According to reports from The Economic Times, KPIT Technologies has experienced a 24% decline in stock value over the past three months, significantly underperforming the 4% gain in the BSE Infotech index. The mid-tier IT exporter's underperformance stems primarily from weakness in demand from the global automotive sector, which represents a major challenge for the company's business model. The company offers software solutions in areas including autonomous driving, advanced assisted driving, and electric powertrains, making it particularly vulnerable to automotive industry downturns.
As reported by The Economic Times, the company reported a 29% sequential and 32% year-on-year drop in net profit for the June quarter, attributed to engineering budget cuts and delayed project execution by major automobile companies in Europe. The company's top line declined by 4.4% sequentially to $176.8 million, while operating margin (EBIT margin) contracted by 360 basis points to 12.3% from the quarter ago, following higher subcontracting costs and provisions towards acquisitions. Some automotive clients in the European region, a major market for KPIT with around 50% share in revenue, delayed project ramp ups due to geopolitical and tariff-related uncertainties, rising commodity prices, and competitive pressure from low-cost countries.
According to The Economic Times, the company continued to book new orders, adding $257 million in total contract value (TCV) of new deals, which was 6.6% higher year-on-year but lower than $349 million in the previous quarter. While new deal wins in the June quarter raise hopes for a gradual recovery, the September quarter performance is expected to stay subdued. Management expects a recovery in the second half of the fiscal year amid new deal wins, though analysts have lowered earnings per share (EPS) estimates by over 25% for FY27.
As reported by The Economic Times, Anand Rathi Share and Stock Brokers has reduced the EPS growth estimate to 8.1% from an earlier 12.3% for the FY26-28 period, noting that "program ramps and deal starts were pushed out, keeping near-term revenue growth subdued." The broker maintains a target price of ₹661, implying a 29.6% upside over Tuesday's closing price of ₹509. The company management expects margin improvement in subsequent quarters, aided by revenue mix and productivity gains due to the use of artificial intelligence (AI) tools.
