Kaynes Technology

about 29 days ago
Kaynes Technology

IPO Size: Rs. 858 cr IPO

  • Rs. 530 cr fresh issue for capex (Rs. 248 cr), debt repayment (Rs. 130 cr) and working capital (Rs. 115 cr)
  • Rs. 328 cr offer for sale (OFS) by the promoter (80% stake to shrink to 64%) and an individual shareholder (11% holding to contract to 3%)

Price band: Rs. 559-587 per share

M cap: Rs. 3,413 cr, implying 25% dilution

IPO Date: Thu 10th Nov to Mon 14th 2022, Listing Tue 22nd Nov 2022

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

 

Mysuru based Electronics Manufacturer     

FY22 revenue of Rs. 700 cr split as-

  • 60% from manufacturing printed circuit board (PCB) assemblies for OEMs
  • 30% from box build solutions for OEMs
  • 10% from original design manufacture, product engineering and IoT solutions.

Company caters to auto, industrial, medical, railway and aero-space sectors.

With electronics accounting for second largest import bill, after oil, Hence, domestic manufacturing industry has potential to grow at 40% CAGR, over the next few years, on back of import substitution under Atmanirbhar Bharat, combined with China+1 strategy.

 

Swelling order book

As of 30.6.22, order book was at Rs. 2,266 cr, up Rs. 750 cr in Q1FY23 alone, which is to be executed over next 18 months. Given the rapid order wins and equally strong outlook, company is undertaking sizeable capex through IPO proceeds, as current capacity utilization has surpassed 70%.

 

3.5-4x Capacity Increase by Mar 2024

To increase PCB assembly capacity to 48 million pa, from 14 million currently, and also Surface Mount Technology (SMT) capacity, to 1,530 million components pa from 377 million, in phases till FY24-end, company is undertaking Rs. 250 cr capex. With asset turnover ratio of ~4.5x, new capacity can lead to incremental revenue of about Rs. 1,200 cr from FY25E.  

 

Attractively Valued

Kaynes reported Rs. 200 cr revenue for Q1FY23, with an EPS of Rs. 2.1 over FY22 EPS of Rs. 9. Based on FY23E EPS of Rs. 14, share is being offered at a PE multiple of about 41x, similar to both Amber and recently listed Syrma SGS, despite Kaynes 13% EBITDA margin being 150-500 basis points higher than peers, as it manufactures more complex products and in low-to-medium volumes.

Given 20% RoE and quadrupling of capacity in 18 months, valuation is seen attractive, despite being 5.6% higher than pre-IPO price of Rs. 556, transacted 3 weeks ago.  

 

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