Buy KPIT Technologies Ltd For Target Rs.1,850 by Axis Securities
Resilient Performance in Action ``
Est. Vs. Actual for Q3FY25: Revenue – INLINE ; EBITDA Margin - INLINE; PAT – BEAT; Deal Wins – BEAT
Changes in Estimates post Q3FY25
FY25E/FY26E: Revenue: 3%/4%; EBITDA Margins: 13%/12%; PAT: 15%/10%
Recommendation Rationale
* Robust Growth Across Verticals: The management has highlighted robust and broad-based growth across various verticals, supported by a solid deal pipeline and enhanced client engagement. Europe led growth, followed by the US and Asia, with strong traction in Powertrain, Connected Vehicles, and SDVs (SoftwareDefined Vehicles).
* Total Contract Value (TCV) Performance: Total Contract Value (TCV) for Q3FY25 stood at $236 Mn, with significant contributions from Europe and the US, reflecting higher deal conversion rates and increased client confidence in KPIT’s capabilities.
* Optimistic Outlook on Medium-Term Demand: Management remains bullish in the medium-term demand environment, driven by strong deal wins in previous quarters. The company is witnessing strong conversations with eight new clients, further strengthening its pipeline, which grew by 20% QoQ
Sector Outlook: Cautiously positive
Company Outlook & Guidance: Strong revenue growth momentum will continue, backed by robust deal wins and strong addition of capabilities. FY25 revenue growth guidance is retained at 18% to 22%. EBITDA outlook is revised upward to 21%+ from 20.5%+
Current Valuation: 45x FY26E P/E; Earlier Valuation: 58x FY26E
Current TP: 1,850/share (Earlier TP: Rs 2,150/share)
Recommendation: Given the company’s strong growth potential backed by robust deal wins and superior execution capabilities, we recommend a BUY rating on the stock.
Financial Performance
KPIT Technologies Ltd. reported Q3FY25 revenue of Rs 1,478 Cr, reflecting a 0.4% QoQ and 17.6% YoY increase, which is in line with expectations. The operating profit was Rs 254 Cr, up 1.3% QoQ, meeting expectations. Operating margins expanded by 29 bps to 21%, driven by revenue mix change, productivity improvement, and a favourable currency mix. The net profit for Q3FY25 stood at Rs 193 Cr, marking a 24.7% YoY growth. Further, it has announced an interim dividend of Rs 2.5/share.
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SEBI Registration number is INZ000161633
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