Brokerage firms remain divided on KPIT Technologies after its quarterly earnings. Some of the brokerage firms are positive on the stock and suggest the stock may reach Rs 2,100-levels on the back of a healthy order book, while others suggest that the counter may fall up to 40 per cent on the back of rich valuations.
KPIT Technologies reported a 52.4 per cent year-on-year (YoY) jump in net profit at Rs 204.2 crore for the first quarter ending June of the ongoing fiscal year 2025. The profit was due to a one-time income gain of Rs 39.6 crore as compared with Rs 13.4 crore a year ago.
The automotive-focused software services provider's revenue rose 24.3 per cent YoY to Rs 1,364 crore in Q1FY25 compared to Rs 1,097.6 crore a year ago. Operating margins of the Pune-based company improved to 17.3 per cent in Q1FY25, while Its deal wins during the first quarter stood at a total contract value (TCV) of $202 million.
After the quarterly earnings, shares of KPIT Tech tumbled more than 4.35 per cent to Rs 1,770.65 during the trading session on Thursday, with its market capitalization slipping below Rs 50,000 crore mark. The stock had settled at Rs 1,851.75 in the previous trading session.
KPIT Tech reported a solid 1QFY25. Revenues grew 4.7 per cent QoQ led by Japan and architecture and middleware business unit. EBIT margin increased 60 bps QoQ to 17.3 per cent, after absorbing partial impact of new ESOP grant. The company has maintained FY2025E revenue growth and profitability outlook, said Kotak Institutional Equities.
"The automotive sector is going through challenges due to demand and profitability pressures, which could constrain R&D spends for a few clients. At 50 times FY2026E earnings, KPIT stock is extremely expensive. We tweak our EPS estimates by 1-4 per cent over FY2025-27E," it added but raised its fair value to Rs 1,150 but maintained a sell rating, suggesting a 38 per cent slide.
KPIT sustained its growth momentum in 1Q. Revenues grew 4.7% cc QoQ, meeting elevated expectations. Honda deal continues to ramp, reflected in 13 per cent QoQ growth in Asia. Deal wins were healthy at $202 million, taking the book-to-bill to 1.3 times, said JM Financial. KPIT’s revenue growth, despite 1.3 times book-to-bill indicates minimal leakage and faster ramp, it said.
"Current order book is sufficient to achieve an unchanged 18-22 per cent cc revenue growth for FY25, per the management. Better margins despite two months of ESOP expense and consistent improvement in employee productivity reflects KPIT’s pricing power. We build this in our margin assumptions driving 1-2 per cent EPS upgrades," it said with a target price of Rs 2,140 and buy rating.
Sequential CC growth was led by middleware and powertrain domains and Asia geography. Company formally launched EcoVoyage 2030 to reduce carbon footprint in its operations and infrastructure and is also a key area focus for its clients, said Choice Broking. The management aims to improve utilization rates, thereby aiding profitability and boosting the revenue, it said.
"Operating margins came in at a healthy 17.3 per cent for the quarter, up 188 bps YoY. EBITDA margins for the quarter expanded to 21.1 per cent, up 160 bps YoY. KPIT expects creation of meaningful growth opportunities via investments in differentiated offerings and adjacencies and continues with the growth momentum," it added with a 'buy' rating a target price of Rs 1,980.