KPIT Technologies shares plunged 10% today; should you buy?

Shares of KPIT Technologies Ltd fell 10 per cent in Thursday's trade amid concerns the revenue growth for the IT firm will come at lower end of FY25 guided range of 18–22 per cent in constant currency (CC) terms.  The lower end of guidance implies a compounded quarterly growth rate of 1 per cent for KPIT Tech through H2FY25 against 4.7 per cent CQGR over the last four quarters, ICICI Securities said.

The brokerage re-initiated coverage on the KPIT Tech stock with a 'Hold'  rating and a target price of Rs 1,700, valuing the stock at 49 times one-year forward EPS. 

On Thursday, the scrip fell 9.66 per cent to hit a low of Rs 1,474.50 on BSE. With this, the IT stock has erased its entire 2024 gains. It is still up 30 per cent in the one-year period.

"We like KPIT for its deep domain capabilities in SDV, infotainment, middleware and powertrain; however, the changing demand dynamics in the automotive industry (read as challenges for European OEMs) brings near term growth uncertainty," ICICI Securities said. 

The brokerage said KPIT Tech maintained its Ebitda margin at 20.5 per cent. It noted that the expectation of top line at the lower end of the guided range is because of increased offshoring and delay in project implementations. Accordingly, profitability is likely to trend higher supported by higher offshore revenues. 

"KPIT expects 0.2–0.3 decimal points higher than estimated margin in FY25. Q3 may be slightly weaker on furloughs," ICICI Securities said.

The brokerage said auto companies pushing electrification timeline poses a downside risk while swift pick-up passenger vehicle may drive upside risk.