Motilal Oswal Recommends Buy on Kaynes Technologies, Target Price Set at Rs 6,400

Motilal Oswal is positive on Kaynes Technologies and has given it a “Buy” rating, setting a target price of Rs 6,400, as per their October 5, 2024 research report.

Kaynes Expands Smart Meter Business to Meet Growing Demand

Kaynes Technologies is rapidly expanding its smart meter business to capitalize on India’s growing demand for 250 million smart meters, worth INR 750 billion, over the next few years. The company recently opened a new electronics manufacturing plant in Hyderabad, aimed at producing these meters, and acquired a key client, Iskraemeco. This acquisition allows Kaynes to provide installation and after-sales services while entering other utility markets like gas and water meters.

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Key Points:

• Growing Demand for Smart Meters: Smart meters are becoming more popular due to India’s RDSS program, which aims to replace 250 million old meters by 2025. So far, only 14.5 million meters have been installed, leaving a big opportunity for companies like Kaynes.
• New Facility: Kaynes has launched an automated facility in Hyderabad that produces 3,000 smart meters per day. The company plans to expand production capacity to 10 million meters annually by next year to meet rising demand.
• Major Acquisition: Kaynes acquired Iskraemeco India for INR 492.86 million, strengthening its position in the smart meter market. This deal will help the company boost its revenue by providing installation, maintenance services, and offering meters for utilities beyond electricity, such as gas and water.

Future Growth and Financial Outlook

The company expects a major revenue boost from the smart meter business, aiming to generate INR 4-5 billion in revenue in FY25, and INR 8-10 billion annually from FY26 onwards. Margins from smart meters are expected to be better than Kaynes’ current business lines, pushing up overall profits.

Financial Projections:

Kaynes is expected to grow rapidly over the next few years with a revenue growth of 57%, EBITDA growth of 64%, and profit growth of 71% between FY24 and FY27. The stock’s target price of Rs 6,400 is based on 60x projected earnings for June 2026.

Valuation and Conclusion

Kaynes Technologies is positioned as a leader in smart meter production, with strong growth expected from its new facility and recent acquisition. With a healthy order book and improving margins, Motilal Oswal reaffirms its “Buy” recommendation with a target price of Rs 6,400.