We are still optimistic about KPIT Technologies despite the tough market conditions. While many companies in the auto engineering and research development (ER&D) sector reported poor results, KPIT managed to deliver stable performance. However, they didn’t give any guidance for the next financial year (FY26).
The company is making smart moves to reduce its reliance on Europe (which now accounts for 43.4% of their business, down by 8.3% compared to last year). Instead, they are focusing on expanding in the Asia-Pacific region, especially Japan, where their share has grown by 10.3% to 28.9%. Additionally, KPIT is increasing its share of fixed-price contracts, which now make up 59.6% of its business, up by 8.8% from last year. These changes should help improve their profit margins.
KPIT’s collaboration with QorixJV, Chinese automakers, and a list of high-profile clients, along with higher productivity from fixed-price projects and low working capital needs, are strong advantages for the company.
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Outlook:
The target price for KPIT is Rs 1,498, which suggests a potential upside of 21.9% from its current market price of Rs 1,229. The stock is currently trading at a price-to-earnings (P/E) ratio of 39x for FY26 and 31x for FY27. We have slightly lowered our revenue and earnings growth projections for FY25-27 due to reduced demand in the short term, but KPIT remains a strong performer in the long run.
