Kaynes Technology has seen its sharpest correction in recent months, with the stock falling 25% over the last one month, significantly underperforming the Nifty’s +2% gain. According to JPMorgan, the decline is largely driven by concerns around the company’s balance sheet, cash flows and working capital, overshadowing its earlier reputation as a market favourite.
JPMorgan notes that investor sentiment turned negative after the company’s 2Q earnings, where there were unexpected spikes in receivables, working capital requirements and provisions for doubtful debts. While revenue growth remains intact, analysts say the market’s focus has decisively shifted towards cash flow quality rather than topline expansion.
The brokerage highlights that investors now want to see clear improvement in receivables and working capital management over the next two quarters (3Q and 4Q) before regaining confidence in the stock. Until then, sentiment-driven weakness may continue.
JPMorgan added that although fundamentals and management guidance have not changed since Q2, the stock continues to drift lower, making it difficult to call a bottom at this stage. The firm does not see a strong catalyst ahead of 3Q earnings, and thus advises against “bottom-fishing” in the near term, even though it maintains an Overweight view on a 12-month horizon.
According to JPMorgan, the stock will need to demonstrate meaningful improvement in cash flows in the upcoming 3Q and 4Q results for any sustained recovery. Analysts expect key scrutiny on receivables, working capital, and provisions for doubtful debts, which they believe will determine the stock’s trajectory from here.
