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Revenue & EBIT marginally below estimates, PAT beats expectations even after excluding one-time exceptional gain

• Revenue for Q4FY25 came at INR 15.2Bn up, 16.0% YoY and 3.4% QoQ (vs consensus est. at INR 15.4Bn).

• EBIT for Q4FY25 came at INR 2.6Bn, up 20.4% YoY and 4.5% QoQ (vs consensus est. at INR 2.7Bn). EBIT margin was up 64bps YoY and 17bps QoQ to 17.3% (vs consensus est. at 17.5%).

• PAT for Q4FY25 stood at INR 2.4Bn, up 47.5% YoY and 30.9% QoQ (vs consensus est. at INR 2.0Bn).

Deal wins rise to USD 280Mn in Q4FY25 despite macroeconomic challenges:

KPIT reported strong Q4FY25 deal closures worth USD 280Mn, marking continued sequential growth. A notable multi-year collaboration with Mercedes-Benz aligns with earlier SDV deals involving Honda & Renault, reinforcing KPIT’s role as a strategic partner. While full-year revenue guidance is withheld due to external macroeconomic uncertainties, KPIT expects positive QoQ growth in H1, with momentum increasing in H2. Likewise, we also expect KPIT to face softness in H1FY26 due to delay in ramp-ups of deal wins & cautious IT spending by clients. As macroeconomic conditions stabilize, auto companies may resume or accelerate projects. However, in the near to mid-term, KPIT is likely to benefit from vendor consolidation & cost optimization deals, especially as global OEMs respond to China’s disruption in cost, speed, & innovation. While Passenger Cars remain the core growth driver, recent wins in Commercial Vehicles & Off-Highway are set to diversify growth. Regionally, Asia shows strong momentum, with Europe & US poised for acceleration in latter FY26, driven by new clients & large deal ramp-ups.

Flat margin outlook as KPIT balances growth & investment strategies:

KPIT reported an EBITDA margin of 21.1% in Q4FY25, which met their increased guidance of 21% for the full year FY25. The FY25 EBITDA margin stood at 21.0%, showing a YoY increase from 20.3% in FY24. The management has not provided specific guidance for FY26E but aims for a modest improvement, if not, to maintain margins while investing in future growth areas. They plan to give a full outlook once macroeconomic conditions stabilize. KPIT is actively focused on various strategies like AI-led productivity & managing their investments to maintain margins. While China is considered a strategic margin accretive medium-term opportunity, its contribution to revenue remains small, though growth is expected. Given these factors, we forecast a 10bps margin decline for FY26E due to weak revenue growth & cost optimization pressures. A clearer picture of demand postQ1FY26 will offer better insight into margin performance.

View & Valuation: KPIT's strong deal wins and healthy pipeline signal strong longterm growth potential. However, near to mid-term top-line growth may face challenges due to macro uncertainties, especially trade-related risks. The company’s significant exposure to Europe, which is experiencing an economic slowdown and a potential threat of recession, as well as the automotive sector, impacted by US tariff policies, pose risks. Consequently, we’ve reduced our estimates by 4%, assuming a conservative, flat margin outlook for FY26E and lower our PE multiple to 35x (from 40x earlier). We expect Revenue/ EBITDA/ PAT to grow at CAGR of 17.3%/ 18.6%/ 13.8% over FY25–27E & reduce our target price to INR 1,520 based on FY27E EPS of INR 40.0 while revise our rating to ADD.

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