. Kaynes aims to compress this metric to 85 days by FY26, a 39% improvement over the 139‑day level in the first nine months of FY26. Faster cash conversion will boost free cash flow, reduce financing costs, and improve the firm’s ability to fund the Rs 91 bn order book without dilutive equity raises.
Railway Revenue Deferral: Hidden Risk or Timing Play?
The company disclosed a Rs 3 bn deferment of railway‑related sales to FY27. While the delay trims FY26 top‑line, it also staggers cash inflows, smoothing earnings volatility. Investors should watch the FY27 earnings release for the actual impact—if the railway segment rebounds, it could add a new growth pillar beyond automotive.
Sector Landscape: Smart Meter Rollout and Competitor Moves
Smart‑meter adoption in India has lagged due to regulatory delays, leaving Kaynes with a modest Rs 3 bn contribution. Competitors such as Adani Power’s subsidiary are accelerating meter deployments, which could revive that segment next year. Meanwhile, the automotive space is witnessing a wave of EV‑centric suppliers (e.g., Amara Raja, Exide) entering the market. Kaynes’ diversified product portfolio—ranging from power electronics to industrial automation—positions it to capture cross‑segment demand.
Historical Parallel: Past Tech Cycles and Kaynes' Resilience
In FY19‑20, Kaynes faced a similar dip in its industrial business when the government slowed smart‑grid projects. The firm responded by pivoting to automotive and railway contracts, restoring growth by FY21. The pattern repeats: a temporary slowdown in one vertical is offset by aggressive capture of emerging demand elsewhere. Historical data suggests that such reallocation tends to improve long‑term revenue CAGR by 5‑7% points.
Investor Playbook: Bull and Bear Scenarios
Bull Case: Automotive demand continues its upward trajectory, EV component orders rise 30% YoY, and railway revenue materialises on schedule in FY27. Working‑capital efficiencies unlock Rs 2 bn of free cash flow, enabling a dividend increase or share buy‑back. The DCF model’s target price of Rs 5,502 (45x FY28E PE) becomes attainable, delivering >30% upside from current levels.
Bear Case: Smart‑meter delays persist, railway deferment pushes revenue into FY28, and automotive OEMs trim orders due to global chip shortages. Working‑capital improvements fall short, dragging OCF negative into FY26. The high valuation multiples compress, pushing the fair value down to Rs 3,800, erasing ~15% of the premium.
Investors should monitor three leading indicators: (1) automotive OEM production data, (2) railway contract award announcements, and (3) the company’s quarterly working‑capital day metric. Align your position size with the prevailing risk‑reward balance, and consider a staggered entry to capture upside while protecting against the bear‑side tail risk.