Buy KPIT Technologies Ltd For Target Rs.1,080 by Choice Institutional Equities Ltd
Revenue Growth Muted; H2FY27 Ramp-up and Deal Conversion Key:
KPITTECH reported a soft Q1FY27, with revenue declining 4.3% QoQ to USD 176.8 Mn as continued weakness at large European OEMs offset healthy traction in the US and after-sales and Vehicle Engineering & Design practices. Strategic clients, which contribute 87% of revenue, declined 1.3% QoQ, while Europe remained the key drag amid OEM cost pressures, tariffs and Chinese competition. However, USD 257 Mn of new engagements, healthy Products & Solutions traction and improving diversification across geographies, mobility segments and offerings provide visibility for a stronger H2FY27. Management expects sequential margin improvement from Q2 onwards, aided by revenue recovery, mix and AI-led productivity
View & Valuation:
We believe KPITTECH's near-term performance remains constrained by OEM-specific pressures, but the USD257mn deal wins and growing Products & Solutions pipeline support a better H2FY27, with increasing traction in AI-defined mobility, autonomous technologies, digital cockpit and After-sales. We downgrade to ADD with a TP of INR 780, with valuation supported by the company's differentiated SDV positioning, expanding wallet share and diversification into CV/off-highway and newer adjacencies. We expect improving execution and deal ramp-ups to drive a gradual recovery in growth and margins through H2FY27.
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SEBI Registration no.: INZ 000160131
